You know it's a lot more fun than thinking about how to best pay off student loans? Thinking about how rich you're going to be one day in spite of your student loans. That's why we started the financially free era podcast. Financial free era, if you search that term on any podcast platform, you're going to find it. It's hosted by my colleague Megan McGuire over a DSLP wealth. And this podcast is where we dive deep into all the things you want to know about how to be wealthy one day. How do you best maximize tax loop holes and write offs? How do you best invest money? How do you make smart money moves in spite of even a very large six figure student loan balance that are going to get you where you want to be much sooner? Go follow the financially free era podcast wherever you listen to podcasts. I promise you if you like student loan pointers podcast, you will love financially free era by SLP wealth. Search that term, follow the show, you will love it. Hello and welcome to the episode of the Steel Loan Piner Podcast. It's Travis. Today I'm going to do something a little bit unorthodox for the show. We did a really interesting tax webinar with our head of tax at SLP wealth, Sim Torelliger in me. And we did it just for our SLP insiders and for our SLP wealth clients. But I thought it was so good and I thought that it is so relevant that it would be frankly better for me just to share the recording of that webinar for today's episode than to do a whole spiel about taxes and talk about taxes just by myself. So instead of doing my usual steel loan planner episode today, I thought we would just share the recording of that webinar and I hope you enjoy. All right, Sim, do you want to kick it off? Could you introduce yourself and let people know who you are? Yeah, hey everyone. So I'm Sim. I'm one of the founding partners here at SLP wealth. I am also our director of tax. I'm not just leading tax this year. I'm also doing tax preparation and planning myself. And so just for fun and not to judge anybody, I've been keeping a little note pad of mistakes I've been seeing through tax season. I'm only like 25% of the way through of my client loads. So I'm wondering, you know how many more these will see, but I just kind of jotted some of these down. I think it'll overlap with some of the questions we're getting today. That's great. A lot of people are asking about separate versus joint at a high level Sim. Could you talk about separate versus joints and things to consider? Yeah, so I'm assuming that most of you guys are student loan borrowers or at least one of you is a student loan borrower. And so with student loans, you kind of have one or two paths that you're going to take on how to deal with them. You're either going to pay those things off or you're going to go for some type of forgiveness. And when you're going for forgiveness, they're calculating your payment based off of your AGI, your adjusted gross income, which you can find on line 11 of your 1040. So when you file jointly, you're probably going to have a bigger line 11, which is going to result in a bigger student loan payment. So we're always thinking strategically and legally, how can we keep line 11 as low as possible? And one of the biggest ways that we have is by just excluding your spouses income. And you do that by filing separately. But there's this big asterix next to what I just said. And the rules kind of change a little bit if you live in what's called a community property state, which I think a lot of our listeners today do. That's California, a bunch of the states on the West Coast. It's nine states. But the rules for married filing separately in those states is kind of weird. What they do is they take everything that everybody earned when they say everybody, that's why they call it community property. Like you and your spouse are the community. And they take everything that you guys earned and they split it in half for the most part. There's always exceptions to these rules. And so when you do it that way, that also presents some planning opportunities for some clients where you have maybe like a higher new physician and a stay-at-home parent, maybe the physician's one has the student loans. That's going to really lower his AGI, right? He or she it's going to split their income and move it to the spouse. They're going to have a lower income on paper. They're going to go lower student loan payment. Sometimes it hurts the spouse. If you're like the lower earning spouse, now your tax return is showing a higher income. Well, we have strategies for that. We have all stock of income, right, using a pace or something like that. But that's high level, right? And this split has to be done correctly. You have to do it on form 8958. And that's one of the mistakes I jotted down for clients who did not work with us last year. They might be a new tax client. We always look at your prior year return. We're looking to see what did you do? Are you doing carry forwards? I can get really technical, right? But we're looking at what happened last year. And the clients, yeah, go ahead. I was just saying before we talk too much about 8958 and things that make people's eyes gloss over. Just one story that you'd let me know about is one of our prepares helps somebody correct a self-file return in a community property state where they did that MFS split wrong. And they like didn't in a way where they like overpaid by $20,000 in taxes. I think the number was approximately because they didn't do that split correctly. So they didn't they didn't split it right. So the thing about student loans is there's definitely more complications, right? Like we have some clients that you would describe as like overachievers. And then the idea of like filing an extension for their taxes is like, what do you mean? I'm not going to turn in my taxes on time, right? That's like so important to me. What do you mean? You want me to like delay it until September, right? At a high level when we file extensions for people, right? A lot of time, it's strategically because of the different repayment certification timing, right? Right now we're seeing Department of Ed only processing people who have said, yes, take my IRS information. I'll turn to documentation and a lot of clients that we're saying is just like sitting and processing waiting them doing something. If you just became an attending physician filing that extension could like save you thousands of dollars even a month because you're essentially using that older tax to turn instead of turning it in on time. Let's say your IDR recertification dates in July, you file the extension that you turn in your tax to turn is September, October, you get that lower IDR payment, right? They always use your most recently filed tax return within the last two years. So strategically, a lot of our clients 2024 was a lower earning tax year. So it's just better to have that on file. The extension can also be strategic for other reasons like if you're waiting on documents, we have a lot of overachievers like no, I have to file on time, we file them and then they find out, oops, I got this $10.99 they did it for now, I have to do an amendment. Yeah, and there's some reasons why you might want to file on time for non-student reasons like, for example, somebody wanted to buy a really nice new house and they needed to get proof of income and they wanted that tax return, I think because they were self-employed and they needed to show a certain number of years of income to be able to get qualified for the mortgage they wanted, right? So there's all kinds of like new on sometimes when it comes to this stuff. Some one idea that I had real quick is I thought I maybe would show our MFS calculator spreadsheet. This is on our student loan calculator that we use, both for consults and for SLP wealth clients. And you know, I do have to throw up a disclaimer that this is not tax advice, consult your tax professional, which may be us, but you know, this is not personalized, is you know, educational purposes only all those usual disclaimers, right? But one kind of interesting way to illustrate the community property thing is let's say you've got one person earning $400,000 a year and one person earning 60, right? So like maybe a physician married to say a public school teacher or something like that. And if they live in New York, which is not a community property state, boom, they are paying a ton of extra taxes, almost $20,000 extra. So this is an excuse maybe. Yeah. Let's talk about this scenario because sometimes this absolutely makes sense to do you know, why would someone do this? Well, because we have another workaround too, file on a men. So maybe they go ahead, they do this cry pay that extra 19,000 to get a low student loan payment. You have three years to mentor a turn from separate to joint. There's this really corny. I think it's a fun expression in tax world. You can make up, but you can't break up. You can go from separate to joint, but you can't go from joints to separate. So a couple could do this. They can, you know, pay more in tax now, get a low or student loan payment and then get a refund within the next few years. Right. And you know, just to show the impact of the community property part, if you have that community property status, so like you live in California, Texas, etc. You change that from no DS, boom, that cost goes from 19 grand in a year to about a thousand just from additional Medicare tax, essentially. It's a pretty big deal. If you're in a community property state, it lessens the impact of very filing separate penalties substantially. Now, there are other things that come into play too. ACA subsidies, you can't really get if you're doing married filing separate. That's something that's relevant folks under the age of 13. That's kind of relevant for and also daycare expenses. The independent care of the say is yeah higher ed deductions in some cases. Roth IRAs. Can we talk about Roth IRAs for a second? Okay. So this is like if you can have like a favorite mistake or a top mistake. This is the biggest mistake that I've been seeing is Roth IRAs not being done correctly back to Roth. So basically with a Roth IRA, regardless of how you file your taxes, there's income limitations. If you earn above a certain amount, they don't let you put money into the Roth anymore. Several years ago, some financial nerds figured out a very legal workaround called the Backdoor Roth. And so if you file separately, that AGI limitation is like $10,000 and most of our clients are more than $10,000. So if you're married filing separately, you probably cannot contribute directly to a Roth at all. And even if you file jointly, your income may still be too high to contribute directly to a Roth. But a lot of people contribute to a Roth and then they find out oops, I wasn't supposed to. And if you don't correct it on time, now you're subject to a 6% tax every year until you fix this. Yeah. A lot of times people that need to file separately for state alone purposes, they might be kind of early bird gets the worm kind of people. They've already done the direct Roth contributions and then to recharacterize to avoid problems later because you need to do that traditional nond deductible contribution, right? And then convert it immediately to the Roth IRA. And then you have to watch out for a given pre-tax IRA. So do you have a roll over or one can't to an IRA, a simple IRA, a set IRA? Because then you have this weird problem called the pro-rotable. And so keep it as high level as I can. The IRS is looking at all of your IRAs like one big IRA. They're looking at what percentage is pre-tax, what percentage is after tax. If you do a conversion, you're going to get taxed on that conversion, which in a way defeats the purpose of doing a back row. And it's avoidable by the way. And we kind of talk about that when we do financial planning. But top mistake I'm seeing even with like our clients. Yeah. Some other topics here. So adoption credits, that's a big thing. Like if you adopt a child, you can get into a situation depending on age, eye limits where you cost yourself a bunch of money from that. Medicare is an interesting one too. Let's say you've got two people making 150,000 and somebody's on Medicare. Your Medicare premiums, your Irma basically, your income adjusted Medicare payments, your premiums on Medicare basically get higher at certain age, eye levels if you're filing taxes separately. And that's very relevant for people like especially parent plus borrowers and folks like that. There are some small business considerations. So like because of QBI limitations, right? If somebody is a dentist, for example, and they're jointly under a certain age, eye limit where they get to claim the writing off 20, you know, a big chunk of their business income because of the QBI deduction. You lose that. In some cases, that's the main stuff. The good news is as you can amend from separate to joint, our position on this generally speaking is one of caution. We kind of like to amend only if it's going to save you a certain amount of money, right? Sam, like, I mean, you can't. I'm told that in turn that these like 2000, if you are going to save 2000 or more, we'll probably reach out to you if we prepared your taxes to let you know, hey, you may want to consider an amendment. And we track this for clients. And I think the thing is is like, if somebody's going to save $1500 and it's going to cost us several hundred dollars to do all the work to amend it, then it's like, is that really worth it? Like, is that really worth extra letters in the IRS and having to like potentially paper sign something in some situations, right? Like, is that juice worth the squeeze? So to speak, right? Yeah, just to comment on that, doing the strategy is perfectly legal, but the IRS is looking at it and they may think, was this really you can trigger like identity verification notices or other notices for the IRS to, you know, verify certain information, which doesn't mean you did anything wrong, but those notices, I will tell you from seeing with our clients, people can find them very distressing because the IRS feels like a scary entity. Oh, I hate IRS notices. I get a ton of them because they have multiple different entities for all kinds of reasons, right? And my favorite ones are the ones where they send you like, eight pieces of mail and you're like, oh, shoot, what did I do? And then you open it up and it's like, we've received confirmation, your mailing address has changed. And it's like, dang it, why don't you put that on the freaking front of the envelope? Hey, this is a mailing address change. You know, you have nothing to worry about, you know, you want to make sure you open it. You're scared a little bit. You'll open it right? Well, I think the problem with the IRS is it's very underfunded, right? A lot of the rules, it's going through a lot of turmoil and there's also a lot of rules that are just like, they don't make sense. Like one of the rules that I hate is the solar 401k 5500 easy rule, which says that if you have more than $250,000 of assets in your solar 401k, if you fail to file a $4,500,500 easy, it's a $250 fine per day. So if you make like some kind of reasonable mistake and all kinds of different tax stuff, the consequence of doing something wrong is very expensive. Even if you were well-meaning, the good news though, Sam is what do we generally find for honest mistakes that don't involve like lying like under reported? I mean, honestly, maybe this is a hot take, but I feel like the IRS is generally very reasonable. Like if you get a notice, just respond to it, they'll give you a deadline response to the notice and it will take some time just because they are operating on a skeleton group, but usually these notices will get resolved. Yeah, I mean, I had the one of the scariest notices I had ever was because of an address change in my business, something was going to the wrong address and for whatever reason, the address for the particular entity didn't get changed correctly. And so I was getting multiple notices, but they weren't arriving to me. And it was just on some sort of like misallocation where estimated payment was applied to a wrong tax here basically. And I finally did get the final notice, which was like, you know, it wasn't like we're going to come kick your door down, but it felt like that. You know what I mean? It was like, you know, we're going to explore seizing bank account assets. Like what? What do you mean? I didn't get any of these notices, and so I worked with my CPA at the time to just essentially just make a reasonable reply to that. And everything worked out fine. I think one piece of advice is like if you don't report income, you go to jail, if you make an honest mistake or maybe are too aggressive on deductions or something like that, you know, that's more of like a civil issue, right? So I think that's the general thought. Thinking of notices, I would much like if a client emails me and like, Sam, I gotta know this. I'm like, please let it be the IRS and not from California. California, FTV, much worse. They have very broad, I mean, so the IRS, but the California will go after you for a much longer time. They'll build pursue whatever you owe for like 20 years IRS is 10. Well, I think that's one thing people underestimate is a lot of times like people think, oh, like I can do my own and you can do your own taxes. But like, I think in my mind, the thing that often makes it worth it to hire somebody is the state agencies or even local entities, right? Because those are not run the same ways the IRS. A lot of times, the competence these agencies is much lower in my opinion than the IRS. And just the weirdness is greater. So I'll give you one quick example. Sam, the trigger for me hiring a tax professional was when I lived in St. Louis, they had multiple different types of like wage taxes, earnings taxes, like payroll, like all kinds of nuts stuff for just like a fairly small city. I was just like, I will pay double the amount of taxes for this to be simpler, you know? I mean, it was terrible. And then one year, the IRS didn't audit me. It was the city that wanted to audit me. The city government wanted to audit my books or something like that. In my local like CPA literally called the collector of our news office and he's like, so and so's my client, they're good. You don't need to audit them. And he sent me back to his email. I was like, Hey, I got you off the hook for the audit. Like, I just told him, no, I'm like, what? What are you talking about? Like, that's nuts. You know, he like. I would never work for California. I mean, states are certainly a level of sophistication above any like local entities, probably with the exception of like New York or something like that. But I think in general, like the notices that people get from state governments can be a little scary sometimes, especially for the mayor filing separate, the amendments, the community property. We basically have one notice that we pretty much call like the California notice that goes out a lot of times and people do pretty much every California notice I've seen with our clients is them not understanding their own rules with 89.58 and they're not doing the split and they're like, Hey, why does this and come not match what we received on the W2? It's like because we split it according to the community property rules of your state. They're like, Oh, okay. And then they back off, but we've had maybe 10 of those I've seen. Yeah. Well, so we've got other questions here. So I'm going to answer a couple of these questions. So yeah, mayor filing separately doing back to Roth is okay, but not direct Roth, right? Yeah, that's right. You need earned income though. You still need our income to contribute. One person says, do you do planning a tax prep services for non-planning clients? Unfortunately, no. What we found. Design. Well, what we found to be fair, tax tends to be either a high touch high relationship business or volume business is generally one of those two at most firms. And if you are a volume business, you are very likely they're very likely going to miss things. Not to say that you can't miss things at a higher touch business, but the volume business like the extension planning, the separate versus joint analysis, right? The helping know how to respond to certain kinds of these community property notices stuff like that. That's not their business model. Their business model is pay me a few hundred bucks and leave me alone. On the other side, the high touch businesses, basically a lot of CPAs are being told go up market, get richer clients, go after people with more complexity that you can charge more, right? And those CPAs in a lot of cases charge tens of thousands of dollars a year and they really want to work with as few people as possible because taxes is a very challenging business. And we've certainly found that like we are leading more in the high touch integrated relationship planning kind of side of things. And so for that reason, we don't have the capacity essentially to take on clients that are just looking for that tax only piece. Unfortunately, I also think we wouldn't do as good of a job and I'll give you an example of how we add service. We're not just doing tax prep. I was looking at someone's 1099 div, right? This is a form that you get from a brokerage account. And I think in a high volume situation, the tax prepare just takes it and then it's going to return and they move on. I read the div and I saw that this client had 2600 in capital gains distributions. That is not good. That is activity. That's it's very technical. It's activity. It's in current within the mutual fund. But basically that told me she did not have a tax efficient portfolio. We reached out to her. We're going to reposition her entire investment strategy and all of this because I looked at her 1099 div. I saw her investments and that she wasn't doing what makes and this was her tax bond account for student loans. Like you want that thing to grow. You want it to be in the best position possible for when you need it. Well, I mean, Travis is big three. Look at schedule D. Schedule D is carry four losses. It's where you do taxless harvesting. It's where you put all of your carry four losses that you weren't able to claim from prior years because you didn't have enough gains to claim them. So somebody doesn't have a bunch of carry four losses in their schedule D. It means they're not doing taxless harvesting. It means that they're under optimized when their taxes. Another thing back to our Roth IRAs. I always chuckle with them about this because it's like we have so many people that want to lease oil and gas trusts and wells and get involved in Airbnb and like do all these complicated tax strategies. Real estate syndicates. Yes, but then they you look at their 1040 and you see they didn't do a back to a Roth IRA and it's like, come on. Let's at least focus on the vegetables first before we get involved in like chocolate spice and things like that. And then the other one big one is donation of appreciated shares. The one that I like to use for my own personal donor advised fund is is daffy and I like this a lot because essentially what you're doing is you're taking appreciated shares things have gone up in value and you donate it to your donor advised fund which is the house the central housing facility if you want to think about it like that of all your donations. And then you donate from the donor advised fund all the charities you want to donate to. And that's a really great strategy because instead of donating like 10,000 bucks to charity like your church or something whatever your charitable goals are you donate the appreciated stock you get it right off the gain you take the cash that you would have given the charity and then you invested at a much higher cost basis on the investments so that essentially you're going to be able to use that money in the future without as much tax consequences right so that's you can also consider bunching those contributions we have a number of clients that are like right at the cusp between standard deduction and itemizing can make sense to do a couple years worth of those contributions instead of doing it every year and you know maybe every other you'll do like standard itemize standard itemize but that's tax planning yeah okay a couple things that are like niche things there is a loophole that I think will be available under the rat plan when it becomes live for people who make five figures filing taxes separately who both have student loans so sim at a high level the way this would work is let's say you've got two teachers married to each other and they're both going for PSLF right if you file joint you are over the hundred k threshold and you're going to pay 10% of your income under the rat plan but if you file separately it's possible that you could be under the 10% of income threshold right that you might be able to pay five to six percent of income if you're two public school teachers marrying to each other and that could save you as much as a few thousand dollars a year and see to loan payments so that's like a kind of a cool five figure income each kind of strategy that I've been thinking about filing separate versus joint in other cases if people have both have six figures of income in a household you know the filing separate situation is best if only one person has most of the debt right versus both of them having the debt and then just for fun let's talk oil and gas you know leases and short-term real estate and stuff like that what are your thoughts on that why do we get questions about that so often so we get these questions typically from very high income earners because truthfully they do pay a lot in tax and that's that's very painful and so these are people who are thinking of what are ways I can get big tax savings fast and that doesn't exist in my opinion but with these types of investments I'm a financial planner at heart so my goal is to grow your network and when people are talking about these investments they're talking about depreciation or a depletion and losses and like look at all of these losses I'm taking I'm like that's not great you're letting taxes dictate your investment strategy we want to grow your network right if your investments losing money that is not good but a lot of people are letting you what's the expression the tax tail wag the dog or whatever but that's the idea is that you're taking losses against income when normally wouldn't be able to take those losses because they'd be considered passive there's there's some exceptions certain tax rules you can take advantage of one way to illustrate this from like the obvious kind of case is like okay let's say you've got a dentist for the practice and like hey I've got too much income and I want to pay so much in taxes I need to get something that I can deduct this year and so you go buy something well it's like if that thing didn't add value to your practice then that was like okay you deducted it you saved 40% on taxes but you lost the other 60% you know what I mean so it's it's still a loss and if you buy an investment that is under performing compared to like another asset class long term then that tax loss is not going to necessarily help you and actually I think what's interesting in my mind about some of these short terminal loopholes is my bigger concern would be the lifestyle impact that it would have on somebody it actually I think can work really well for certain kinds of couples like we have a friend that is very active on the you know kind of that kind of strategy and she follows the letter the law she's hyper organized she she does it well but it's like you've got to spend at least I believe it's 500 hours and more than anybody else in the team right so if you have a cleaning people or you can't have a property manager for that short terminal loophole right so it's like you're talking about the material participation rules for rep status there's different criteria yeah so I thought about this myself for my own family and the way I look at it is like I don't want to spend a thousand hours a year managing Airbnb's I know my wife doesn't want to spend a thousand hours a year managing Airbnb's so like if yeah I could save some money on taxes if one of us did but that's not how I want to spend my time you know what I mean so I think that if you had a spouse who was like super interreal estate loved the idea of managing properties was just an absolute rock star for like handling complaints and online reviews and encouraging those reviews and marketing and property and doesn't mind traveling to and from that property sometimes for different kind of purposes right so it's just I think it's sort of like many things people hear about it think it's a great idea and it can be but I think it's oversold right like a lot of the things that I get online sometimes are these ads for courses for short term rental loopholes oil and gas trust kind of things keep in mind the fees in a lot of cases of these investments are really high right so there's a big incentive for whoever's pushing it to try to get you to do it same thing for like real estate syndications right like high fees there's a big incentive for the sellers of it to try to get you to do it you know if you look at a lot of these syndications a lot of them have underperformed public markets in a big way a lot of these alternative investments in my view kind of come more from a position of pain the pain is I don't want to have to do clinical work my entire life I want to create a passive stream of income that I can eventually rely on when I don't want to keep working anymore right that is the very real pain and then sometimes I think it comes out of a sense of boredom I'm bored with my job I'm bored with being a specialist that knows extremely well how to do this particular procedure a thousand times a year and I just want excitement in my life I think there's nothing wrong with that I don't think there's anything wrong with being involved in alternative investments but I would are you don't do it from a tax perspective do it because you want that lifestyle you want that do mean rush of owning your own Airbnb you know you want to try to pay for some of the cost of the mountain cabin you want to buy anyway that would be maybe a more good reason to look into that for most people obviously some people are gonna have unique circumstances I always tell people to make sure you're doing the basic things first before you try to get complicated I'm not against real estate as part of someone's portfolio but people were asking you this are also not maxing their HSAs or 401k's I'm like this is really easy tax savings that's passive right so do the basic things before you try to get complicated yeah one thing I want to say is if anybody has any specific questions writer concerns comments fears hopes dreams whatever I would encourage you guys to send sim and email directly
[email protected] so one thing ironically enough is we're not trying to sell you today to become a tax client because we don't have the space we have grown a lot as a company from a tax perspective like I'm really proud of sim's leadership I think she's got things going in the right direction for where I want it to be which is to be best in class for people who you know have student alone in taxes and the complexity surrounding that being their main thing that they're trying to figure out my goal today was you know for our tax clients we do a broad overview just in case you still want to hear from us on tax stuff we want to do it for you for SLP both clients not having us to taxes this year you know we just wanted to do this to talk a little bit about what people are experiencing when we're saying with tax season and then for the SLP insiders we just wanted to try to provide you you know just some insights and things to look out for if you DIYing your taxes or working with a tax professional already you know we've talked about some of the big ones right the watching out for doing your back to a Roth correctly making sure you've recaracterized it if you did it directly and oops didn't do it and you need to fix that some obviously it's not too late to make IRA contributions and solo 401k employer contributions right thank you so for back door Roths you have until April 15th I wouldn't recommend doing it April 14th but you still have some time so okay contributions if you're filing an extension that could be a good use of a strategic extension right if you want some time to figure out what you can contribute that's your deadline to make the contribution otherwise it's going to be April 15th and you can still make the employer one by the way that's a weird calculation it's kind of circular based off of you know roughly 20% of your schedule seeing that profit but yes you can still do those and I recommend you do it and then I wanted to comment on what you said Travis that we're not looking to add clients right now we are full if you're interested we can add you to our wait list and reach out to when we have more space looking at a couple of other questions here one person says that my students gonna have a low income you know when they graduate should I sign up for rap it's hard to give a broad answer to this in general yes because the rap plan incentivizes a lower percent of your income if your income's lower right so like for 45k I believe it's 5% of income something like that so for a 45k income it's a pretty modest payment and it subsidizes the interest so the interest is not going to grow on you if somebody's got a modest of balance they have a modest income the rap plan can be a good plan for people so that would be my kind of high level thought on that so let's see a couple other things for mistakes to point out well but I think a lot of people are interested in this MFS so we can keep talking about that by having the other things I've noted for this year okay yeah good best for your no no list your filing status is determined by what was your status on December 31st so if you were married even for one day then you cannot file a single and yet that is a mistake I've seen a couple of times now we're clients are like hey we got married this year and they file the single can't do that you have to do married filing separately or married filing jointly so that's one that that costs them a lot of money toaks the tax brackets are different this one hot take lots of people I'm seeing this you're getting large refunds some of them are five figures I've got probably four or five clients already getting like five figure refunds that is bad I know it feels good you're like dang I'm gonna like use this money maybe I'll do a backdoor Roth now that means you gave Uncle Sam a free loan throughout the year that's money that you did not have in your high yield savings account that's money that you aren't using to like go to Poulting at the guac on it you know I mean so like do a tax planning meeting when you check your withholding especially if you had any transitions during the year in other words you don't want a huge tax refund right no personally when I do tax planning I like to keep my clients up in the $1,000 range you know own more than a thousand you're not getting more than a thousand back I think that's good tax planning but it's like Christmas and February though Sam what do you talk about I like big refunds it's so fun I like earning interest on my money so yeah Uncle Sam unless they're late and getting your refund they're not paying you interest for that money that you gave them that is your money that you worked hard for so which is non-zero now it used to be zero basically right but it's you know you can get decent savings account interest now yeah it's not nothing but the point is you'd rather keep in your pocket than let someone else borrow it for free yeah and so that point about tax planning being important if you have a transition like if you're getting a new job or you're gonna be making more money or you're making less money maybe it's up like a parental leave we want to account for that multiple jobs so we've had several clients that have switched jobs and those two employers do not talk to each other employer A does not know what's happening in employer B so we've had a few clients that have 401k over contributions which is not a big deal but it's annoying you have to do some paperwork you have to fix it or you're gonna be paying taxes on that every year until it's fixed all right any other big things what's the big one so far i'm gonna just kick a dead horse with the backdoor rots because another mistake is not just people not doing it correctly but also not reporting it correctly you have to do form 8606 i've seen a number of clients where they did not have 8606 at all or it was done incorrectly we've seen people that reported their backdoor roth conversion completely as income with no cost basis and essentially you're reparded like 14,000 of like straight up income to the IRS is like an early distribution that having their paying like top ordinary rate plus 10% penalty all because they didn't fill out the basis of their conversion right so it's like yeah DIY tax prep might be like a hundred bucks but if you cost yourself more money than a tax firm would save you in potential mistakes obviously that ROI makes sense yeah I look at it now is like when I was poorer I was cheaper because my time wasn't worth as much right like me spending a couple hours on my taxes was like what am I gonna do with that time anyway I play video games I mean like this is like early 20s right but as the value of my time went up now like anytime I spend on taxes is time I don't get spent with my kids I don't get to spend it on other more profitable business stuff that more my time is higher value and I still collaborate with my tax person right but it's like I try to make that high impact time right another thing I want to point out too is get the right tax person or firm for like your number one pain point we are not the best option currently for somebody who needs an escort for turn filed for dental practice not yet maybe one day maybe one day but you know right now that's not our focus that's not our bread and butter so that's why I encourage people to email you because we will try to tell you honestly what we think is you know your best path right in terms of who you should talk to we are a good option I think long term for anybody with a bunch of 10 on a nine kind of stuff that isn't in the escort range where you should do that I think escorp is a hot takes them I think escorp's you're oversold kind of like short term and all kind of like how short term and all is oversold somebody made a point which is correct I guess that you know you have the the hundred hour material participation role where there's some loop holes right with the short term and all is where you can spend more time than anybody else but it can be a lower amount of time I don't know I think that there's probably I'm not saying this is the case of this particular person right but I would argue in the short term in all space there is very likely a lot of people skirting the rules and hoping they don't get out of dead do you know what I mean do people really spend if they're spending you know 150 hours a year are they really spending more time in that unit than the the person on their cleaning team that shows up every week are you really making sure that you're monitoring everybody's hours religiously where you can make sure that person doesn't show up every time so they don't have more hours than you you know what I mean I think that some of this short terminal stuff is kind of like I hope I don't get caught I hope I don't get audited and if you don't get audited then it's like great it worked well people do this actually says another great point schedule sees people trying to take expenses that are not legitimate expenses they're not ordinary and necessary and then they just report it to us and expect us to sign our name on a return and like you're going to get audited and we are going to IRS jail it's that's like well I mean an IRS jail's not the same thing as jail right just to be clear it would be a civil situation versus a criminal situation like we said like if you don't report your income that's actual jail and if you put something that shouldn't be on your return then that's something you don't want to get into but it's civil versus criminal but yeah like we have people that try to put their student loan payments on their schedule see as an expense to deduct it can do it like sorry like that we didn't make the role the IRS did sometimes we have a couple people who are like oh I found less new strategy that like saves me more money than you said that I was going to save and it's like that's because you can't do that legally yeah I mean yeah upload what turbo tax told you we'll go through it line by line go through the discrepancies and that's what's going to come down to you did something you weren't supposed to probably right so I actually see a really good question here that's a mistake I've seen someone's asking about amending from MFS to MFJ I have seen and maybe this isn't a lot right now but a two or three that were done incorrectly where that MFS to MFJ was not done and it resulted in a tax notice the correct procedure is you don't amend both people you put one spouse and you amend that spouse from separate to joint and there's a specific way you have to report the original income and the taxes paid and a lot of our DRYers just they didn't do it correctly and so then we had to deal with the notices and they didn't get the refund that they wanted one thing I want to do real quick is talk some good news can I talk about some good news them oh please no what's good tax news it might not be good news for our country because it's going to increase the deficit but like the salt tax changes for 2025 2026 or big change for a lot of clients this is going to affect a lot of our clients if I had to guess right now it's a probably half so if you should say hypothetically what was your AGI in 2025 let's pretend you got two pharmacists married to each other 300,000 total AGI let's say that they have state income tax property tax combined let's say they paid I don't know 20,000 something along those lines let's say that they paid 25,000 and mortgage interest in 2024 now I think I need to update some of these year numbers but the math is still correct so now let's say your income is 300,000 and your mortgage interest so in other words let's assume a sort of an unchanged situation this is going to save you more money because you're able to take a higher state local income tax deduction that's basically the gist of it right so the state local income tax deduction was kept at $10,000 for W2 to 99 folks I think it's up to 40,000 which is huge if you live in a state like California because you're paying a ton in state taxes probably a lot in property taxes as well yeah and it's not just for people to have the living states within income tax either if you live in Texas, if you live in Florida or you know you also have property taxes that's something to think about yeah and also I believe sales tax is an option too in those states that you can look at right in terms of like you know you buy a new car right you paid a bunch of sales tax that's relevant in terms of looking at that deduction amount. The IRS does give you like a diminimous amount so we do already put that on those clients returns but if you think your amount can be higher if you made a big purchase we can always do a comparison we had one client I'm not even kidding this year she has spreadsheet I forgot how many receipts she saved 500 receipts to total up a sales tax and she still couldn't pay the money she still had to take the standard deduction so that wasn't necessarily work her time probably not work her time to do something like that but if you have a big purchase that's worth noting. Well in the big scenario version of this if somebody is making 500,000 of AGI and let's say your property taxes, state local income taxes are you know 40,000 and you had 30,000 of mortgage interest you're just barely itemizing in the scenario of last year but then if you've got that same income and very large property state and local income tax mortgage interest in 2026 you could save 10 grand with this potentially so I think a lot of our clients are going to save anywhere from a couple thousand to several thousand because of changes on the caps for state local income taxes and that does phase out too right like so one reason for good tax planning is that state local deduction kind of gets phased down I think it's to 10 right down from 40. Once you have a high AGI so like that's another good reason to focus on like pre-tax contributions things like that to keep your taxable income below a certain level so you can maximize the salt tax deduction that's another big one for this 2025 tax year. Yeah it's a strategy we've had several clients in the what you're describing we call the tax torpedo when you're in the 500 to 600 range and there are some of them have self-employment incomes we're like do a solo K get below that phase out get the full salt cap. Yeah let's see if anybody has any sort of last minute questions in the chat one thing that I am a little concerned about is people putting dependence on certain tax returns with the family size definitions there's still some regulations we're awaiting because the save plan defined family size with the regulations for the Biden administration and very specifically but all those regs are thrown out and part of the settlement is they have to come out with new regs and response to that being thrown out so the definition of family size for people that are on ibr might change and we're not really sure how it's going to change so I was a pro-phalactic move for most of our clients we have been putting the dependence on the taxpayer with student loans if there's only one and sometimes what happens is the other spouse is the one that made a dependent care FSA contribution so they're going to be taxed on that I still think that's worth it because they're still saving payroll tax on that contribution and if they amend it later then it's extra not a big deal so I think we're taking steps just to put our student loan borrowers in the good position. We do have some tax calculators for SLP wealth clients that you can talk to with your tax manager or well if it's with your planter it's going to be at a high level if you want to go into detail it can be with your tax manager if you're a tax client of ours but we have stuff for like $1099 versus W2 calculators we have stuff for like helping people kind of think through the S-Corp decision about should I or shouldn't I solo 401k's you know so we have got a good number of calculators that we can help people think through things also like the tax bomb calculator we can help people think about that I saw one question was essentially about the tax bomb you know what are some strategies I could use to mitigate my tax bomb situation one thought I've got some is just be aware of your marginal tax bracket so like if you get a big boom of bonus income in a particular year and that's going to push you into a super high tax bracket if you're ever going to plan a sabbatical maybe that's the time to do it is in the year you get your tax bomb happening so you're in a lower tax bracket you could also look into temporarily moving abroad if that's an option you know for tax purposes you get a foreign income exclusion yeah you have to be careful with that you have to be in the for a certain period of time and but yeah you might not be worth it because then you might get taxed at a higher rate if you're a tax resident in a different country so there's all the kinds of things the student loan forgiveness will still come though so even if you're excluding all of your foreign income yeah you're still going to get taxed on that student loan for you see that's why you're the tax director not me the key thing is when somebody is coming up on that deadline I think it would be very wise for somebody to meet with somebody competent to talk about ways to be aware of what that impact might look like if it happens planning in terms of are there any things I can do where should I pull the funds from should I pull it from my brokerage account should I pull it from heaven forbid a home equity loan or something like that what I tell people on tax bomb accounts the reason why I think long term they won't happen is because most people have their wealth in their retirement their home or their business most people don't have six figure brokerage accounts the vast majority of people don't and so that means taking that money and paying that tax is going to be super painful for most people and eventually politically I even think that Republicans are not going to want to charge it but it has returned the tax bomb is active again as of 2026 and I think the reason it returned is because they want that their Republicans do as a way to prevent mass student loan forgiveness that's the reason I think why they did have it come back but I do think that they're going to get constituent pushback when we see some large 1099 seas with huge tax bills that come with it and I think my prediction is if they'll change that rule at some point or you know eventually Democrats probably win power again and they'll you don't reintroduce that but definitely worth a good tax planning conversation if you're at all worried about that happening in the 2020s you definitely should be talking to someone interesting question somebody asked what about like IDR counts like now it's kind of a mystery because they took down the IDR payment counter tracker some people have no idea when they're forgetting the states supposed to happen if you do a consult with us you should know you should get that from a consult with us is to went to expect that if you are a wealth client you should talk to your planner about that in your next regularly scheduled financial planning meeting and a quick and dirty way is just to look at your old dis loan you know if you consolidated during the IDR account adjustment go look at your oldest loan how long have you had that oldest loan that was not in a period of deferment right because that didn't count for in school deferment and then just that's the rough number is how many years you have that makes sense so like you say you've got you know a loan you had from undergrad and you had it five years you went back to school for a couple years you went back out you've been out of school 10 years you consolidated during the IDR account adjustment okay you've got about five plus 10 you got about 15 years you know and then if you're on the IBR plan or you a newer old IBR 20 or 25 years and then if you're about playing your 30 and so just subtract the 15 into those numbers probably wait you technical stem I didn't follow my own advice right but you know we can't help but we love what we do yeah it's it's fine to help people when we started tax I underestimated how hard it was going to be there are so many different rules state agencies local stuff cross state stuff for people move entry year and the student loan complexity just adds an enormous amount of complexity to everything else because you're trying to think through do you file on time do you file late uh well not late but you know do you do an extension in and file that way some really grateful to have you in the chair you took charge for us last tax season we've seen a market improvement in overall client experience and tax with your leadership and so I'm really grateful to have you in the chair and you know one thing I'm proud of is I'm not aware of any group that does more of this than we do I don't think it exists I think this is somewhat of a really challenging niche to deal with with all the student loan complexity that happens in taxes so we're excited to be able to provide this at least for some of our clients and to be able to get knowledge from that business to be able to share to folks that are not having us do their taxes I think that's like a blessing too do you want to take a stab at any last minute questions let's see someone just asked how do you certify without income or any evidence of income and we live in a community property state so you see that sometimes with like a state home parent isn't there like a self certified option we just say I have no taxable income yeah so the problem is is the processing with Department of Ed is totally been upended the past year I would just say in general alternative documentation of income has been a train wreck the past several months they've tried to cut Department of Ed they don't have enough people to process things Department of Ed has to approve certain things that the servicers do and they have put the breaks hard on this alternative documentation of income in terms of actually processing it and we're seeing people who give IRS permission that they've been processing the people who share IRS authorization to share income data right so that's just a little thing to let people know in general if you're wanting something to process give them permission to share with the IRS the data and then we probably will go through a couple other questions about limbo versus buyback okay I guess people wanting to know about jointly versus separate with like the buyback complexity going on yeah some people it might make sense to not amend if you need that tax return for buyback you kind of have to do a comparison see if it's worth it to miss out on that refund well in general though right you want to use up all the time that you have so if you're waiting on buyback you think it might happen the next year and you've got three years to amend your return yeah you don't have to demengrade away then like you don't have to rush to do it right like sometimes the smart thing to do from a tax situation is just like if we don't know something can we buy more time yes or no we've had to deal with this a lot with the IDR recertification stuff like will they are won't they like remember they kept kicking the can down the road and when IDR recertifications were going to be due like years ago really every year felt felt like so sometimes we'll do extensions just like strategically to buy more time to try to get more data on what we need to know before we file for somebody let's see extensions I believe everybody's got to file an extension or what's the rule on that I actually don't know you mean when the when there's two spouses so the iris will let you have like one spouse that files on time and another one that's an extension from our process how we do it is we tend to want to keep spouses on the same timeline and we will only split them if there's a good reason to do so because it's just honestly a lot easier to track like okay they're both on extension we can track a whole household but there's a reason to split them we will yeah somebody asked about pay should I stay on it or whatever we're still we're still waiting on the regs I mean like that's the kind of the hard thing that we're having to deal with the timelines for everything are so out of whack we're waiting on the save plan lawsuit regs we've gotten the final draft of the one big beautiful bill act regs that have already come out but that doesn't address a lot of the stuff that was struck down in the save plan court case that's another reason why we talk extensions sometimes because it just buys a section time to make sure things are done the right way so I guess that would be my general advice to people now one thing I want to say caveat about extensions before I say extensions are your friend Sam you still have to pay the taxes do on time right so yes and if you don't want any underpayment penalty you want to get us all of your info so we're filing extension I still want your return done yeah we still need it done done but it's like if we pay all the expected taxes it's going to be due on all the different levels that it's going to be due at then we've got a lot of flexibility and honestly from a client perspective I think it's great to to do an extension because what happens to tax preparers in February or March it was actually pretty hard for me to get someone the webinar today basically she's like sacrificing her lunch hour I think or something like that so it's like yeah so it's like February March is like that is not a great time to have a bunch of questions for your tax preparer even though that's when the taxes are due just because of how slammed they are instead it's not a bad idea to try to like make sure you're up to date on all the taxes that you owe when that extension kind of literally buys you that extra leisurely time to have that was final conversations with your tax manager prepare and you know may June July August where things are way slower the pace is slower they're more rested they're more relaxed you know just you guys know what to expect if your tax client all of our tax clients got a loom walkthrough of their tax return and an email summary yes it's AI generated but we fill in the information so we just wanted it to look pretty and then everyone is also getting a link to their tax managers calendars you can right away schedule your tax planning meeting and I do recommend you schedule that because we want to make sure we meet with you and you're not getting five figure refunds again so one person asked um but we have a farm and a business do we need to get those prepared first and come to the remainder in general always ask
[email protected] s i m right like sim card so we say sim so sim like the sim card yes some schedule fs we can do and some that may be too complicated so I always like to look at your prior year return if that activity existed and then I can talk through with you if it's something we can do and if not I have referrals we have a very good idea now that we've been in the business for three years about what is in our wheelhouse and what's not like the first season you know in some ways we weren't fully understanding of what we were walking into in all circumstances so an example I remember is a cost basis issue for inherited timberland trust or something like that and that was just like okay this needs to go to a separate firm we're not the best place to handle something like this that's what's nice is like we know what we can do well on and we can always just share our thoughts when you ask us I'm proud of the niche we've carved out within this space and exciting to be more excited to provide some guidance to people at a high level again we are not taking on tax clients today we are open to hearing that you're interested or just this is my situation what would you recommend should I talk to a tax preparer should I try to find somebody those kind of questions we would welcome
[email protected] the cost for the tax prep we have an onboarding fee currently because we're in crunch time if I make a one off exception the onboarding fee is 995 but our normal onboarding fee is 495 so we have like a right I think generally the way we do it is we onboard people at the end of the calendar year at that lower onboarding fee we charge the onboarding fee because we want people to have skin in the games that they are committed to wanting to use us long term frankly because it's just not worth it to take on a client for one season for either side really it's just kind of a pain in the butt for everybody for that someone pays for three months to do a complicated return and then cancel because we on purpose we don't want to lock people in we want to work with someone yeah and we learn that less in the hard way and and it's 199 a month ongoing so if you think about that yearly cost 2400 dollars a year that's not cheap you could definitely find places that are cheaper but again the reason it's cheaper my view is because it's more the volume play right somebody who's doing 500 returns and they're pumping them out and there's not a lot of strategy there's not a lot of stuff that's carefully looked at especially and as it relates to student loans and that's why we charge what we charge I would say sim if you go look at some other pricing on like some popular marketplaces online that some professionals will be subscribed to or follow that 2400 dollar a year price is very cheap compared to some places for yeah we did a really extensive like cost analysis we compared ourselves to other firms looked at what our offering was and we're we're not the cheapest game but we're by no means expensive for what we're doing the four seasons costs the four seasons price as long as you're staying in a holiday and or above you're going to upgrade experience so that's what we try you know I'm just joking around but if you have complexity around student loans and you don't have inherited timberland trusts or S corporate turns that you need to be done or something like that I think that's the other thing we we change we change a lot of processes since April 16th and we also just we do better vetting of our clients and the people we bring on to our team the last CPA we brought on to our team I specifically asked him in the interview what is your experience with California notices and he had experience of California notices so there you go we know what questions to ask for now yeah it's not a separate fee from the filing costs we do have a cover ourselves kind of thing and the in the contract where we say basically you know for complex situations we can charge I think it's a 199 per hour fee or something like that outline those complexities but most of our clients aren't subject to that most don't have most most situations are covered yeah for example if somebody's got multiple rental LLCs right or somebody's got multiple states like three or more states or something like that people have some weird situations right like they're doing locomotines and they've got five different states in their return and you're like multi states yeah right thank you for listening to that webinar in my unorthodox episode for today's student loan planner podcast if you want to talk about high level strategies for student loans and just getting the basic answers of like what do I do this tax season with my student loans if you are not an SLP wealth client just go to student loan planner.com/book and book a consult one of our student loan experts that is more than adequate to get a bunch of different kind of questions answered as it relates to your taxes and your student loans to know what to do with this big major upcoming transition for a lot of people to the rap plan and also basically walking in on a people onto the IBR plan so if you need a consult student loan planner.com/book like I mentioned in the webinar we don't have space for tax clients at the moment with this tax season we're fully committed but I will say that when we do have space we're going to make it available to SLP wealth financial planning clients we do have to have you be an SLP wealth financial planning client for you to be able to get the tax services because of how integrated the two services are and how it's really built to be a one-stop shop so if you would eventually maybe like to get tax services added on if you're already an SLP wealth client just let your advisor know you'd love to get on that wait list and then if you would like to eventually be on the wait list the best thing to do would be to simply go become an SLP wealth financial planning client so that you can get access to that service when we open it up again for new clients assuming of course you're interested and the link for that is pretty straightforward it's just SLP wealth.com and then just click on the get started link anywhere on that website and it'll take you to the page to sign up and try out SLP wealth thank you all so much for listening to the seal and plan a podcast I hope you have a great rest of your day
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