Acquania Escarne 0:00
Hey everybody, today we are going to talk about five tax tips you need right now. It is almost the end of the year. It is time to start working on our taxes and saving ourselves the most money possible.
You are listening to the purpose of money podcast, a podcast where we talk about ways to build wealth and create more freedom in your life. Today. I am your host, Acquania Escarne.
So I want you to go ahead and share this live with five people because I'm sharing five tax tips you need to know right now, okay. I am excited about this topic because I feel like entrepreneurs do not do enough tax planning.
Now, I will start with the caveat that I am not a tax expert. But I do work with tax experts who make sure I get my taxes, right and today, I'm going to share some of my top tips that I actually review for myself at the end of the year and I want you to review for yourself. So you can make sure you're maximizing your taxes this year. I do not want anyone to overpay Uncle Sam. And I think that a lot of us just pay taxes because that's what we're taught to do right work, earn money, pay taxes, but we never tried to use the tax system to our advantage and making sure that we are paying the minimal amount of taxes necessary.
I am an advocate for paying what you owe. Everyone deserves to contribute to society success. But it's really, really important that you guys also keep in mind that there's no reason that you should over pay your taxes at any point. Okay, so I want you guys to tune in today, share this live with friends, because we're going over five tax tips you need right now, I want to make sure that everyone understands that it is the time to plan.
Everyone assumes that tax season is only time, they're supposed to worry about their taxes, but the ones who save the most on taxes, worry about taxes all year round and this is the time where you should be doing end of the year tax planning, right. So one of the things that I will be honest, like 2015, my husband and I came back to the United States after living abroad for three years and I had an I met a person who referred me to a new CPA, and she was the one who was like, you don't have to wait till April to do your taxes, you need to be doing tax planning. And I was like, wow, tax planning, like what is that?
So I am being honest with you prior to 2015, I didn't even really know what tax planning was. But when I did it, it was like mind blowing, not only did it help us save a whole bunch of money, it also helped us set expectations on our taxes and what we owe, and how we could potentially improve our tax situation before tax time.
Okay. So tax planning, for those who don't know, is when you sit down with your spouse, or your CPA or whoever helps you with your taxes, and you actually walk through what your year was like, financially.
So you're gonna, in the last quarter of the year, you're going to look at quarters one through quarter four, you're going to look at how much taxes you paid. And listen, this is not just for entrepreneurs, this is for everyone. Individuals should tax plan just as much as entrepreneurs, okay. And when I started in 2015, it was just me and my husband, I had no business, I did not even really want to pursue entrepreneurship. I wasn't thinking about entrepreneurship. So I want you to understand that tax planning is for everyone. It is not just for entrepreneurs, but it will save you tons of money, and it'll help you get ahead on your taxes. Right.
So I met with our CPA, my husband was there too. We presented our income, we presented our pay stubs, so he could see exactly how much we'd already paid in taxes. He also was able to see how much we contributed to our retirement accounts and what we had done to basically offset our taxes for the year.
Tax Planning is when you sit down and you literally look at what are your taxes still owed even after all the things you've done? And what steps can you take right now before tax season ends, so that you don't have to owe as much as you may owe right now. The reason people end up writing the IRS checks is because they don't do tax planning. So they always miss opportunities because they wait until April to start thinking about last year's taxes when they should have been thinking about the taxes in the last quarter of the year, right?
When you think about your taxes, now, you can actually still do stuff between now and the end of the year to lower your tax bill. So this is why planning is so important, right? And you've guys, I'm sure you've heard that phrase, when you fail to plan you plan to fail, right? So when you plan, you're more successful at lowering your tax liabilities, right?
So today, I'm going to share with you five tax tips that you can use right now. And I want you to invite a friend in the room, get your questions ready, I'm sharing real tips that I use, I use it as an individual, and I use it as an entrepreneur. So I think that these will be really good for everyone who's here today, not just business owners. Okay.
So I kind of already talked a little bit about my first tip, which is talk to your CPA and do tax planning, I cannot emphasize enough how invaluable that is, because tax planning is how you really assess where you are. And you don't have to wait until April to do it. For those of you who are curious, okay, we actually have 154 days. And so April 18 2023, which is tax day next year.
But as I've emphasized today, you actually can start planning for tax day today. So the five tips I'm going to share about tax strategies that you can use now are going to help you to hopefully lower your taxes for next year. Because 154 days until tax day doesn't seem like a lot of time, but we only have about two less than two months of this year. So you really need to take action today to lower your taxes to maximize your income, and to get some more money in your pocket.
So tip number one is to actually sit down with whoever you do your taxes with, whether it's a CPA, your spouse, your partner, but figure out how much have you already spent in taxes. And based on your income, any revenue you've generated from assets, whether it's real estate stocks, or investments, you want to also look at what is my potential tax liability for these things? You know, what is my bill looking like? Have I already paid more than my share of taxes? And am I potentially do a refund? Or am I going to owe taxes in April, and I need to potentially do some more things today to lower that tax bill. Okay, so that's what we're going to focus on today. So tip number one is to work with a professional, I love working with a professional because they are paid and trained to know the tax code. I am not, it's boring to me. And taxes. Honestly, they scare me. Like I don't want to mess up Uncle Sam is the one person I never want to owe, I don't want to be running from and I always pay my bills.
Okay, so if you are like me, and you just don't like dealing with taxes, I recommend you work with a professional CPA. I work with a CPA to help me with my tax planning strategies, but also helped me go through my books because I'm an entrepreneur, I also have a nine to five, I have income that needs to be accounted for. We have real estate, that needs to be accounted for. It can get complicated, but I didn't always have someone to help me do my taxes in the beginning, my husband and I were able to do them for ourselves for a couple of years until we realize our income and revenue has grown. It's now time to hire a professional. And I love working with a professional who can help me understand a tax call. But it's not just working with a CPA or an accountant, you need to work with someone who is committed to helping you save on taxes.
So they need to be thinking forward, they need to be making sure that they are giving you strategies that can help you save on taxes, not just pay your taxes, okay? This is to, you know, it's 2022 we're all here to make money. And we want to keep as much of it as we can, while still abiding by the law and paying taxes. Okay? So work with a professional to help you navigate the tax code, and really understand all the things you're entitled to write off, and all the things that you should remember so you get to maximize your money.
The second tip I have for you is the importance of really evaluating your income. Like I have an income goal as an entrepreneur, I have an income goal as an employee, right? Like some things we do control to an extent. We want to make sure we're making enough money are meeting our goals right on our money. And if you're not, this is where you can reevaluate, you know, should I look at other opportunities, businesses or jobs right? But why you're looking at your income. If you feel that you have already made a lot this year, whether it'd be because how your job is structured, if it's commission based, you've made a lot of commission or if you actually have made so much money you might be at the border of a tax bracket and You're afraid that if you get one more check, you're gonna go into another tax bracket. One strategy is to defer your income.
So Tax Tip number two, is if you're an entrepreneur or an employee, and you feel like you are on that border of changing tax brackets, you could ask to defer your income. What does that mean? Right? So for an entrepreneur, that means I can actually bill some of my clients for my services at the end of December. So in this year, but let's say December 31, right, which who's gonna be looking at their email to pay invoices on December 31, they might pay those bills right on January 1. But guess what all that income that comes in on January 1 is income for the next year. So it is not taxable in 2023. So if you're an entrepreneur, you've hit some crazy income goals, and you need to actually lower or stay in your tax bracket. And the next big payout is going to impact that you can choose to bill your December invoices at the end of December, and potentially, for them to be paid in January. So that's one way of deferring your income.
Another option, if you're an employee is to talk to your employer about potentially getting your bonus next year, if you are working at an employer who gives bonuses, and they do have a policy where they pay them out at the beginning of the new year. That's a great way to know that the incomes coming but defer it until the next year. So that tax wise, you're saving now, right, so you're not going to get that big check at the end of the year, that is now taxable. When you pay taxes in April, I have a client who actually is in the same position, started a new job was offered a large signing bonus. And rather than giving him one check, the company said they do have a policy where they can take that signing bonus, and spread it out over multiple pay periods, allowing him to stretch out that signing bonus across this year and next year, which helps him lower the tax hit right. So this is not something that's illegal, you can do this, if it's a company policy to defer bonuses, or they have a policy with pay it in the next quarter, then you are well within your right to go according to that policy and defer that bonus until the next quarter.
If you're an entrepreneur, you decide when you bill your clients, right, you send out your invoices. So if you've already hit some high income goals this year, and you want to defer some of your income, you can bill at the end of December and have those bills due in the next year. Now this is also assuming that your calendar year for your business is January to December like mine, but some businesses will operate on a July, June to July schedule or some other format, whatever your calendar year is, just make sure that you're taking note of what your income is how much you're making. And then if you need to defer any income, make sure you do it before the end of the year, right. So it doesn't count in this year's taxes. So that's tip number two.
So tip number one was work with a professional, get your taxes done by a professional and work with a professional who helps you understand taxes, and what you should be doing to save the most. So make sure you're doing tax planning. Don't just hire someone who does your taxes never explains anything to you and you have no idea what's going on. I think it's important that we are involved in that process. And we're doing what we need to do to make sure together, we are maximizing our income and minimizing our taxes. Make sense? Okay, cool.
My third tip is get all your deductions. So many people forget that they can deduct stuff like charitable donations. So one of the things I do you know, everyone normally does like spring cleaning, but I actually do end of the year cleaning, I actually am going through my closet right now picking out clothes, sweaters, things that I will never fit again. And I'm donating those right? Because I can collect enough that I if I want to I can itemize my donations or I can just put them in my standard, but I want to cleanse my house of stuff I don't need I want to help other people. And if it ends up helping me on my taxes, that's a win win win, right? So why not just go ahead and clean your house and make some donations take advantage of all of your tax deductions. But you don't have to just donate stuff. Most people don't realize this, but you can also donate stock.
So if you want to donate stock to an organization you can and you get to write off that stock or you can donate property. Yeah, I'm a real estate investor. Right now. I haven't been given away property just yet. But it's on my radar because listen to this. When you have property and you donate it to a charity, you get to write off the property's market value at the time of the donation. So as long as you donate the property before December 31, you get to deduct that donation from your income, right? So it's a win for the charity, they get that stock, or they get that real estate, and you get the write off. So we're always interested in saving money in any way we can. And you don't have to always donate cash. You can donate things, I donate stuff I donate to charity, what are the things that they need, so you can donate materials from your home, you could donate used items, you can donate property, and you can donate stock. And then you can write that off. How's that sound? That's like, so cool. I, I don't know if anyone's ever gotten to that level to think about it in that way. But this is tax strategy that billionaires use, okay, and they're using it to really lower their taxes, until you got to know the game to play the game. And I think it's important that we all know more about taxes, so we can take advantage. But you need receipts, okay, um, I'm not kidding, you need proof that you qualify for this deduction, and that you made the donation.
So whatever you donate, make sure you get a receipt, make sure you kind of give an estimated value. If you are donating property or stock, there is a value, you know what it is, you can look at the stock price, you can look at the home value or the property value, but try to get a receipt for your records and for your bookkeeping purposes. So when you make that deduction, it is very clear why you made it and how much the deduction was for Okay, so let's donate to charities. And let's get the tax write offs. Okay.
The fourth tip I have for you today that I really want you guys to know, is an extension of the stock piece. Okay. So let's say you have stocks, they haven't been performing that well, in your portfolio, they've had losses, and you've had gains in other spaces, right. Other stocks have done really well, some stocks have done poorly, right? Most people who invest in stocks don't realize that if you sell the stock that's losing value, called it's a method called Loss Harvesting, right? So it's selling off your loser stocks, that's the easiest way to think about it, right?
These stocks are not performing, I want to get rid of them before the end of the year. Because when you sell stocks at a loss, you get to offset those losses, dollar for dollar to any gains that you have received from your other investments, this counts for stocks and accounts for mutual funds. So if you're an investor, you have money in the stock market, and you've experienced significant losses, and you want to write off those losses, sell the losing stock, just get rid of it. It's called Loss Harvesting, it is legit, and it's probably going to be better for you in the long run to be able to write that off, but also to get those thoughts out of your portfolio.
Now remember, I am not a financial advisor, I'm not giving you specific financial advice. I'm just saying what I do to lower my taxable income each year, we look at our portfolios, we figure out what needs to go and we sell it right so we can write off those losses. And hopefully you've had more gains then losses. So it'll just lower the taxes that you pay on any gains that you might have experienced this year. Okay. So I think that's a really good tip to keep in mind as well.
One of my fifth tips, cuz I said five tips. I might even give me some bonuses too, is retirement accounts. So this is the time I want everyone here on this live to really look at your pay stub and see if you have already maxed out your retirement plan. Okay. If you are in a 401 K, 403 B, Thrift Savings Plan, whatever employer offer retirement account, you have, the IRS says you can contribute up to $20,500 for 2022.
So that means as long as you contribute up to that much in this calendar year, that's how much you get to put into your retirement account. And if you are over the age of 50, you actually get to put $27,000 in your retirement account. So you will get to save even more. It's called Catch Up Contributions it's the extra money you get to put in because you're older and they want you to catch up before you retire. But the benefit to that is if you are putting your money into a tax deferred plan, that's a 401k normally, where you're contributing pre tax dollars, then you also get to deduct from your taxable income, those contributions so you contribute 20,500. You get to write off 20,500 from your taxes. This is a dollar for dollar win for you because for some people that may change your tax bracket, right?
But it also saves for your future like It's so dope to be able to put money aside today for your future. So your future will thank you. But it's also really good to get less taxes taken out now, right or pay less taxes now, because you're contributing to your retirement in the future. Now, I know what some of you may be thinking, How in the heck am I going to save $20,500 in one year? Or how am I going to catch up to that amount before the end of the year?
Here's my advice. If you can afford to do it, do it, it's always better to take that number and divide it by your pay periods at the beginning of the year and pay it out over the year. But if for some reason you weren't able to, or you're just now realizing how beneficial it is to max out your retirement account, I want you to take a deep breath. I want you to contribute 1 to 2% more to your retirement account than you were before. And then just let it grow. Okay.
I am someone who, when I started my job, I didn't think I could afford to contribute more than what my job was going to match at my retirement account. So I was not maxing out my retirement when I started my career. But in hindsight, I realized I hadn't had any children, I only had student loans. And I was doing okay, I was about to be married about to be in a two income household. We could have afforded to max out our retirement accounts. But we just didn't think we could and we weren't budgeting as well as we are now, right. But a few years into working at my job, when I realized that I just want to try it. I didn't go from 5% of my income to maxing out what I did instead was I progressively increase my retirement contributions. And as they went up, I would look at my budget. And I would say, do we still have enough? And then I would increase my retirement contributions again, and I'd say do we still have enough, then I just went for it after a couple of times of raising my retirement contributions. Year after year, I just maxed it out. And you know what happened?
We didn't miss the money. Believe it or not, I probably could have max out sooner. But I just had fear that I needed more in my household to survive. And I was like, but I don't, we are eating, we're still going out, we're still able to travel. There is no reason why I shouldn't max out my retirement account, I can afford to do so. But I will admit that I started maxing out pretty late, right and not too late. I'm still have a long career. But I wasn't maxing out in the beginning. But once I progressively increased my contributions, and then I felt comfortable that I could do it, I pulled the trigger on maxing out. So I definitely want to encourage you to look at what you're contributing to retirement. If you have not contributed 20,500, and you're under the age of 50, you can raise your contributions between now and the end of the year to get closer to that number.
If you're putting in pre tax contributions, you are getting closer and closer to lowering your taxable income today. And you're also giving your future self some more money to hang out, have fun, and live right. So it doesn't hurt you to contribute more to retirement today. In fact, it helps you today because it lowers your taxes dollar for dollar. So that's one of my favorite tips. If you're someone who's maxing out and you still have money leftover, and your income allows you to qualify for Roth IRAs or traditional IRAs, I want you to contribute to those two.
Ya know, I love Roth IRAs, they are my absolute favorite. Because a Roth individual retirement account is a very special retirement account that allows you to put today's after tax dollars into an account that is invested and gets to grow and not pay any taxes on the income that you earn off that account at all. Because you're investing after tax dollars.
The Roth IRA comes with this really cool perk where in retirement at 59 and a half or older, when you take money out of your Roth IRA, you will not pay taxes on that money. Because the Roth IRA tax law basically says you don't have to. So I think the Roth IRA is a super, super cool tax win.
For anyone who can qualify. Your income has to meet certain income levels in order to contribute to the Roth IRA directly. So look it up irs.gov. For the income thresholds, whether you're single, head of household, or married, but if you still qualify to contribute to a Roth IRA, do it, max it out. You can put up to 6,000 into those accounts, and you can do that before the end of the year and really save for your future.
Now granted, contributing to a Roth doesn't lower your taxes today, but it lowers your taxes tomorrow. So it's still a good tax tip to save your future self some money, okay? That's why I like them so much. And for those who've been following me, you know that at 16 I started saving for retirement with a Roth IRA with my first paycheck from my first job.
So I know that you can do it guys, I know that this is definitely a great strategy for you, you just need to write these tips down and take advantage. So guess what, I got some bonuses for you. So I went over the top five. So for those who are just joining us, I went over some five tax tips that you should do right now.
The first one was work with a professional work with your CPA or an accountant to do tax planning. So you can know what you need to do between now and the end of the year to really minimize your taxes and maximize your income.
The second thing I talked about was deferring your income. If you've already reached a high income, and you want to prevent yourself from going to another tax bracket, as an entrepreneur, you can always do your final invoices at the end of the year and get them paid in the next year. If you're an employee, and you're gonna get a bonus, you can always ask your employer if they have a policy where they can defer your bonus until the next year, so you will pay taxes on it later, right.
Tip number three was taking your max contract deductions. So riding off as an entrepreneur, you can write off mileage, if you own a car, and you're using it for most of your business expenses and meetings, you can probably even write off a car note, but you have to pick one. So taking deductions. That's a bonus because I didn't talk about that the first time. But I also talked about contributing to charity, giving stocks to charity, giving real estate to charity, and then being able to write that property off from your taxes is like the biggest benefit real estate investors or anyone who has property to donate can do. So if you have any deductions that you want to take advantage of. This is the time to do it, give away stock, give away money, give away stuff, or give away property, and deducted from your taxes. So that's a great tax tip for anyone in the real estate space, or who has property or stocks to give.
The fourth tip I talked about was Loss Harvesting. So that's selling off poor performing stocks, so that they can offset your gains dollar for dollar. So if you have lost some money on some stocks, and you have gained some money on others, definitely consider selling the bad apples so that you can hopefully have an overall lower tax bill on any of your gains.
And then the fifth tip I talked about was maxing out retirement accounts, like your 401 K, 403 B, whatever you have with your employer, and progressively increasing your retirement savings. If you're not in a financial position to max out, I progressively increase my retirement contributions over time until I could max out and now I'm able to take the full advantage of deducting those pre tax dollars from my taxable income today and then I also talked about the Roth individual retirement account, and how that's really good on helping you save on taxes in the future.
So I really want you guys to think about these tax strategies. But here's my bonus. How many of you have health savings accounts? Anyone have a Flexible Spending Account or a Health Savings Account? If you're on here? Let me know. Tell me in the chat, because I do I have a Flex Spending Account. And one of the things I like about my Flex Spending Account is that it allows me to save on health expenses, because I get to take this money in my Flexible Spending Account and actually put it to the side. It is not taxed. Oh yay, Chef chef easy says he has a chef Izzy has a Flexible Spending Account. Yep. So the awesome thing about Flex Spending Accounts or Health Savings Accounts is that you get to put money aside, it's not taxed, because it's taken out before it's taxed. It's also put to the side and given back to you when you have qualified medical expenses.
So for me, that's massages. I go and get massages on a regular basis. And my massages are tax deductible, because I use my Flex Spending Account to pay for them. So what does that mean? I also get to get my money back for deductibles that I pay. So if you're someone who goes to the doctor to dentists, eyeglasses, these are all things that can come from your Flex Spending or your Health Savings Account. And you didn't have to pay taxes on that money. So it's like a win win win, right? Because you lower your taxable income by the amount you put into the Flex Spending Account with a Health Savings Account. Then when you spend the money on qualified medical expenses, you get to write you get that money back and it's still not taxed. And so it's a win win for everybody. So that's the bonus tip.
So I actually gave six tips today. But I said I will give you five so enjoy the bonus booboo. Oh, where do you go from aside is that you can pay with your HSA, I go to Massage Envy, but as long as you go to a location that can provide you the receipt to submit to your insurance company, then you can use your HSA to pay for the massages. So Massage Envy, they are not sponsoring this today. But um, I definitely want you guys to know, that's what I do. And I do it every month. And I use those massages to provide me self care. So I do want to say to you guys, if you were listening to this live, and you're asking yourself, how the heck do I get a CPA to help me with my taxes and make sure that that's done for me, I want you to check out this link, I'm gonna pin it. But I also want you to check out the link in my bio, because I'm offering a free consultation with 1-800 Accountant, they really help you figure out your tax strategy, and they offer a consultation for free. So let's get it get a free tax consultation.
All right, so I'm gonna put that there. So you know where you can go. And then we're gonna pin it. So you have it for you next time. Okay, but check it out. Use your health savings plan to or health savings account to pay for your massages? You don't it depends on your plan. But no, the IRS actually allows them massages is one of the authorized expenses. So you just have to provide the receipt. And that's what I do. I upload the receipt, and they pay me back.
Oh, hi, Carolyn, love how you doing boo. So good to see you. So who's who's gonna go get a massage now that I've told them who's gonna go get a massage, call it self care, get it done.
I just pinned a link for you. But I also included it in my bio. Now is the time if you're interested to do tax planning with a professional, I recommend 1-800 accounting, I dropped their link there because they do offer free consultations. But I also have the link in my bio. So if you're just joining, I encourage you to rewatch this live please because I shared not five but six tax tips that you can use right now to lower your taxable income and I want you guys to use these tips right now.
I want you to use them before the end of the year. So you can maximize your income and minimize your taxes. I'm super excited. I'm glad that you guys were able to hang out with me today. On our usual go live Tuesdays, I'm hoping that if there's anyone here who missed it or wants to catch it again, watch the replay.
I'm gonna post this for everyone to see. Thank you so much for the love and the tips. I hope these were useful. I hope that you use them today. And I hope that you click on the link in my bio, so you too can get a free tax consultation. Don't worry, Care Live Love is going to be in the grid and you can watch the replay. So I'm excited. I'm going to also share this with all of you and leave it up. So you guys can take a peek and hop in and watch it again.
Okay, so my name is Acquania Escarne. I am the creator of The Purpose of Money, a platform that teaches you how to build generational wealth $1 at a time, and I appreciate you for joining me live to learn five tax tips that you can do right now.
Thank you for listening to the purpose of money podcast. For more resources and information, check out my website thepurposeofmoney.com and while you're there, please sign up for our newsletter so you have the latest information on new episodes and blog posts. Until next time, keep creating freedom in your life today.
Transcribed by https://otter.ai
