Forethought Planning Podcast

Ep 80: What Should I be Doing in 2022 to Get Organized with my Taxes?

February 08, 2022 Shannon Foreman Season 1 Episode 80
Forethought Planning Podcast
Ep 80: What Should I be Doing in 2022 to Get Organized with my Taxes?
Show Notes Transcript

Look, it's February. I know a lot of times we wait until April 15 to have tax conversations, so if you missed our last episode of The Thrive For[e]ward podcast, we talked about what you should be doing right now in February, before April 15.
But on today's episode, we're going to actually talk about what you should be doing in 2022, to get yourself even more organized for next year.

The thought process, labels, and teams to help you get more organized and not overwhelmed when it comes to taxes.

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Securities offered through LPL Financial, a member of FINRA/SIPC. Advisory services offered through Advisors' Pride, a SEC registered investment advisor. LPL Financial, Advisors' Pride, Forethought Planning and the guests of Thrive For[e]ward podcast are separate and unaffiliated parties. Lisa Harris and Lisa Harris & Co are not affiliated with Forethought Planning, Advisor's Pride, or LPL Financial. The views expressed here are those of the participants, and not those of Forethought Planning, Advisor's Pride, or LPL financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. LPL Financial and Forethought Planning do not offer legal services.   

Shannon Foreman  0:02  
Well, hey friends, it's me again, she can inform and your host of the Thrive Forward podcast. And we are here to talk about nothing else more exciting than taxes. Look, it's February. I know a lot of times we wait until April 15 to have these conversations. If you missed our last episode of The Thrive Forward podcast, we talked about what you should be doing right now in February, before April 15. But on today's episode, we're going to actually talk about what should you be doing in 2022, to get yourself even more organized, and thought process and labels and teams and helping you to get overall organized and not overwhelmed when it comes to taxes. So continue to subscribe to the Thrive Forward podcast where we are constantly every week, downloading for you some great content, when it comes to making sure that you feel empowered with your wealth. Now, let's dive in to some more taxes.

Shannon Foreman  1:10  
All right, I'm going to try and make this topic of taxes, a little bit more fun than maybe I don't know, a nap you might want to take during this episode of The Thrive Forward podcast. That being said, friends I get taxes aren't always the most fun topic, but they do affect us in different ways. And as we talked about, on the last episode, we don't want to wait till that mid April deadline, we want to start planning ahead. So what should you be doing now? Well, there are a few things that you want to maybe plan ahead and think about what are things that are changing from a tax law perspective, it feels like maybe it's a constant rat race to understand the rules of taxes, because we live in a complex country with complex taxes, and so they're not always easy to understand. So as I said in Labbit, last episode, if this isn't your damn thing, you should probably be leaning into your personal board of directors, your financial planner, attorney and tax professional to help guide you through this year. Now, some of the topics that I have conversations with my clients about, we don't want to wait till the end of the year to start having conversations. In fact, at the beginning of the year, we start to understand what are some of the changes that we can anticipate? Will they be buying a house? Are they expecting a child? Are they retire me? Are they changing jobs? Potentially? Will they have arrays that they can consider any bonuses or stock options or restricted stock that's coming due? And what do we anticipate their income to be producing for them this year, both important while you're still working. But also when you're retired, it's important to understand what are your resources that are available for you. Many times, we are hearing from our tax professionals that we want to lower our taxable income, here's the deal, they're paying to be able to tell you to lower your taxable income. That's what they want to do. That's why it's so important to make sure that your personal board of directors is looking at all different angles for you. A lot of times when I have clients who are lowering their tax bracket by maybe maxing out their 401k, or making a deductible contribution to either an IRA or deductible contribution maybe to a charity, a charitable donation, we aren't always thinking about okay, here is how much it's lessening our taxes. But this is how much it's actually going to a cost me in the future? Or be how much I'm actually removing from my portfolio? How is this going to impact my short term and my long term goals? Saving on taxes isn't the only thing that you should be thinking about? You should be thinking about, okay, hey, here are the different buckets of money I have. We've talked about this before on the episodes of the podcast, you can go back and listen. But we should have different buckets of money that we're planning for for the long term or what we can choose from when we're in retirement, we want a bucket that has money that does allow us to get a lower tax deduction now, which is called tax deferred, and we're gonna pay taxes on it later in life, a tax free bucket if we're so wonderfully able to directly participate in that, although there are other options out there for you too. And then a taxable something that we're paying taxes on kind of all the time, so that when it comes time for us to use it, we aren't necessarily having to pay as much taxes or have a little bit more control over what that bucket might look like. That being said, us making those tax deductible contributions right now might actually mean down the road. that we're paying more in taxes. For many, many decades, the thought process was that when we reach retirement, we wouldn't be in a lower tax bracket because we would have less income. Well, that isn't always the case. And especially if we are locking up money in a tax deferred product, and like a traditional IRA, a 401 K, or a SEP IRA, or pension plan, or all of these different parts, it might mean that we actually have a bigger bucket of taxable income to us maybe not the same as what we're making right now. But we will have some in the future, they're called required minimum distributions that you have to take in retirement. And you don't control when you get to take money out. When you turn, as of right now, 72, you have to take money out. And at 72, we don't know what the tax brackets are going to be. And maybe you have an RMD required minimum distribution, that might be $100,000. If you're socking away money every single year, and then that money is compounding interest, and capital gains and portfolio appreciation on top of all of that, then you might have a larger tax situation for yourself in the future. So as you can bet, I'm going to say financial planning will allow you to be able to see some of those things, and how you can be allocating some of those monies into other buckets so that you can even out that Plainfield just because today, it means a tax deduction for you now, it could mean more taxes for you in the future. And so that kind of leads me to if you're going to fund and save in a tax free manner, looking at those on understanding, like what is it that in my health benefits, maybe it's open enrollment time, right, open enrollment time for some individuals, as in the fall Summit is in the beginning of the year, it kind of fluctuates based on whatever your company has decided, usually their fiscal year, and you're going to apply for benefits, what is available for you. Many times, we only think of tax free as a Roth IRA. But an HSA option is like a Roth IRA except for for health reasons. And that is one area where you have the ability to usually use a high deductible insurance plan and participate in that HSA, of course, you want to understand how do all of these parts play? Do you have a lot of medical expenses, do you have enough in savings to get to that deductible, don't just pick a high deductible and not have money, socking away for yourself to be able to pay for the different things that you're going to have to cover before you reach that deductible. Sometimes even your employers will give you part of that deductible because it costs them less to operate for you on a high deductible plan. So making sure that you're looking at how all of those situations play, not every individual has the ability to directly contribute into a Roth IRA. Those are things that are limited by income. And actually, there are a lot of things on the table right now, when it comes to Roth IRAs in the legislature. So we want to pay attention to what's going on again, throughout the year, you want to make sure that your personal board of directors are talking to each other. And they understand how one thing that happens over here might affect you in the long term and explaining that to you so that you have a better understanding. For instance, if you have smaller 401k is out there right now might be a great opportunity for you to sit down with a financial advisor, financial planner and understand what is the opportunity for me to maybe convert some of this to a flat tax free option? Does that make sense in my financial picture? And understanding that if you did do something like that, are you eligible to do it? And what are the tax situations that you're going to have to incur right now? Is that going to put you up another tax bracket? How do all of these things play into part? Another piece that I constantly run up against with my clients is charitable donations. Look, everybody wants to run away from taxes, and especially no fault of your own tax preparers. CPAs but not all the time. If you know 5000 $10,000 In less taxes might mean somebody's actually having to take 20 or $30,000 out of their portfolio to make that make sense. The other piece is in when it comes to charitable donations we want to understand, of course, I'm all about giving like if you have spent time with me, you understand charitable donations are a big part for me, but what is it that you're doing? And how does it make sense for you? If you're To make those large donations, is there an appreciated security that could benefit you in order to make that donation? What is it meaning for you to make and write that extra check? Is it meaning that long term, you might end up not having as much money to spend for yourself and the dreams that you have? versus making that charitable donation? Not disconcerning you from like, being able to actually make that donation, just think about it in the big picture scale scale, because your tax advisor is going to tell you well, this will save you taxes will tell me how much in taxes is this going to save me, a lot of times we deal with this conversation, especially at the end of the year, in December, but it doesn't have to wait that long. We can do projections in the middle of the year. In fact, plenty of the partners that I work with who are my clients, CPAs, or professionals that I work with, they are doing projections throughout the year. Now, you usually don't want them to do projections in the month of April, they're kind of busy. And quite frankly, even until May. So a lot of times I'm meeting with those individuals medeor to be able to do some of that planning. So we're not waiting to the last minute, and you don't miss any end of the year deadlines. So there are a lot of different things that you can think about before the end of the year. I hear so often, like here are the end of the year, you know, deadlines that you have. Or you can make contributions up until this point for this point, right? Look, I get it. But if you plan well in advance, and you understand how all of those things correlate to each other, then you don't have to wait till the last minute.

Shannon Foreman  11:46  
Wow, we talked about a lot of preparing so far in this episode. And I just want to pause, because I think sometimes this can feel very overwhelming. And maybe you're like literally getting to the point where you're like Shannon, I don't know if I can take in any more information. I need help digesting some of this. Well, my friend, everything that we talked about on our episodes of Thrive Forward are things where you do need to dig down inside and understand how these topics might affect you or not affect you from a personal standpoint. So I strongly encourage you if you're feeling in this situation, to simply schedule a wealth assessment with us today, we would love to have a conversation with how does everything in your financial life, touch the rest of your life? And what could you be doing to move forward in a way that helps you thrive? Simply go to forethought?, backslash wealth assessment, all right, don't hit stop, let's continue to learn and grow our brains so we can feel incredibly empowered with our wealth. The part that's hard is some of my small business owners look, I get you don't have a crystal ball. Me either. Sometimes we aren't going to understand what our revenue is for the year what our expenses are going to be. And overall what our taxable income is, because sometimes that correlates to what are we going to contribute to our own retirement because business owners, nobody else is saving for you except for you. So you need to make sure that you're setting aside those monies for yourself and understanding the big picture as well. Now, you my dear business, entrepreneur, badass women out there who is managing your own business,

Shannon Foreman  13:40  
you too can keep yourself organized throughout the year. And leaning into a professional is one of the best things that I did. When we I was starting my business. I deal with this stuff all the time, y'all. But it's important for me to delegate some of these tasks to somebody else, because I'm busy doing everything else and running my business. And I'm sure you are too. There are great resources out there for you to be able to track your expenses as well as pull pull business reports for yourself understand where your business is, from a profit and loss standpoint, what your cash flow looks like so that you can be really educated when it comes to your business. One particular product that I know a lot of business out businesses out there use and CPAs love is QuickBooks. Now there are a lot of other great resources out there that you can use to in order to be able to track your expenses. Some software's that you use to do billing and things like that might even track some of those things for you. But for instance, technology has become so great that we can use our phone to scan our receipts, upload them and you actually don't need to keep a hard copy of your receipt. But if you simply take a picture, upload it to your cart QuickBooks and have it right there for yourself, you are eliminating so many last minute steps for yourself, schedule a CEO day for yourself, as a business owner, when are you sitting down and actually going through these things? If you are not a business owner? When are you going through the other aspects of your finances? When are you going through your expenses that you've had? Are there any charitable donations, we should all be sitting down with our money, at least once a month to understand what is going in? And what is coming out? How are we paying ourselves? What does that payment look like? Where are we saving things? What is that savings doing for us in the long term? What does that savings produce? For us? What does our debt look like? There are a lot of things that are going to be changing in 2022. Student loans are coming back into fruition, Child Tax Credits are up for debate of whether they're going to be able to be paid to us anymore. And that is something that I know a lot of individuals have counted on. So you want to pay attention to some of those things. We talked about charitable donations, one of the things that changed in 2022 for taxes is the element that up to $300 per person or 600, as a married filing jointly, you now don't actually have to keep receipts. So in my previous episode, where I was talking about, you know, the donations to the Girl Scouts, or the wreaths that you buy from the Boy Scouts, or the magazines that you buy up the road for the school fundraiser, and you don't necessarily have to keep those receipts anymore, we've been keeping them for so long, or writing down on a post it note to put into our Excel file. Here's where we add donated to, now you have the ability to right off up to $300 for cash donations to of course qualifying charities. So you want to make sure that they are registered 501, C threes, in order for that to be eligible for you. And as always make sure that you're leaning into your tax professionals are utilizing great websites like To double check your work. Some of the software's will ask you the questions so that you can make sure that you're inputting that number correctly. But again, as we kind of look forward into this year, I would encourage you every month to schedule a date with yourself. If you have a partner that you manage your funds with, or without like some households manage their money completely separately, guess what, if something happened to either one of you, you should probably understand what's happening with the other person's finances. That doesn't mean that you get to judge what they're doing, but have a good sense of what's happening. So if anything did happen, you're there to step in and assist. So meet monthly, at minimum, understand what's going on. If you are a business owner, you should absolutely be sitting down and understanding this. It's something I kind of do weekly, and sometimes even daily to understand the movement that's coming in and out of my business. So I strongly encourage you to have that monthly date. Then involve your personal board of directors, what are the strategies that you personally should be taking? We talked a lot about different things that you could be doing right? What does it mean for you to be saving? What are the investment vehicles that you are doing right now? How do they work for you right now and in the long term? Lastly, don't just look at reducing your taxable income. Look at the actual strategies for the long term. How is this affecting you right now. And going forward? If you don't understand these things, as I've said before, this is something that you can totally delegate. If this isn't something you want to do. Now, not understanding and not doing are two different things. If you delegate this to someone else, please ask questions, please make sure that you verify, please make sure that you get references or referrals from individuals in order to make sure that person is actually giving you qualified tax advice. And not just shooting from the hip or taking a three week course on taxes and all of a sudden are considered a quote unquote, expert. We are professionals in our field of fact, I don't think any of us are experts because things are changing all the time. So we have to keep up enough for you to have a better understanding of what is happening. So if you don't have your personal board of directors, and you've listened to this episode of this podcast, and you're like, oh, Shannon, I know I need to get my rear end gear. Well, you can sign up for your wealth assessment and forethought planning today. Just simply go to forethought. backslash wealth assessment,

Shannon Foreman  19:55  
my dear friend. Yes, taxes are part of your financial life. You are worthy of wealth. So don't put this part off. You got this. In 2022, we have decided to feature some really great nonprofits who are making moves, and trying to create change in the areas of financial education, empowerment, empowerment for women, and girls and young people, and helping to create jobs that really transform people's lives and supporting small business owners so that we can close the pay gap and the wealth gap in so many other financial gaps that we have. So we are looking forward to spotlighting a few of these organizations. Now, let's talk about this month, feature non profit. In February 22, we would love to outline for you in terms of great organizations who are supporting women, and thriving to close the wealth gap and support education when it comes to financial empowerment, the local black women's wealth Alliance in Minneapolis, when I tell you that this organization is inspirational, I mean it. They are providing wealth, education, business support, professional development, and even donations based wealth funding to small businesses within their community. What this wealth fund does is help support some of those small businesses who are starting up and trying to create change and have a great idea. The women that are a part of these circles, as women are brought together to grow in business support and professional development, actually get to see some financial support from these organizations as they grow their business. So many women had to create change in their lives in 2020 and beyond. And we know how powerful it is to own your own business. Of course, there's a lot of work that comes with it. But when when you're surrounded with a community that supports you, not only from a strategic standpoint, but a emotional standpoint and a developmental standpoint, and then you back it with the professional aspect of funding. I mean, how could you not want to see these strong, courageous, amazing black woman business owners thrive. You can check out more on the black women's wealth Alliance at B WW a dash or simply search black woman's wealth Alliance on Google. They are also on social media so make sure that you take an opportunity to follow along with them. And if you feel so called Make sure that you participate in helping these black women business owners move forward. The views expressed here are those of the participants and not those of forethought planning advisors pide, or LPL. Financial all investing involves risk including loss of principle, no strategy assures success or protects against loss securities are offered through LPL Financial and member of FINRA and SIPC advisory services offered through advisors pride and SEC registered investment advisor LPL Financial Advisors pride forethought planning and the guests of the Thrive Forward podcast are separate and unaffiliated parties

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