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Speaker 1: Welcome to Hou of Money. I'm Joel, and today we're

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Speaker 1: talking I don't want taxes to terrify you with Hannah

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Speaker 1: Cole to many taxes are more terrifying than horror movies.

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Speaker 1: Not to me. But it's only because I scare easily

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Speaker 1: and I completely avoid those movies. Yeah, I don't. I'm

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Speaker 1: like being scared. It's not though, because I'm super comfortable

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Speaker 1: with the complexity of our tax system. But my guest today,

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Speaker 1: she is Hannah Cole, is on a mission to create

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Speaker 1: fearless folks who launch into the world of deductions, bookkeeping, tracking, filing,

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Speaker 1: and all the other terms that strike a little fear

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Speaker 1: in your heart with full confidence. Her new book, Taxes

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Speaker 1: for Humans will acts as a field manual for self

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Speaker 1: employed people, in particular to simplify their taxes and to

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Speaker 1: take the bowl by the horns. So, Hannah, thank you

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Speaker 1: so much for joining me today on the podcast.

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Speaker 2: Joel, thanks so much for having me.

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Speaker 1: All right, so, first question out of the gate, we

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Speaker 1: ask everyone who comes on. I'm so curious to hear

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Speaker 1: your response. We I like to splurge on craft beer.

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Speaker 1: I think it's delicious, but it can be expensive at

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Speaker 1: the same time, I'm doing the smart thing, saving and

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Speaker 1: investing for my future. Right, you can do both things

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Speaker 1: at once. What is that thing for you? What do

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Speaker 1: you like to splurge on?

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Speaker 2: Yeah, well, I too like to splurge on craft beer,

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Speaker 2: and I live I live in Asheville, which is craft

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Speaker 2: beer paradise, but.

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Speaker 1: Well the Southern beer mecca.

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Speaker 2: Oh it's so good. But my splurge is really wonderful

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Speaker 2: coffee out of the house every single day, which is

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Speaker 2: very against that don't buy a latte.

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Speaker 1: Thing every single day?

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Speaker 2: Huh, every single day. But here's why, because I actually

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Speaker 2: use it, you know, for like as a habit builder.

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Speaker 2: So I need coffee when I wake up, right like

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Speaker 2: this is this is like a bright star to me,

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Speaker 2: and so it gets me to lace on my shoes

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Speaker 2: and it gets me you know, the coffee shop is

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Speaker 2: a mile away, and I walk to it and so

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Speaker 2: it gets me walking and then I do a four mile.

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Speaker 1: Loop, okay, and so you get your steps in every

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Speaker 1: day to get your coffee.

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Speaker 2: Oh I am, I am. Yeah, So it's that. And

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Speaker 2: it's also like I like the community part of it.

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Speaker 2: So like I fully recognize it is not cost efficient,

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Speaker 2: but I really like like that the baristas know me

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Speaker 2: and that I have a little chat with them. It

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Speaker 2: just like it makes me feel connected to my to

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Speaker 2: my city and my neighborhood.

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Speaker 1: So I totally get that. We we try to keep

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Speaker 1: it till once a week, but Matt and I on

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Speaker 1: Mondays will walk down to our local coffee shop and

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Speaker 1: get coffee and I love it. I love the walk,

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Speaker 1: I love Matt and Eric. We're catching up and just

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Speaker 1: kind of being out in the community, talking to the

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Speaker 1: brista's fellow, you know, humans in the coffee shop. It's

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Speaker 1: such a lovely experience. So I get that totally, and

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Speaker 1: I don't know, maybe off to up it to two

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Speaker 1: days a week after after can you.

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Speaker 2: I feel like the common theme with all of my

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Speaker 2: splurges is like if it makes me be social or

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Speaker 2: get exercise, you know, like because I feel like those

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Speaker 2: are those are great, Those make my life good.

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Speaker 1: Yeah. If it's like the little lure in the mouth,

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Speaker 1: right that gets you out there doing the things that

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Speaker 1: you want to do but you might avoid if you

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Speaker 1: were just having coffee at home, that makes sense to me.

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Speaker 1: You talk early on you're an artist, and you talk

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Speaker 1: about having to figure things out the hard way. And

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Speaker 1: I'm curious. I think this you might not be alone

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Speaker 1: in that right where artists maybe and taxes are not.

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Speaker 1: Best friends are not synonymous in a lot of ways.

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Speaker 1: Right where it's like, I'm great at making art. I

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Speaker 1: have friends like this who are business owners. It's like

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Speaker 1: a great photographer. But when it comes to like running

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Speaker 1: the business or doing the tax side of things, the

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Speaker 1: creatives can often have a hard time. Right, So tell

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Speaker 1: me about you. If you have them figure out the

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Speaker 1: hard way, what did that look like?

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Speaker 2: Yeah, I mean, I think creatives get a bad rap.

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Speaker 2: Creativity is actually a synonym for resourcefulness. And and you know,

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Speaker 2: because all my everybody I am in community with are

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Speaker 2: creative people. It's you know, what I see is that

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Speaker 2: creative people are like actually pretty incredible at making things

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Speaker 2: work on a shoe string and pulling off magic. But yeah,

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Speaker 2: the way I learned the hard way by you know,

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Speaker 2: going into my dad's accountant's office for the first time

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Speaker 2: when I you know, I got an MFA and painting.

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Speaker 2: I've been a professional painter for twenty years, and I

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Speaker 2: knew I needed to I kind of knew there was

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Speaker 2: stuff I needed to know. I didn't even know what

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Speaker 2: I didn't know, and just like sitting down in front

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Speaker 2: of my dad's accountant, he was like, so, why are

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Speaker 2: you going to get a real job. I just like

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Speaker 2: I felt so humiliate. I was like, I have a

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Speaker 2: master's degree in this, Like I have artists, you know,

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Speaker 2: I know a lot of people don't know what artists

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Speaker 2: do every day. It's a little mysterious.

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Speaker 1: But I'm assuming paint, sculpt you know, whatever it is

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Speaker 1: they're into, that's gonna be part of it.

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Speaker 2: Definitely that, definitely that, But like the professional side of it,

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Speaker 2: I think is pretty hard to understand, and like applying

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Speaker 2: for grants and residencies, like how do you make the

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Speaker 2: money work? Honestly, a lot of artists don't know how

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Speaker 2: to make the money work. It's difficult. It's like, you know,

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Speaker 2: being in the NBA. It's like the ads they're not great.

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Speaker 1: So you went into that account and office, you got

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Speaker 1: kind of sort of talked to in a humiliating way, Well,

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Speaker 1: how did you respond?

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Speaker 2: Well? At the at the moment, I just like my

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Speaker 2: pulse was racing and I felt completely awful. Like all

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Speaker 2: the questions I had come in with and prepared they

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Speaker 2: just flew out of my head. I couldn't even make

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Speaker 2: use of that situation. And also just like I was

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Speaker 2: pretty organized. I had read a book on deductions before

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Speaker 2: I got there, because I was, you know, I was

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Speaker 2: trying to do a good job, be a good student.

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Speaker 2: And I had kept a mileage log. I had, you know,

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Speaker 2: artists do these things called residencies a lot where you

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Speaker 2: like it's competitive, you apply and you go to some

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Speaker 2: you know, beautiful ranch in Wyoming and paint for a month.

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Speaker 2: And I kept my mileage log like and this was

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Speaker 2: analog in a notebook in the dashboard, and it was

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Speaker 2: a four thousand dollars deduction and he just missed it.

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Speaker 2: And that was because I think he just didn't consider

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Speaker 2: that I was like a real business. He didn't he

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Speaker 2: didn't actually see my true legitimacy as a person in

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Speaker 2: the arts.

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Speaker 1: So he saw it as a hobby on the side.

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Speaker 1: And you're like, no, no, no, this is my job.

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Speaker 2: It's a business, absolutely yes. And I think one of

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Speaker 2: the real issues and it's not just artists who face this.

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Speaker 2: I think a lot of times anybody in a career

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Speaker 2: that's really underpaid. So that can be people in like

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Speaker 2: caring fields or you know, nonprofit adjacent areas, Like when

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Speaker 2: you're not making a lot of profit, it it doesn't

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Speaker 2: necessarily look to an accountant like it's a business. And

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Speaker 2: this is a really big issue. When you don't have

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Speaker 2: a consistent profit, your your business activity can be called

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Speaker 2: into question by the IRS, and they can come and say, hey,

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Speaker 2: is this a hobby? Just because they asked doesn't mean

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Speaker 2: it's true. It's not an accusa, it's a checkup. But

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Speaker 2: people don't know, you know, don't We don't teach taxes

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Speaker 2: in high school in this country, though I think we should,

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Speaker 2: and so people just don't know what their rights are

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Speaker 2: and their responsibilities, and so it's just feels like all

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Speaker 2: fear and no empowerment. So I just really want to

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Speaker 2: partly be here to witness those people who are in

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Speaker 2: those like caring fields and the humanities. People who weren't

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Speaker 2: in those like well resourced STEM departments in college.

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Speaker 1: Engineers will be fine, I know, thanks to hear themselves.

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Speaker 2: I mean, it's hard enough. It's hard enough when you

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Speaker 2: sort of didn't get all those resources and so you

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Speaker 2: need them, but then you also feel this sort of

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Speaker 2: like shame and fear about the people you're working with,

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Speaker 2: the accountants because they really like they're not used to

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Speaker 2: working with people like you and they don't feel like

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Speaker 2: they get you.

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Speaker 1: Yeah, well, I think that that taxes course should be

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Speaker 1: side by side with the personal finance course. I mean,

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Speaker 1: those are two things that we're going to use for

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Speaker 1: the rest of our lives and what like half of

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Speaker 1: its finally do now require it in high school And

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Speaker 1: but yeah, it's there are so many things we learn

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Speaker 1: in school that are lovely and beautiful, and maybe we

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Speaker 1: don't use them for the rest of our lives, and

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Speaker 1: maybe they were still worth learning, but my goodness, personal

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Speaker 1: finance and a little bit of tax knowledge should go

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Speaker 1: a long way to help the average American for sure.

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Speaker 1: The tagline of your book is and I love this,

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Speaker 1: simplify your taxes and change the world when you're self employed.

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Speaker 1: That's like, that's a big promise, changing the world. So

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Speaker 1: tell me more about that.

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Speaker 2: Yeah. So it's kind of a secret agenda inside my

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Speaker 2: book that I feel like a lot of people who

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Speaker 2: are really passionate, people in the humanities, people in creative

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Speaker 2: fields are often really good agitator's activists. They're like people

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Speaker 2: who really move the culture. That is what I think

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Speaker 2: is so important about creative work. You know, it's really

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Speaker 2: hard to advocate for a fair, equitable tax law if

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Speaker 2: you just have no idea how tax laws are made

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Speaker 2: in the first place. And so I just feel like,

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Speaker 2: if I'm going to do the work of getting people

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Speaker 2: up to speed on how their taxes work and sort

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Speaker 2: of where they sit inside the tax code, I'm going

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Speaker 2: to go the extra mile and be like, and here's

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Speaker 2: what a fairer way to do it might be.

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Speaker 1: Hint h your senator, Well, yeah, I mean, I think

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Speaker 1: some people assume that the way the tax code currently

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Speaker 1: exists is the way it's always been, and that's far

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Speaker 1: from the truth and in fact, and I want to

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Speaker 1: get to this later, buttile lot of recent task legislation

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Speaker 1: over the past few years has is making a big

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Speaker 1: difference in who pays what, and also in our national

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Speaker 1: debt and deficit. I'm curious, though, I want to start

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Speaker 1: in a place of optimism here too, because there is

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Speaker 1: a lot of pessimism about an individual's ability to start

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Speaker 1: a small business and to do well in this country.

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Speaker 1: But you you're far less pessimistic on that. Can you

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Speaker 1: maybe give me a little bit an overview of why

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Speaker 1: you think the United States is still a great place

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Speaker 1: to start a business.

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Speaker 2: Oh my gosh, I love this question, And yes, I

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Speaker 2: think hope is important and we have a lot of

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Speaker 2: good reason for it. You know, like forty four percent

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Speaker 2: of all Fortune five hundred companies were started by the

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Speaker 2: children of immigrants. I mean, like, just think about what

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Speaker 2: that means. People are coming to this country for the

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Speaker 2: opportunities that we provide for businesses, Like it is a

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Speaker 2: great place to start a business. And I think a

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Speaker 2: lot of people who are self employed don't even realize

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Speaker 2: that they are considered a business under US tax code.

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Speaker 2: So an uber driver, you know, person just getting paid

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Speaker 2: ten ninety nine versus on a W two, right, that's

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Speaker 2: a business person. But often that person, you know, because

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Speaker 2: of a lack of education, perhaps they just don't know.

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Speaker 2: They don't know that they could be keeping deductions and

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Speaker 2: getting a lot of benefits, you know, because the fact

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Speaker 2: of being paid ten ninety nine means you get to

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Speaker 2: take expenses of running that business as a deduction on

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Speaker 2: your taxes. So there's just like a lot of benefits,

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Speaker 2: really really generous, wonderful encouragement to invest in yourself when

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Speaker 2: you are a business, even at the tiniest little micro level,

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Speaker 2: and I just want more people to be aware of that.

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Speaker 2: I think, you know, if you went to business school,

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Speaker 2: you know this, right, But if you went to art school,

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Speaker 2: maybe you don't. So I want everybody to.

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Speaker 1: Know you even say you say the tax code is

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Speaker 1: built to give you a financial boost as a new

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Speaker 1: self employed person. Absolutely, So talk about that for someone

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Speaker 1: who's like I was afraid to start a small business

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Speaker 1: because I've heard maybe some rumors about how taxes work.

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Speaker 1: Is a self employed individual, Well, you're saying that the opposite, Like,

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Speaker 1: it's not harrowing, it's actually potentially some wind at you're back.

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Speaker 2: I love that, Yeah, I mean, and rumor is a

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Speaker 2: lot of how we understand taxes here. Right, it's rumor

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Speaker 2: and not fact. But you're right. So one of the

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Speaker 2: incredible benefits of having what's called a schedule, see that's

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Speaker 2: a tax turn but it just it's the part of

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Speaker 2: your tax return where you put the business income and

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Speaker 2: the business deductions. So when you're self employed, that's where

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Speaker 2: you're reporting your income and your tax return. But one

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Speaker 2: of the benefits we all kind of know that we

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Speaker 2: get deductions. But the thing that people don't realize is

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Speaker 2: you also have the ability to take a loss. So

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Speaker 2: a schedule. See if you look at the title like

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Speaker 2: on the top of that form, it says profit or

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Speaker 2: loss from business, not just profit. Right, so the loss.

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Speaker 2: I know this is very counterintuitive, but if you you

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Speaker 2: know every business, if you think about it, every single

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Speaker 2: business starts in the negative because expenses come first. Right,

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Speaker 2: So if you think about like a pizzeria, right, So

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Speaker 2: if you start a pizzeria, you cannot make a single dollar,

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Speaker 2: not even profit, but just like a dollar in the door,

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Speaker 2: until you have set up a pretty fully operational pizza

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Speaker 2: reha Right, you need an.

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Speaker 1: Oven, pizza ovens here exactly.

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Speaker 2: You need an oven, flour, a baker, you need a storefront.

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Speaker 2: And so you can't make a single dollar from selling

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Speaker 2: a pizza until you have the full ability to make

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Speaker 2: the pizza already in place. Right. So you bought the oven,

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Speaker 2: paid the rent, paid a baker, bought the flour, right,

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Speaker 2: all of those things. You have to spend the money first,

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Speaker 2: and it might take you some time before you sell

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Speaker 2: enough pizza, get a reputation, get your advertising going, get

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Speaker 2: word of mouth going, maybe get I don't know, reviewed

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Speaker 2: in the local newspaper. By the local Instagram influencer or whatever.

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Speaker 2: But it might take a little while to actually get

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Speaker 2: enough money coming in that you break even. Right, that's

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Speaker 2: the moment where you actually even. That's not even the

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Speaker 2: moment you're profitable yet. It's the moment where your expenses

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Speaker 2: and your income equal out and it's zero. So being

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Speaker 2: able to take the laws to report a negative number

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Speaker 2: on your taxes is a tax benefit because what it

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Speaker 2: does is it actually that negative number is added to

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Speaker 2: your other taxable income. And so if your spouse is

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Speaker 2: earning money with a day job, your negative income will

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Speaker 2: subtract taxable income off the spouse's income that you jointly

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Speaker 2: pay taxes on. So in other words, it'll save you, you know,

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Speaker 2: thousands of dollars in taxes, which is deliberate. That is

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Speaker 2: meant to help you through that delicate baby investment year

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Speaker 2: of your business.

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Speaker 1: So is that is that part of the iris's goal

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Speaker 1: to ensure that we have a nice playing field for

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Speaker 1: small businesses. It's like their goal is to see small

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Speaker 1: businesses succeed. And if they can't report that loss and

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Speaker 1: use it against other income, that's really hard for a

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Speaker 1: small business to last. If they're you know.

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Speaker 2: Absolutely, it's very and the first year of business, when

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Speaker 2: you have all those expenses and you don't have income yet,

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Speaker 2: that is the hardest year of business. Right. There can

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Speaker 2: be other hard years. I mean, I'm I'm coming to

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Speaker 2: you from Ashville, and we had a real hard year

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Speaker 2: last year when Hurricane Helen destroyed a lot of businesses,

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Speaker 2: including my studio, and so that loss. You can take

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Speaker 2: a loss later if something like a Hurricane Helen comes

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Speaker 2: and destroys your business, you can have a loss in

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Speaker 2: a later year when you thought you had every reasonably

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Speaker 2: you'd be profitable. But I think the thing to think

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Speaker 2: about is like when you're a small business, you're growing

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Speaker 2: the GDP, right, and that is one of the chief

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Speaker 2: aims of the US government. So they want that. They

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Speaker 2: want you to grow. They want you to have more

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Speaker 2: and more and more profit, maybe hire people, spend a

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Speaker 2: lot of money in the economy, and eventually pay taxes

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Speaker 2: on that profit. So it's not like charitable. They're just like,

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Speaker 2: this is good for everybody. We want you to win.

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Speaker 1: Tell me a little bit about the Hurricane Helen and

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Speaker 1: what you learned as a small business owner, and that

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Speaker 1: obviously just the pictures, the devastation. Going to Asheville, even

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Speaker 1: in March, like, I could see a lot of the

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Speaker 1: devastation still, logs and trees everywhere. Still. But what was

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Speaker 1: that like for you from a business owner perspective? How

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Speaker 1: did you get through that? What did you learn in

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Speaker 1: that process?

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Speaker 2: It certainly made me lean on community. There's this sort

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Speaker 2: of you know, we perpetuate this myth that we're all

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Speaker 2: alone in this country, the sort of cowboy culture thing.

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Speaker 2: And you know, there's nothing like having your water go

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Speaker 2: out for five weeks to make you realize that you

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Speaker 2: were very dependent on your government and that government being

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Speaker 2: functional and well funded. You know, I wanted my water.

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Speaker 2: All the business, all the restaurants couldn't open because they

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Speaker 2: had no water, and my kids were out of school

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Speaker 2: because there was no water. There was no way to

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Speaker 2: flush a toilet in the school. So for certain it

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Speaker 2: was like, oh, tax dollars going to pay for you know,

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Speaker 2: infrastructure that brings clean water. And also just like a

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Speaker 2: resiliency plan. I was really happy that we have electeds

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Speaker 2: who had some like resiliency planning already in place. Some

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Speaker 2: forethought that was that was really great, But also rebuilding

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Speaker 2: is really hard and really slow, and the media is

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Speaker 2: here for you know, maybe a month, and then it's

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Speaker 2: gone and you are still in it. So that's a

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Speaker 2: hard part. Anybody, you know, if you were in the

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Speaker 2: La fires, if you were in the Texas floods, I mean,

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Speaker 2: anybody who's been through it knows that when the media

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Speaker 2: goes away, it feels lonely.

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Speaker 1: Yeah, I believe it. Yeah, there's a spotlight for a

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Speaker 1: minute and then they all leave, and then you're still

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Speaker 1: left for many months, often years, kind of cleaning up

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Speaker 1: and trying to get back to normal.

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Speaker 2: Yeah.

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Speaker 1: I'm curious too. You mentioned the difference between like a

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Speaker 1: hobby and a business and can you maybe the IRS

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Speaker 1: has like specific guidelines about that, right, So it's not

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Speaker 1: like you don't necessarily say, I think I'm just a

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Speaker 1: hobbyist or I think I'm a business owner. How is

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Speaker 1: that defined?

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Speaker 2: Yeah, there's a real definition, and it's actually not at

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Speaker 2: all what people think. The definition of a business versus

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Speaker 2: a hobby is a business has a profit motive. Those

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Speaker 2: are IRS words. It's important to note that how having

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Speaker 2: a profit motive is different from having a profit Like

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Speaker 2: if you think of that pet pizzeria, the year that

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Speaker 2: they spend the money on the oven in the storefront,

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Speaker 2: and they don't have customers yet, Like, that doesn't make

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Speaker 2: them a hobby right, They're a business that's just not

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Speaker 2: profitable yet. So that's really important to know that a

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Speaker 2: legitimate profit motivated business can still have losses. That's important.

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Speaker 2: But a hobbyist does not have a profit motive. They're

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Speaker 2: doing it for fun.

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Speaker 1: Okay. So and then how how do you know when

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Speaker 1: a small business or what maybe has been your side

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Speaker 1: hustle but you're like trying to profit from it, you

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Speaker 1: want this to become a business. How how do you

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Speaker 1: know when that business needs to be incorporated? I think

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Speaker 1: this is one of those tough decisions that people like

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Speaker 1: trying to wade through the alphabet soup of you know, letters,

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Speaker 1: and they're like, I don't know, I'm what what should

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Speaker 1: I be? Should I be an escorp? Like I have

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Speaker 1: no idea?

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Speaker 2: Yeah, yeah, there are there's some tricky things there. What's

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Speaker 2: important to note is that there's different order of operations,

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Speaker 2: like the start time of the various things can be different.

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Speaker 2: So what I mean is you're a business to the

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Speaker 2: irs before you're a business anywhere else. And that makes

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Speaker 2: sense because the irs is the tax collector, right, Like

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Speaker 2: they're there to be like, hey, okay, the minute you

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Speaker 2: earn a dollar back, like we're going to be here.

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Speaker 2: We would like the taxes on that, right. So you're

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Speaker 2: already a business to the irs. Now, a lot of

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Speaker 2: people I think, because of like Internet and the rumor

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Speaker 2: of how business stuff works, it's like they think, oh im,

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Speaker 2: maybe need an LLC, Maybe I need an escort. So

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Speaker 2: just to clarify what those things are, the LLC is

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Speaker 2: a legal entity and it's about a liability protection. So

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Speaker 2: that stands for a limited liability company. And what it

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Speaker 2: does is stick a shield in between your business assets

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Speaker 2: and your personal assets so that if you get sued,

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Speaker 2: only the business assets are subject to the law suit.

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Speaker 2: So that's the purpose of an LLC. It's not required

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Speaker 2: that you become an LLC to be a real business,

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Speaker 2: not at all. In fact, you might be wasting your

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Speaker 2: money if you're not, if you're not at any risk

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Speaker 2: of a lawsuit, if you're if you have no personal assets,

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Speaker 2: you know it might it's possible that you don't need

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Speaker 2: to waste money on LLC.

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Speaker 1: And the cost of an LLC can very significantly state

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Speaker 1: to state. In some states like a hundred bucks, and

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Speaker 1: then in some states it can be eight hundred bucks

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Speaker 1: a house, and it can do just be more a

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Speaker 1: lot more expensive.

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Speaker 2: Very much. And then the ask corp is that. So

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Speaker 2: the LLC is a legal entity, it's actually not a

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Speaker 2: tax entity. So one of the interesting things is that

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Speaker 2: the IRS, if you're just a single owner of the

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Speaker 2: LLC that's called a single member LLC, the IRS disregards it,

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Speaker 2: so it actually has no bearing on your taxes. A

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Speaker 2: lot of people think the LLC is going to change

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Speaker 2: all their tax stuff. It actually doesn't at all. That's

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Speaker 2: the thing to know. But anes Corp is actually a

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Speaker 2: tax entity, so unlike LLC, it's totally different, and you

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Speaker 2: can have both. You can be an LLC and an escorp.

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Speaker 2: Like I actually am Sunlight taxes both in LLC and

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Speaker 2: an escort. My biggest thing that I want to tell

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Speaker 2: people is like, just don't form it too early and

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Speaker 2: check your state rules because you know, someone on the

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Speaker 2: internet might be talking about how you're going to save

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Speaker 2: all this money when you form an escorp. Well, if

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Speaker 2: you're living in New York State, New York taxes back

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Speaker 2: all the benefit you get from an escorp so you're

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Speaker 2: wasting your money. You're literally lighting money on fire. So

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Speaker 2: you just have to be careful when you're.

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Speaker 1: Getting just a state specific thing, and you need to

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Speaker 1: know what your state's tax rules are in order to

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Speaker 1: kind of know what designation you should be choosing.

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Speaker 2: Yeah, and in the book, I have a chapter on these,

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Speaker 2: you know, sort of setup issues like LLC and ESCORP,

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Speaker 2: and I have a list of the states that have

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Speaker 2: rules that sort of tax back some of the benefit

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Speaker 2: of an escorp. Definitely check which state you're in in

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Speaker 2: the state rules before you go spend the money, because

434
00:21:57,520 --> 00:21:59,760
Speaker 2: you might be wasting the money grant you if you're

435
00:21:59,760 --> 00:22:03,879
Speaker 2: in a state like North Carolina, great, can be great.

436
00:22:04,400 --> 00:22:05,800
Speaker 1: All right, we've got I've got more to get I

437
00:22:05,840 --> 00:22:07,000
Speaker 1: want to get to with you, Hana. I want to

438
00:22:07,000 --> 00:22:11,600
Speaker 1: talk specifically about maybe some of the systems we need

439
00:22:11,640 --> 00:22:13,239
Speaker 1: to set up as a small business owner, and then

440
00:22:13,240 --> 00:22:15,680
Speaker 1: also kind of that some of the recent tax law

441
00:22:15,800 --> 00:22:17,840
Speaker 1: changes that have been made and how those are going

442
00:22:17,920 --> 00:22:21,280
Speaker 1: to impact us as as self employed individuals and just

443
00:22:21,359 --> 00:22:23,800
Speaker 1: really everyone who's listening to Well, we'll get to more

444
00:22:23,840 --> 00:22:33,600
Speaker 1: with Hannah Cole right after this. We'll back. We're still

445
00:22:33,640 --> 00:22:36,560
Speaker 1: talk about Hannah Cole. We're talking about taxes. They can

446
00:22:36,640 --> 00:22:41,080
Speaker 1: be terrifying, but Hannah is demystifying them so well in

447
00:22:41,119 --> 00:22:43,560
Speaker 1: her new book, and I'm excited to continue this conversation.

448
00:22:44,200 --> 00:22:46,480
Speaker 1: Let's talk about like running a business, Hannah. This is

449
00:22:46,520 --> 00:22:49,040
Speaker 1: something you do address as well on your blog and

450
00:22:49,040 --> 00:22:52,199
Speaker 1: in the book a little bit, like the systems that

451
00:22:52,240 --> 00:22:55,120
Speaker 1: we need to streamline in order to make taxes less

452
00:22:55,119 --> 00:22:56,639
Speaker 1: of a bear. And I do think a lack of

453
00:22:56,960 --> 00:23:00,440
Speaker 1: organization is probably a big part of what makes tax

454
00:23:00,520 --> 00:23:02,840
Speaker 1: is so frustrating for people that are like trying to

455
00:23:02,840 --> 00:23:05,160
Speaker 1: go back to all these different folders on their desktop,

456
00:23:05,280 --> 00:23:07,240
Speaker 1: or items that have just been dropped in dragged rand

457
00:23:07,280 --> 00:23:10,320
Speaker 1: in places, a little folders inside of their email inbox.

458
00:23:10,720 --> 00:23:13,639
Speaker 1: So can you talk about the systems that need to

459
00:23:13,680 --> 00:23:17,160
Speaker 1: be streamlined and maybe offer some best tips for getting organized.

460
00:23:17,480 --> 00:23:20,239
Speaker 2: Yeah? Absolutely. I mean one of the key things to

461
00:23:20,920 --> 00:23:25,480
Speaker 2: realize about taxes is that they're retroactive, so no matter what,

462
00:23:25,720 --> 00:23:28,120
Speaker 2: just the mantra to have is like, don't hate yourself

463
00:23:28,200 --> 00:23:31,840
Speaker 2: because things got messy, like that happens to everybody, but

464
00:23:32,000 --> 00:23:36,080
Speaker 2: just start now, start now. So the systems that you need,

465
00:23:36,560 --> 00:23:39,280
Speaker 2: you need receipts, you need tax documents, and then you

466
00:23:39,320 --> 00:23:42,560
Speaker 2: need bookkeeping. Those are the three key systems to get

467
00:23:42,560 --> 00:23:47,160
Speaker 2: your taxes organized. Receipts is like a five minute task.

468
00:23:47,200 --> 00:23:49,520
Speaker 2: It's like almost nothing. All you need to do is

469
00:23:49,600 --> 00:23:51,879
Speaker 2: just keep them right and they actually go in cold

470
00:23:51,920 --> 00:23:56,119
Speaker 2: storage because the purpose of a receipt is actually just

471
00:23:56,720 --> 00:23:59,520
Speaker 2: in case you're audited. You don't actually need to use

472
00:23:59,560 --> 00:24:01,400
Speaker 2: the receipt unless you're audited.

473
00:24:01,680 --> 00:24:04,879
Speaker 1: So like taking pictures of those receipts or just having

474
00:24:04,920 --> 00:24:06,880
Speaker 1: a digital record of it is good enough.

475
00:24:06,800 --> 00:24:09,600
Speaker 2: Totally fine, as long as it's legible, like and as

476
00:24:09,640 --> 00:24:11,680
Speaker 2: long as you can access it so audits can come,

477
00:24:11,760 --> 00:24:14,360
Speaker 2: you know, as far you know, as late as six

478
00:24:14,440 --> 00:24:16,840
Speaker 2: years later. That's a little rare, but it can be.

479
00:24:16,880 --> 00:24:19,680
Speaker 2: So we say keep receipts for seven years for that purpose.

480
00:24:20,640 --> 00:24:23,120
Speaker 2: Just make sure, you know, if you sell your computer,

481
00:24:23,280 --> 00:24:25,520
Speaker 2: you know you want access to the files. You don't

482
00:24:25,520 --> 00:24:28,679
Speaker 2: want to digitize it and then like stop paying for

483
00:24:28,720 --> 00:24:31,479
Speaker 2: the you know, receipt capture software and then lose your access.

484
00:24:32,040 --> 00:24:32,320
Speaker 1: Gotcha.

485
00:24:32,359 --> 00:24:34,760
Speaker 2: But as long as you have it digital is fine, okay,

486
00:24:35,720 --> 00:24:38,000
Speaker 2: But you don't need to be sorting receipts. Sorting receipts

487
00:24:38,119 --> 00:24:40,960
Speaker 2: is just a complete waste of time, and I everybody listening,

488
00:24:41,040 --> 00:24:42,639
Speaker 2: I dismiss you. You don't have to do it.

489
00:24:43,359 --> 00:24:46,399
Speaker 1: And then tax documents are you just are you taking

490
00:24:46,720 --> 00:24:48,720
Speaker 1: digitizing those and sticking them in a fold receive in

491
00:24:49,400 --> 00:24:50,800
Speaker 1: or how are you? How are you handling those?

492
00:24:51,080 --> 00:24:52,960
Speaker 2: Yeah? So, I mean most of us get a mix

493
00:24:53,040 --> 00:24:56,040
Speaker 2: of digital and physical tax documents, you know, and to

494
00:24:56,119 --> 00:24:58,239
Speaker 2: do your taxes is going to be I find it

495
00:24:58,240 --> 00:25:00,399
Speaker 2: helpful to get them all in one format. So for me,

496
00:25:00,520 --> 00:25:03,679
Speaker 2: that's digitizing the paper ones. You know. The tax document

497
00:25:03,720 --> 00:25:05,520
Speaker 2: thing is something you really only have to worry about

498
00:25:05,520 --> 00:25:07,399
Speaker 2: at the beginning of the year. Those will tend to

499
00:25:07,520 --> 00:25:11,200
Speaker 2: roll in, mostly by February first, but there are some

500
00:25:11,440 --> 00:25:13,959
Speaker 2: that will come late. You know, your brokerage statement if

501
00:25:13,960 --> 00:25:16,800
Speaker 2: you're investing, which I hope listeners of this show are

502
00:25:17,119 --> 00:25:17,440
Speaker 2: me too.

503
00:25:19,960 --> 00:25:21,159
Speaker 1: I'm coming for them.

504
00:25:22,480 --> 00:25:26,040
Speaker 2: Yeah, that's the point, right right, But just dedicate one

505
00:25:26,119 --> 00:25:28,879
Speaker 2: place in your house to keep your tax documents, you know,

506
00:25:28,920 --> 00:25:31,080
Speaker 2: as you get those important you know letters in the

507
00:25:31,119 --> 00:25:34,679
Speaker 2: mail from with the tax document stuff. Just like is

508
00:25:34,720 --> 00:25:36,960
Speaker 2: it your sock drawer, is the top drawer of your desk,

509
00:25:37,119 --> 00:25:39,560
Speaker 2: just whatever it is, Just have a place and just everything.

510
00:25:39,600 --> 00:25:42,720
Speaker 2: Make sure you have religion about those documents go in

511
00:25:42,800 --> 00:25:45,119
Speaker 2: that place, and then when they're all there, then you

512
00:25:45,160 --> 00:25:48,160
Speaker 2: can go through and digitize the paper ones. That's how

513
00:25:48,200 --> 00:25:50,720
Speaker 2: I do it, and I think it works pretty well.

514
00:25:50,960 --> 00:25:53,720
Speaker 1: When we're talking about receipts, oftentimes we're talking about the

515
00:25:53,720 --> 00:25:57,880
Speaker 1: receipts for expenses right that the business has incurred. Can

516
00:25:57,880 --> 00:25:59,840
Speaker 1: you talk to us a little bit about deductions. I

517
00:26:00,040 --> 00:26:02,800
Speaker 1: think there's still just so much confusion right in the

518
00:26:02,880 --> 00:26:07,000
Speaker 1: deduction space. And yeah, yeah, how should a small business

519
00:26:07,000 --> 00:26:11,520
Speaker 1: owner think about deductions? Like meals, what counts and at

520
00:26:11,520 --> 00:26:12,240
Speaker 1: what percentages?

521
00:26:12,520 --> 00:26:17,480
Speaker 2: So deductions for your business are really generous. That said,

522
00:26:17,480 --> 00:26:19,719
Speaker 2: there's a few there's a couple outlier people and some

523
00:26:19,800 --> 00:26:21,640
Speaker 2: of them are sort of loud on the internet who

524
00:26:21,840 --> 00:26:24,080
Speaker 2: just try to deduct everything in their entire life that

525
00:26:24,240 --> 00:26:27,600
Speaker 2: is not quite legit. But if it is ordinary and

526
00:26:27,680 --> 00:26:31,040
Speaker 2: necessary those are I r S words ordinary and necessary

527
00:26:31,080 --> 00:26:33,760
Speaker 2: for running your business, then it's deductible. So this will

528
00:26:33,760 --> 00:26:37,919
Speaker 2: include like mileage for driving your personal car to you know,

529
00:26:37,920 --> 00:26:42,440
Speaker 2: a business meeting, It includes a meal. You know, Joel,

530
00:26:42,480 --> 00:26:44,760
Speaker 2: if I were to buy you a beer and to

531
00:26:44,880 --> 00:26:47,200
Speaker 2: talk about this podcast and you know you coming onto

532
00:26:47,240 --> 00:26:51,160
Speaker 2: my podcast, that would be a business expense. Those are

533
00:26:51,920 --> 00:26:53,600
Speaker 2: actually that sounds fun. Let's do that.

534
00:26:53,800 --> 00:26:56,159
Speaker 1: It does. Let's go in, I'm in. You don't have

535
00:26:56,200 --> 00:26:58,520
Speaker 1: to twist my arm.

536
00:26:59,119 --> 00:27:02,280
Speaker 2: So those things that you need to do, and you know,

537
00:27:02,320 --> 00:27:04,080
Speaker 2: and if you think about it, a lot of businesses

538
00:27:04,119 --> 00:27:08,280
Speaker 2: through relationship buildings, so meals travel. We travel for business

539
00:27:08,280 --> 00:27:10,000
Speaker 2: so that we can meet people face to face and

540
00:27:10,080 --> 00:27:13,239
Speaker 2: establish that like warm human connection. So like it's kind

541
00:27:13,280 --> 00:27:16,000
Speaker 2: of fun and awesome to be able to deduct those

542
00:27:16,000 --> 00:27:18,119
Speaker 2: things through your business. You just want to be careful

543
00:27:18,119 --> 00:27:22,479
Speaker 2: to follow some more tricky rules in those areas that

544
00:27:22,600 --> 00:27:26,360
Speaker 2: people you know might tend to abuse, like meals like travel,

545
00:27:26,640 --> 00:27:28,560
Speaker 2: you want to lock it in and make sure you're

546
00:27:28,560 --> 00:27:31,960
Speaker 2: following the rules because those are the most frequently audited categories.

547
00:27:32,160 --> 00:27:35,480
Speaker 1: Okay, yeah, talk to me about small business owners paying

548
00:27:35,480 --> 00:27:38,800
Speaker 1: themselves and then also when it makes sense or when

549
00:27:38,840 --> 00:27:44,520
Speaker 1: it's necessary to start paying corely estimated taxes. So typically

550
00:27:44,600 --> 00:27:50,360
Speaker 1: now you're beyond the stage of the starting losing money, right,

551
00:27:50,520 --> 00:27:52,440
Speaker 1: like you're making money, Like, how do I pay myself

552
00:27:52,520 --> 00:27:56,359
Speaker 1: and start paying the taxes in advance? Because that's what

553
00:27:56,560 --> 00:27:57,400
Speaker 1: DIRUS requires.

554
00:27:57,600 --> 00:28:01,679
Speaker 2: Yeah, first, just the paying yourself thing something that people

555
00:28:01,680 --> 00:28:05,040
Speaker 2: get confused about is you know when you are when

556
00:28:05,119 --> 00:28:07,560
Speaker 2: you have a schedule c which is where you start

557
00:28:07,760 --> 00:28:11,880
Speaker 2: right before you form something like anes corporation. Everybody's got

558
00:28:11,880 --> 00:28:15,199
Speaker 2: a schedule. See on a SCHEDULECEE. Paying yourself is not

559
00:28:15,400 --> 00:28:18,080
Speaker 2: a deduction. So even though it might be a good

560
00:28:18,119 --> 00:28:21,600
Speaker 2: idea and a good business practice and it is, it's

561
00:28:21,640 --> 00:28:24,639
Speaker 2: still not a deduction for your taxes. So that's just

562
00:28:24,680 --> 00:28:28,359
Speaker 2: important to know. But with that said, it's good to

563
00:28:28,400 --> 00:28:30,960
Speaker 2: get in the habit when you have consistent income. It's

564
00:28:31,000 --> 00:28:33,560
Speaker 2: really good to get into the habit of making a

565
00:28:33,600 --> 00:28:37,040
Speaker 2: transfer from your business account to your personal account. And

566
00:28:37,119 --> 00:28:40,240
Speaker 2: let me just pause on that, because having a business

567
00:28:40,240 --> 00:28:43,520
Speaker 2: account is really important too. That helps your bookkeeping, that

568
00:28:43,560 --> 00:28:46,120
Speaker 2: helps your record keeping, and you want to do all

569
00:28:46,160 --> 00:28:49,880
Speaker 2: your business deduction spending through that account because if you

570
00:28:49,920 --> 00:28:52,040
Speaker 2: think about it, then your book your bank statement for

571
00:28:52,080 --> 00:28:55,000
Speaker 2: that business account is going to become the backbone of

572
00:28:55,000 --> 00:28:55,680
Speaker 2: your bookkeeping.

573
00:28:55,720 --> 00:28:57,120
Speaker 1: It's a firewall of.

574
00:28:57,040 --> 00:29:01,200
Speaker 2: Sorts, absolutely, and it makes everything simpler. And then later,

575
00:29:01,320 --> 00:29:04,000
Speaker 2: if you decide to get an LLC, that separate account

576
00:29:04,000 --> 00:29:07,440
Speaker 2: is absolutely mandatory because that is part of you maintaining

577
00:29:07,480 --> 00:29:11,400
Speaker 2: that legal separation between business and personal. Okay, but with

578
00:29:11,520 --> 00:29:14,720
Speaker 2: that said, it's totally fine to transfer money in between them.

579
00:29:14,720 --> 00:29:18,280
Speaker 2: That's normal and fine for a business to do. You

580
00:29:18,400 --> 00:29:21,160
Speaker 2: just want to know that. You know, in your accounting

581
00:29:21,440 --> 00:29:25,040
Speaker 2: when you put money, when you pay yourself moving money

582
00:29:25,040 --> 00:29:26,880
Speaker 2: from your business account to your personal account, it is

583
00:29:26,880 --> 00:29:29,640
Speaker 2: called an owner's draw. That's actually how you classify it

584
00:29:29,680 --> 00:29:32,560
Speaker 2: in your bookkeeping. And you can actually go the other way.

585
00:29:32,640 --> 00:29:34,680
Speaker 2: You can invest in your business. You can move money

586
00:29:34,680 --> 00:29:37,400
Speaker 2: from personal into your business. Maybe I want to buy

587
00:29:37,600 --> 00:29:39,280
Speaker 2: you know, maybe I'm a podcaster and I want to

588
00:29:39,320 --> 00:29:42,720
Speaker 2: buy a big new like gorgeous mic and like, you know,

589
00:29:42,960 --> 00:29:46,000
Speaker 2: do a renovation in my room with soundproofing. Right, yeah,

590
00:29:46,120 --> 00:29:48,440
Speaker 2: So I can put money and maybe I don't have

591
00:29:48,480 --> 00:29:50,360
Speaker 2: the cash in my business account, I can do an

592
00:29:50,360 --> 00:29:54,040
Speaker 2: owner's investment from personal into business and put it in

593
00:29:54,040 --> 00:29:57,320
Speaker 2: my business account and spend the money there. Because you

594
00:29:57,360 --> 00:29:59,120
Speaker 2: have the right as the owner to invest in your

595
00:29:59,120 --> 00:30:01,960
Speaker 2: business and also to to take profits from your business. Okay,

596
00:30:02,000 --> 00:30:06,360
Speaker 2: but the thing to know is that even though that's happening,

597
00:30:07,280 --> 00:30:09,840
Speaker 2: that is not reported on your taxes. So when I

598
00:30:09,880 --> 00:30:12,959
Speaker 2: put money in for my podcast studio, that's not going

599
00:30:13,040 --> 00:30:14,680
Speaker 2: to be income to my business. So I don't have

600
00:30:14,720 --> 00:30:16,880
Speaker 2: to pay any taxes on that. That's the good news.

601
00:30:17,440 --> 00:30:19,600
Speaker 2: The other side of that is that when I pay myself,

602
00:30:19,800 --> 00:30:23,080
Speaker 2: it's not a deduction either, so it just doesn't count. Yeah,

603
00:30:23,240 --> 00:30:24,160
Speaker 2: just doesn't even touch it.

604
00:30:24,440 --> 00:30:28,720
Speaker 1: Let's talk about recent tax law changes. Yeah, what's been

605
00:30:28,760 --> 00:30:32,760
Speaker 1: called the Big Beautiful Bill made a bunch of tax changes,

606
00:30:32,840 --> 00:30:34,760
Speaker 1: Like can you maybe highlight some of the big ones

607
00:30:35,280 --> 00:30:39,000
Speaker 1: and should they be changing our approach to taxes as

608
00:30:39,040 --> 00:30:40,680
Speaker 1: individuals or as business owners?

609
00:30:40,920 --> 00:30:45,160
Speaker 2: Yes, So let me just say that this bill is enormous.

610
00:30:45,240 --> 00:30:48,000
Speaker 2: There is so much in it. I like to have

611
00:30:48,040 --> 00:30:49,640
Speaker 2: the stats at the tip of my tongue, but it's

612
00:30:49,640 --> 00:30:51,800
Speaker 2: so big that I find this difficult.

613
00:30:52,200 --> 00:30:54,440
Speaker 1: It it'd be nice if legislation was bite sized and

614
00:30:54,560 --> 00:30:55,400
Speaker 1: easy to understand.

615
00:30:55,480 --> 00:30:57,440
Speaker 2: Well, I had, you know, in my podcast, which is

616
00:30:57,480 --> 00:31:00,360
Speaker 2: the Sunlight Tax Podcast, I have been breaking down the

617
00:31:00,360 --> 00:31:02,680
Speaker 2: bill by topic. So I did one on like the

618
00:31:02,760 --> 00:31:06,480
Speaker 2: expiring energy credits, and I did one on healthcare. In fact,

619
00:31:06,520 --> 00:31:09,479
Speaker 2: tomorrow I'm interviewing like a healthcare expert, so I am

620
00:31:09,560 --> 00:31:13,320
Speaker 2: trying to do the bite sized version. But basically, there's

621
00:31:13,360 --> 00:31:17,440
Speaker 2: big changes to healthcare. A lot of the energy credits

622
00:31:17,440 --> 00:31:21,120
Speaker 2: that were available under the Biden administration have expired, some

623
00:31:21,160 --> 00:31:23,400
Speaker 2: have already expired, and some are set to expire at

624
00:31:23,400 --> 00:31:26,040
Speaker 2: the end of the year and some next June. I

625
00:31:26,040 --> 00:31:28,320
Speaker 2: guess the way that that bill was designed, and you know,

626
00:31:28,360 --> 00:31:32,680
Speaker 2: this is sort of typical. There's some sugar rush upfront

627
00:31:32,880 --> 00:31:36,120
Speaker 2: to make people like the bill. I mean, legislators want

628
00:31:36,120 --> 00:31:38,760
Speaker 2: people to feel that it was a good thing, and

629
00:31:38,840 --> 00:31:42,280
Speaker 2: then there's some consequences that don't actually kick in until

630
00:31:42,280 --> 00:31:46,280
Speaker 2: a little longer term. Most of the healthcare you know,

631
00:31:46,320 --> 00:31:48,440
Speaker 2: people losing their healthcare that is sort of going to

632
00:31:48,520 --> 00:31:52,000
Speaker 2: kick in around twenty twenty seven, twenty twenty eight, so

633
00:31:52,040 --> 00:31:55,680
Speaker 2: people aren't going to feel that stuff right away. But

634
00:31:55,760 --> 00:32:01,200
Speaker 2: there are big, big changes to healthcare like HSAT. You

635
00:32:01,240 --> 00:32:03,840
Speaker 2: explained this on one on your Friday podcast.

636
00:32:03,880 --> 00:32:07,200
Speaker 1: I think hsas are more widely available to people on

637
00:32:07,480 --> 00:32:12,320
Speaker 1: bronze plans who signed up through healthcare dot Gov. So there,

638
00:32:12,520 --> 00:32:14,720
Speaker 1: which is that's a great thing, right, So there are

639
00:32:15,240 --> 00:32:18,280
Speaker 1: there are some lovely changes, and then there are and

640
00:32:18,320 --> 00:32:21,120
Speaker 1: then there are also some things that are just harder.

641
00:32:21,800 --> 00:32:24,120
Speaker 1: But like, is there anything As a small business owner,

642
00:32:24,200 --> 00:32:26,640
Speaker 1: for instance, I was reading something about why people are

643
00:32:26,680 --> 00:32:30,400
Speaker 1: buying private jets now because of because of the ability

644
00:32:30,840 --> 00:32:35,120
Speaker 1: to deduct that and or depreciate that asset fully in

645
00:32:35,200 --> 00:32:37,400
Speaker 1: a single given year. Right, So is that is that

646
00:32:37,480 --> 00:32:39,840
Speaker 1: like something that that small business owners. I mean, most

647
00:32:39,880 --> 00:32:42,280
Speaker 1: of your listenings still won't be buying private jets, but

648
00:32:42,960 --> 00:32:45,880
Speaker 1: anything for there in that for small business owners to

649
00:32:45,880 --> 00:32:46,280
Speaker 1: know about.

650
00:32:46,760 --> 00:32:50,959
Speaker 2: Well, a lot of the benefit of this current legislation

651
00:32:51,160 --> 00:32:56,080
Speaker 2: is actually just keeping in place benefits that were established

652
00:32:56,120 --> 00:32:59,600
Speaker 2: under the first Trump you know, the the TCGA, the

653
00:32:59,640 --> 00:33:03,800
Speaker 2: Tax and Jobs Act of twenty seventeen, So things like

654
00:33:03,880 --> 00:33:08,040
Speaker 2: the QBI deduction, the Qualified Business Income deduction. Just quick

655
00:33:08,080 --> 00:33:10,520
Speaker 2: primmer on that. The rules are a little more complex,

656
00:33:10,560 --> 00:33:13,680
Speaker 2: but short version is you get a twenty percent deduction

657
00:33:13,840 --> 00:33:17,520
Speaker 2: on your business profit and that's a nice little bonus

658
00:33:17,560 --> 00:33:21,000
Speaker 2: for small businesses. People with a schedule see you know Uber, driver,

659
00:33:21,200 --> 00:33:25,200
Speaker 2: side hustler, you count, you get this deduction. I don't

660
00:33:25,240 --> 00:33:30,080
Speaker 2: think it feels like a revelation when you get something

661
00:33:30,120 --> 00:33:32,440
Speaker 2: that you've had for the last five years. Sure, you

662
00:33:32,480 --> 00:33:34,160
Speaker 2: just continue to be able to have it, But that

663
00:33:34,240 --> 00:33:37,440
Speaker 2: actually is the news because those were set to expire

664
00:33:37,480 --> 00:33:39,360
Speaker 2: at the end of twenty twenty five and they actually

665
00:33:39,360 --> 00:33:40,520
Speaker 2: just all got extended.

666
00:33:41,040 --> 00:33:44,240
Speaker 1: So which is interesting too because in the way the

667
00:33:44,320 --> 00:33:48,719
Speaker 1: legislation was done, so many of the things that were

668
00:33:48,760 --> 00:33:52,800
Speaker 1: kept around and the changes are many of them are

669
00:33:52,800 --> 00:33:57,479
Speaker 1: set to sunset in twenty twenty nine. So from a

670
00:33:57,520 --> 00:34:00,320
Speaker 1: tax planning perspective, how does that impact How do you

671
00:34:00,360 --> 00:34:01,880
Speaker 1: think that impacts small business owners?

672
00:34:02,400 --> 00:34:05,560
Speaker 2: Yeah, you know, it's really hard to predict the future.

673
00:34:07,840 --> 00:34:10,399
Speaker 2: I think you probably teach us as you teach investing too,

674
00:34:10,440 --> 00:34:12,440
Speaker 2: about timing the market. It's just it's hard to know

675
00:34:12,560 --> 00:34:15,440
Speaker 2: what is going to happen. We can guess, but nobody

676
00:34:15,480 --> 00:34:18,040
Speaker 2: knows the future. And it's important to know that nobody knows.

677
00:34:18,160 --> 00:34:21,279
Speaker 2: There's no expert who can tell you, but I will

678
00:34:21,320 --> 00:34:25,040
Speaker 2: tell you this. One of the effects, like really big

679
00:34:25,040 --> 00:34:28,520
Speaker 2: effects of this legislation is a massive explosion in the

680
00:34:28,560 --> 00:34:33,520
Speaker 2: federal deficit. And because of that, it is going to

681
00:34:33,640 --> 00:34:37,600
Speaker 2: mean that it crowds out the ability to spend money

682
00:34:37,640 --> 00:34:41,880
Speaker 2: on programs, you know, social safety programs like that is

683
00:34:41,920 --> 00:34:44,200
Speaker 2: simply going to happen because we're going to have such

684
00:34:44,239 --> 00:34:46,719
Speaker 2: a large debt that it needs to get serviced and

685
00:34:46,760 --> 00:34:49,560
Speaker 2: the interest paid on it so that we can can

686
00:34:49,920 --> 00:34:51,520
Speaker 2: continue to have credit as a nation.

687
00:34:52,760 --> 00:34:54,920
Speaker 1: So I think these are topics.

688
00:34:55,360 --> 00:34:58,440
Speaker 2: These are definitely bigger topics but I think I think

689
00:34:58,480 --> 00:35:01,160
Speaker 2: an important thing maybe to unders stand is one you

690
00:35:01,280 --> 00:35:03,960
Speaker 2: probably will get less benefits from the government, like that

691
00:35:04,160 --> 00:35:06,160
Speaker 2: is probably going to happen. They're probably going to be

692
00:35:06,200 --> 00:35:09,080
Speaker 2: some pretty ugly cuts that have to come in twenty

693
00:35:09,120 --> 00:35:12,000
Speaker 2: twenty nine, twenty thirty four, especially ten years out as

694
00:35:12,000 --> 00:35:15,400
Speaker 2: a long time. And also I would expect tax rates

695
00:35:15,440 --> 00:35:17,080
Speaker 2: to go up in the fire at some point in

696
00:35:17,080 --> 00:35:19,400
Speaker 2: the future. Yeah, I think that's that's one that is

697
00:35:19,680 --> 00:35:20,600
Speaker 2: the most likely.

698
00:35:20,760 --> 00:35:22,920
Speaker 1: I don't think you're alone in that prediction. And actually

699
00:35:23,320 --> 00:35:24,960
Speaker 1: that when they were forming the bill, that was one

700
00:35:24,960 --> 00:35:27,560
Speaker 1: of the things that was discussed was raising that tax

701
00:35:27,600 --> 00:35:31,560
Speaker 1: bracket in that very upper echelon tier of income earners,

702
00:35:32,040 --> 00:35:33,600
Speaker 1: but that was that was not done.

703
00:35:33,760 --> 00:35:34,800
Speaker 2: Yeah, I almost I almost.

704
00:35:34,800 --> 00:35:39,120
Speaker 1: Curiously, just from like a general tax filing perspective, you

705
00:35:39,400 --> 00:35:42,960
Speaker 1: are all about empowering people to DIY, to understand the

706
00:35:43,320 --> 00:35:47,160
Speaker 1: tax code so that they can DIY their taxes. Can

707
00:35:47,200 --> 00:35:49,600
Speaker 1: you make the case to me and to our listeners

708
00:35:49,640 --> 00:35:52,279
Speaker 1: for why a self employed person should not hire a

709
00:35:52,320 --> 00:35:55,840
Speaker 1: pro maybe why they should figure this stuff out and

710
00:35:56,800 --> 00:35:57,840
Speaker 1: learn to do it themselves.

711
00:35:58,040 --> 00:36:01,360
Speaker 2: I feel frustrated personally, and you know as a taxpayer

712
00:36:01,760 --> 00:36:04,640
Speaker 2: that I have to pay to perform my civic duty

713
00:36:04,719 --> 00:36:07,279
Speaker 2: of paying my taxes. That just feels wrong. And I

714
00:36:07,360 --> 00:36:10,680
Speaker 2: know because I've looked at other countries, like other countries

715
00:36:10,719 --> 00:36:12,920
Speaker 2: don't all do it that way. It doesn't have to

716
00:36:12,960 --> 00:36:16,960
Speaker 2: be that way, and so it just feels to me, honestly,

717
00:36:17,040 --> 00:36:19,319
Speaker 2: just like as a civic right, it just feels like

718
00:36:19,360 --> 00:36:22,040
Speaker 2: we should be able to just pay our taxes for

719
00:36:22,120 --> 00:36:25,200
Speaker 2: free without paying a third party. And I think those

720
00:36:25,280 --> 00:36:29,040
Speaker 2: companies they use a marketing method that is to just

721
00:36:29,200 --> 00:36:31,520
Speaker 2: make us all feel really fearful and a lot of

722
00:36:31,560 --> 00:36:34,160
Speaker 2: dread about the irs and about tax law and just

723
00:36:34,160 --> 00:36:36,880
Speaker 2: say like, hey, it's so complicated and so scary. Just

724
00:36:36,960 --> 00:36:39,520
Speaker 2: pay us and we'll do it for you. But actually

725
00:36:39,560 --> 00:36:42,640
Speaker 2: a lot of stuff you don't need. You're probably doing

726
00:36:42,640 --> 00:36:44,560
Speaker 2: most of the work on your own anyway when you

727
00:36:44,600 --> 00:36:47,040
Speaker 2: do pay someone, And so if you just knew a

728
00:36:47,120 --> 00:36:49,480
Speaker 2: little bit more, you'd be able to file the taxes

729
00:36:49,520 --> 00:36:53,719
Speaker 2: on your own. And so to me, you know, it's

730
00:36:53,800 --> 00:36:56,480
Speaker 2: kind of against my own interest, right, nobody's going to

731
00:36:56,520 --> 00:36:58,799
Speaker 2: pay me to do taxes now. But I just this

732
00:36:58,880 --> 00:37:01,000
Speaker 2: is a book I wanted to exist in the world

733
00:37:01,080 --> 00:37:04,080
Speaker 2: because it just think this is fair, and they just

734
00:37:04,160 --> 00:37:06,560
Speaker 2: want people to be able to do their own taxes.

735
00:37:06,840 --> 00:37:08,880
Speaker 2: With that said, I do have a chapter in the

736
00:37:08,920 --> 00:37:10,960
Speaker 2: book that I think is an important one which is

737
00:37:11,000 --> 00:37:15,000
Speaker 2: about tax triage, because there are some scenarios that just

738
00:37:15,120 --> 00:37:18,919
Speaker 2: have complexity. If you go by Joel a corporate jet

739
00:37:19,000 --> 00:37:22,040
Speaker 2: for yourself, the depreciation might be a little complicated.

740
00:37:23,320 --> 00:37:24,120
Speaker 1: I've already done it.

741
00:37:24,239 --> 00:37:27,680
Speaker 2: So is that your craft beers yes?

742
00:37:27,800 --> 00:37:30,240
Speaker 1: Yes, Now you know when you get to the upper echelon,

743
00:37:31,000 --> 00:37:33,440
Speaker 1: you know, like me, you need corporate jets of necessity.

744
00:37:33,520 --> 00:37:37,840
Speaker 1: Right when does it become complex enough to need Like,

745
00:37:38,239 --> 00:37:40,759
Speaker 1: for instance, I'm a real estate investor, right, and that

746
00:37:41,400 --> 00:37:46,040
Speaker 1: owning multiple rental properties does complicate things, But you're right, Like,

747
00:37:46,080 --> 00:37:49,359
Speaker 1: I'm gathering a lot of that information anyway to give

748
00:37:49,440 --> 00:37:53,400
Speaker 1: to my tax professional to then do the actual filing

749
00:37:53,719 --> 00:37:55,719
Speaker 1: and then and then when it comes to making like

750
00:37:56,239 --> 00:37:58,360
Speaker 1: not just year end decisions to try to save on

751
00:37:58,480 --> 00:38:02,400
Speaker 1: some taxes this year, I think sometimes having the input

752
00:38:02,520 --> 00:38:06,000
Speaker 1: of a tax professional who is like up to speed

753
00:38:06,080 --> 00:38:08,640
Speaker 1: on the changes in the most recent tax bill like

754
00:38:08,680 --> 00:38:12,440
Speaker 1: that could be helpful from hey, here's like what changed

755
00:38:12,480 --> 00:38:14,560
Speaker 1: and how it's impacting you now, and then also how

756
00:38:14,560 --> 00:38:18,359
Speaker 1: you should be thinking about your taxes, how much you're

757
00:38:18,480 --> 00:38:24,160
Speaker 1: contributing to like donating maybe bunching donations to maximize tax

758
00:38:24,160 --> 00:38:28,200
Speaker 1: deduction this year versus you know, donating equal amounts in

759
00:38:28,560 --> 00:38:32,399
Speaker 1: over multiple years. Like, there are some complexities like that,

760
00:38:32,960 --> 00:38:35,719
Speaker 1: and people could save more on taxes, but maybe they

761
00:38:35,800 --> 00:38:39,200
Speaker 1: just don't know that exists or know how to go

762
00:38:39,239 --> 00:38:39,680
Speaker 1: about it.

763
00:38:39,920 --> 00:38:43,320
Speaker 2: You're absolutely right about that, and there are things. Tax

764
00:38:43,360 --> 00:38:46,120
Speaker 2: planning is something that actually costs a lot of money

765
00:38:46,239 --> 00:38:49,440
Speaker 2: but is worth it. I actually think that I think

766
00:38:49,480 --> 00:38:53,160
Speaker 2: of that almost differently than just tax preparation, which is

767
00:38:53,200 --> 00:38:55,759
Speaker 2: not always worth it because you often do have to

768
00:38:55,760 --> 00:38:57,960
Speaker 2: do most of that work yourself and could just get

769
00:38:58,000 --> 00:39:01,319
Speaker 2: over the hump with a little extra info. So my

770
00:39:01,400 --> 00:39:04,400
Speaker 2: book really I the people that I was thinking of

771
00:39:04,520 --> 00:39:06,880
Speaker 2: or like, you know me, younger me who was like

772
00:39:06,920 --> 00:39:11,160
Speaker 2: an artist with all the complexity of a larger business

773
00:39:11,160 --> 00:39:14,839
Speaker 2: but not the income, and younger people who tend to

774
00:39:14,880 --> 00:39:18,480
Speaker 2: have you know, a young person recently out of school,

775
00:39:18,520 --> 00:39:20,640
Speaker 2: in their first job or in their first you know,

776
00:39:21,120 --> 00:39:23,759
Speaker 2: just starting their business for the first time. That's a

777
00:39:23,800 --> 00:39:27,200
Speaker 2: person who hasn't accumulated a bunch of real estate, maybe

778
00:39:27,239 --> 00:39:30,600
Speaker 2: a spouse, maybe a mortgage right that your taxes are

779
00:39:30,640 --> 00:39:33,439
Speaker 2: simpler when you're younger, and so a younger person who

780
00:39:33,520 --> 00:39:36,239
Speaker 2: has a much more limited budget, who's listening to your

781
00:39:36,239 --> 00:39:38,560
Speaker 2: show to get all your amazing tips on that stuff.

782
00:39:38,960 --> 00:39:41,480
Speaker 2: That's the person who needs this book and who need

783
00:39:41,600 --> 00:39:43,480
Speaker 2: you know, needs to be able to just do their

784
00:39:43,520 --> 00:39:46,000
Speaker 2: taxes on their own because they actually probably have a

785
00:39:46,040 --> 00:39:49,200
Speaker 2: simpler situation. Yeah, once you do have multiple real estate

786
00:39:49,239 --> 00:39:52,279
Speaker 2: investments and you know, a marriage and a mortgage and

787
00:39:52,320 --> 00:39:56,399
Speaker 2: depreciation and all these things like those, that's where one

788
00:39:56,480 --> 00:39:58,919
Speaker 2: you have the resources, you have the money to pay

789
00:39:58,960 --> 00:40:03,040
Speaker 2: somebody professional, and probably more need for it. So it's

790
00:40:03,120 --> 00:40:05,640
Speaker 2: that like zone of people I think who have been

791
00:40:05,719 --> 00:40:08,640
Speaker 2: left out, who are paying three hundred dollars to turbo

792
00:40:08,719 --> 00:40:11,520
Speaker 2: tax when they have really a very simple tax return.

793
00:40:11,680 --> 00:40:13,400
Speaker 2: That's who I'm really trying to talk to.

794
00:40:13,800 --> 00:40:16,120
Speaker 1: Yeah, I love that you kind of distinguish too between

795
00:40:16,160 --> 00:40:19,719
Speaker 1: paying for advice and paying for someone to file your

796
00:40:19,760 --> 00:40:23,719
Speaker 1: taxes on your behalf. And especially for people who have yeah,

797
00:40:23,800 --> 00:40:28,720
Speaker 1: simpler situations, there's there are free tax software like I

798
00:40:28,719 --> 00:40:31,640
Speaker 1: I have always liked. I think it's cash app taxes

799
00:40:31,680 --> 00:40:34,480
Speaker 1: now used to be done by credit Karma, and they

800
00:40:34,520 --> 00:40:37,640
Speaker 1: have you can file your federal and state for free,

801
00:40:37,680 --> 00:40:40,239
Speaker 1: and you can even have greater complexity than some of

802
00:40:40,239 --> 00:40:43,520
Speaker 1: the major tax softwares that are like well, if you

803
00:40:43,560 --> 00:40:46,440
Speaker 1: meet this like tiny, you know, people who have a

804
00:40:46,520 --> 00:40:48,359
Speaker 1: ten can file at ten forty easy, then we'll let

805
00:40:48,400 --> 00:40:51,040
Speaker 1: you file for free. But cash app taxes opens it

806
00:40:51,080 --> 00:40:52,600
Speaker 1: up to a wider rate of people who can file

807
00:40:52,640 --> 00:40:56,840
Speaker 1: for free in di Wyatt. But yeah, I think paying

808
00:40:56,880 --> 00:41:01,200
Speaker 1: for that advice and insight maybe or even just like

809
00:41:01,360 --> 00:41:04,640
Speaker 1: buying your book and then like learning it downloading the

810
00:41:04,640 --> 00:41:08,279
Speaker 1: information that way can make people feel more confident in

811
00:41:08,320 --> 00:41:10,479
Speaker 1: their ability to kind of go the DII route.

812
00:41:10,560 --> 00:41:13,160
Speaker 2: Yeah, I think, you know, honestly, I just want people

813
00:41:13,239 --> 00:41:16,799
Speaker 2: to have a better sense of what their rights are,

814
00:41:17,040 --> 00:41:20,560
Speaker 2: and because I find when people have that information they

815
00:41:20,600 --> 00:41:24,680
Speaker 2: feel much less scared. They're really made for humans. They're

816
00:41:24,719 --> 00:41:27,200
Speaker 2: made for people who are imperfect, which is literally one

817
00:41:27,280 --> 00:41:31,439
Speaker 2: hundred percent of us. The only really hard and fast

818
00:41:31,560 --> 00:41:34,880
Speaker 2: rule about taxes is meet the deadline, right. But if

819
00:41:34,920 --> 00:41:37,240
Speaker 2: you make a mistake, you can file an amended return.

820
00:41:37,360 --> 00:41:40,160
Speaker 2: Like they're actually more forgiving than I mean, you have

821
00:41:40,200 --> 00:41:42,000
Speaker 2: to follow the rules and do your best. I'm not

822
00:41:42,040 --> 00:41:45,440
Speaker 2: saying cheat on your taxes, definitely not but like you

823
00:41:45,480 --> 00:41:50,359
Speaker 2: can fix mistakes, you can arrange payment plans. There are

824
00:41:50,360 --> 00:41:53,200
Speaker 2: ways to get out of a bad situation. And I

825
00:41:53,320 --> 00:41:55,399
Speaker 2: just want people to have the information so that they

826
00:41:55,440 --> 00:41:57,520
Speaker 2: can kind of go in eyes wide open and not

827
00:41:57,600 --> 00:41:59,480
Speaker 2: just pay money out of fear.

828
00:41:59,680 --> 00:42:02,839
Speaker 1: Yeah, let's let's talk about perfection and a few other

829
00:42:03,080 --> 00:42:05,239
Speaker 1: quick topics. Hannah will get to just a few more

830
00:42:05,280 --> 00:42:14,960
Speaker 1: questions with Hannah Cole right after this are back. We're

831
00:42:14,960 --> 00:42:17,920
Speaker 1: still talking with Hannah Cole, who don't want taxes to

832
00:42:18,080 --> 00:42:21,480
Speaker 1: terrify you. Getting towards the end of the year and

833
00:42:21,640 --> 00:42:24,400
Speaker 1: taxes are, you know, starting to get on people's minds

834
00:42:24,440 --> 00:42:28,720
Speaker 1: where whether it's last minute moves to potentially reduce taxes

835
00:42:28,760 --> 00:42:31,279
Speaker 1: for next year, whether that's contributing more to those taxi

836
00:42:31,320 --> 00:42:34,759
Speaker 1: and retirement accounts or you know, donating more money, which

837
00:42:34,800 --> 00:42:37,080
Speaker 1: you have to be thoughtful about that too. Like I

838
00:42:37,160 --> 00:42:40,879
Speaker 1: just mentioned with the bunching, is donating more money gonna

839
00:42:40,880 --> 00:42:43,200
Speaker 1: actually get you a tax break this year? It depends

840
00:42:43,560 --> 00:42:46,040
Speaker 1: on a bunch of things. But what you were just

841
00:42:46,120 --> 00:42:48,560
Speaker 1: talking about, Hannah right there, you I think a lot

842
00:42:48,600 --> 00:42:50,880
Speaker 1: of people feel like their taxes need to be perfect

843
00:42:51,239 --> 00:42:54,640
Speaker 1: before they file, and that feels like an impossible thing, like,

844
00:42:54,680 --> 00:42:57,760
Speaker 1: what does that even mean? What is the IRS really

845
00:42:57,880 --> 00:43:02,320
Speaker 1: looking for from us when it comes to avoiding getting

846
00:43:02,360 --> 00:43:04,560
Speaker 1: audited and making sure we're jumping through the right hoops.

847
00:43:04,600 --> 00:43:07,600
Speaker 2: Well, nobody can promise you not to be audited because

848
00:43:07,600 --> 00:43:09,840
Speaker 2: it's the only check and balance in the system, and

849
00:43:09,880 --> 00:43:12,600
Speaker 2: so that is that they have a right to audit

850
00:43:12,640 --> 00:43:15,719
Speaker 2: you at any time for the last three years. But

851
00:43:16,160 --> 00:43:18,920
Speaker 2: even though that sounds a little scary. The thing is,

852
00:43:19,080 --> 00:43:21,520
Speaker 2: the thing that I think people don't really consciously think

853
00:43:21,520 --> 00:43:24,600
Speaker 2: about with taxes is that you have to pay taxes

854
00:43:24,640 --> 00:43:28,040
Speaker 2: all year, and it's an estimate. And the whole job

855
00:43:28,080 --> 00:43:31,720
Speaker 2: of a tax return is to reconcile the estimated taxes

856
00:43:31,760 --> 00:43:34,319
Speaker 2: that you paid, whether it was through withholding on your

857
00:43:34,320 --> 00:43:37,759
Speaker 2: paycheck or through paying estimated quarterly taxes, which is how

858
00:43:37,760 --> 00:43:40,640
Speaker 2: you have to do it when you're self employed. And

859
00:43:40,719 --> 00:43:44,359
Speaker 2: so you do that estimated payment all year, and then

860
00:43:44,440 --> 00:43:47,319
Speaker 2: when the tax year is over, so December thirty first

861
00:43:47,320 --> 00:43:49,520
Speaker 2: goes by, then you get those tax documents in the mail,

862
00:43:49,600 --> 00:43:52,360
Speaker 2: you do your bookkeeping, you see what the actual was

863
00:43:52,520 --> 00:43:55,799
Speaker 2: versus the estimate, and the tax returns job is to say, oh,

864
00:43:55,840 --> 00:43:58,759
Speaker 2: you overpaid your taxes. Here is your refund or you

865
00:43:58,840 --> 00:44:01,279
Speaker 2: underpaid your taxes, here's your bill And so if you

866
00:44:01,400 --> 00:44:05,319
Speaker 2: think about that, perfection is not in there at all.

867
00:44:05,600 --> 00:44:11,040
Speaker 2: Estimates are imperfect, and reconciling is part of the process. Okay,

868
00:44:11,040 --> 00:44:13,320
Speaker 2: So I hope that just feels like diffusing to this

869
00:44:13,440 --> 00:44:16,319
Speaker 2: idea like it has to be perfect. No, Like the

870
00:44:16,360 --> 00:44:19,239
Speaker 2: tax returns job is to do the math on that,

871
00:44:19,320 --> 00:44:21,600
Speaker 2: you know, to make change on those final numbers.

872
00:44:21,800 --> 00:44:24,600
Speaker 1: That's all when people come to visit you or in

873
00:44:24,640 --> 00:44:26,840
Speaker 1: the process of writing this book, as you're talking to people,

874
00:44:27,760 --> 00:44:30,040
Speaker 1: what are the biggest misconceptions that people tend to have

875
00:44:30,080 --> 00:44:33,400
Speaker 1: about taxes and like what do you maybe trying to

876
00:44:33,400 --> 00:44:37,000
Speaker 1: combat fiercely here that people believe that's that's maybe not true.

877
00:44:37,239 --> 00:44:39,480
Speaker 2: I mean, one is that they're super scary. I mean,

878
00:44:39,480 --> 00:44:41,640
Speaker 2: because I really do find I do a lot of

879
00:44:41,640 --> 00:44:44,840
Speaker 2: workshops around the country just teaching people about taxes, and

880
00:44:44,880 --> 00:44:47,440
Speaker 2: I find consistently people come up to me after and

881
00:44:47,440 --> 00:44:49,480
Speaker 2: they're like, Oh, I totally feel like I can do

882
00:44:49,560 --> 00:44:50,920
Speaker 2: it now. Yeah, like.

883
00:44:52,600 --> 00:44:54,880
Speaker 1: You heard my intro, Like it's fear based like that.

884
00:44:54,960 --> 00:44:57,400
Speaker 1: There is a lot of like I don't like horror movies,

885
00:44:57,440 --> 00:44:59,480
Speaker 1: like that was not that's that's not a joke, Like

886
00:44:59,480 --> 00:45:02,480
Speaker 1: I get scared, but I think taxes have a similar

887
00:45:03,120 --> 00:45:05,440
Speaker 1: like people feel that way about like even just the

888
00:45:05,480 --> 00:45:07,360
Speaker 1: work getting spoken in a room.

889
00:45:07,440 --> 00:45:10,280
Speaker 2: Absolutely well as a person who has called the IRS

890
00:45:10,320 --> 00:45:13,400
Speaker 2: a lot because before I knew, you know, before I

891
00:45:13,400 --> 00:45:15,800
Speaker 2: went back to school for accounting, I myself got in trouble,

892
00:45:15,840 --> 00:45:17,480
Speaker 2: like some of this book is written based on my

893
00:45:17,520 --> 00:45:21,279
Speaker 2: own pain. But just as a person who also calls

894
00:45:21,320 --> 00:45:25,560
Speaker 2: the IRS on behalf of clients, they're so nice, Like nobody,

895
00:45:26,120 --> 00:45:28,640
Speaker 2: nobody you talk to in bill collection, in any other

896
00:45:28,800 --> 00:45:32,040
Speaker 2: private area is ever going to be as kind and

897
00:45:32,120 --> 00:45:35,920
Speaker 2: sort of forgiving as the IRS. They just want basically

898
00:45:35,960 --> 00:45:37,799
Speaker 2: for you to pay your taxes in any way that

899
00:45:37,840 --> 00:45:40,560
Speaker 2: you can. It's not actually so terrible.

900
00:45:40,760 --> 00:45:43,680
Speaker 1: Well, I'm gonna say maybe some of the things that

901
00:45:43,719 --> 00:45:46,480
Speaker 1: will get you in the most trouble is like not

902
00:45:46,560 --> 00:45:49,160
Speaker 1: filing right like that can talk about how big of

903
00:45:49,200 --> 00:45:50,560
Speaker 1: an issue that can be.

904
00:45:50,680 --> 00:45:52,480
Speaker 2: And actually, you know, you were asking like one of

905
00:45:52,480 --> 00:45:55,320
Speaker 2: the most you know, the things that people get wrong

906
00:45:56,320 --> 00:45:59,920
Speaker 2: thinking that estimated taxes, estimated quarterly taxes don't apply to me,

907
00:46:00,640 --> 00:46:03,200
Speaker 2: or that I'm going to get some written in stone

908
00:46:03,239 --> 00:46:09,360
Speaker 2: engraved invitation to start paying estimates, Like, no, I wish

909
00:46:09,480 --> 00:46:12,319
Speaker 2: everybody had this education and I'm trying to provide it

910
00:46:12,360 --> 00:46:15,399
Speaker 2: in this book. But estimated quarterly taxes apply to you

911
00:46:15,960 --> 00:46:18,560
Speaker 2: if your tax bill last year was over one thousand dollars.

912
00:46:18,880 --> 00:46:21,720
Speaker 2: So like you can actually look, that's a knowable number.

913
00:46:21,760 --> 00:46:24,160
Speaker 2: You can pull out your ten forty from last year,

914
00:46:24,719 --> 00:46:28,440
Speaker 2: look at that tax you know amount you o line

915
00:46:29,000 --> 00:46:30,879
Speaker 2: and you can see you can see the answer. If

916
00:46:30,880 --> 00:46:33,320
Speaker 2: it's greater than one thousand dollars you have to pay quarterly.

917
00:46:33,440 --> 00:46:36,200
Speaker 1: What happens if you don't pay quarterly.

918
00:46:35,960 --> 00:46:38,640
Speaker 2: Estimated tax Yeah, so if you don't pay quarterly taxes,

919
00:46:38,680 --> 00:46:41,040
Speaker 2: then the following year, when you do your tax return

920
00:46:41,120 --> 00:46:44,799
Speaker 2: for that year, you'll be assessed up to four penalties

921
00:46:44,840 --> 00:46:47,120
Speaker 2: for each of the quarterly deadlines that went by that

922
00:46:47,200 --> 00:46:51,359
Speaker 2: you missed, right, So you might pay four, you might

923
00:46:51,400 --> 00:46:53,799
Speaker 2: have four penalties. You could only have three if you

924
00:46:53,840 --> 00:46:55,880
Speaker 2: figured it out and paid your last payment, right, So

925
00:46:55,920 --> 00:46:58,399
Speaker 2: you can stop the penalties by getting on board the train.

926
00:46:58,960 --> 00:47:01,839
Speaker 2: And then there's also daily interest, and of course, like

927
00:47:02,200 --> 00:47:05,320
Speaker 2: you know, that's a penalties and interests are an incentive

928
00:47:05,360 --> 00:47:08,760
Speaker 2: and negative incentive. So the incentive with the daily interest

929
00:47:08,840 --> 00:47:11,360
Speaker 2: is to say Hey, okay, you missed the quarterly deadline

930
00:47:11,400 --> 00:47:15,000
Speaker 2: for you know, January fifteenth. But if you get on

931
00:47:15,080 --> 00:47:17,640
Speaker 2: board and make your payment before the don't wait till

932
00:47:17,680 --> 00:47:21,160
Speaker 2: the next quarterly deadline, pay tomorrow. Pay today. It's always

933
00:47:21,160 --> 00:47:24,040
Speaker 2: going to be more cheap to pay your taxes today

934
00:47:24,120 --> 00:47:25,280
Speaker 2: than to wait till tomorrow.

935
00:47:25,680 --> 00:47:28,839
Speaker 1: And what's your advice on how people can figure out

936
00:47:29,040 --> 00:47:31,880
Speaker 1: how much they should be paying in quarterly estimates to

937
00:47:31,880 --> 00:47:32,360
Speaker 1: the irs?

938
00:47:32,440 --> 00:47:36,719
Speaker 2: Yeah, So there's two rules called safe harbors, and your

939
00:47:36,760 --> 00:47:38,960
Speaker 2: goal as a taxpayer is just to meet one or

940
00:47:39,000 --> 00:47:41,279
Speaker 2: the other of them. It can be either one. The

941
00:47:41,360 --> 00:47:44,319
Speaker 2: easy one is one hundred paying one hundred percent of

942
00:47:44,400 --> 00:47:47,839
Speaker 2: last year's tax this year. So if you just look

943
00:47:47,880 --> 00:47:50,920
Speaker 2: at the total tax line on your ten forty summary,

944
00:47:51,000 --> 00:47:53,400
Speaker 2: that's the page. It's on the page that has your signature,

945
00:47:54,080 --> 00:47:56,960
Speaker 2: There's a line that says total tax. You take that number,

946
00:47:57,000 --> 00:48:01,640
Speaker 2: divide it by four. That will be a good baseline

947
00:48:01,640 --> 00:48:04,319
Speaker 2: for meeting the first safe harbor rule for paying your

948
00:48:04,440 --> 00:48:07,759
Speaker 2: estimates for this year. So if last year, for example,

949
00:48:08,040 --> 00:48:10,880
Speaker 2: my total tax was twenty thousand dollars, I'm going to

950
00:48:10,920 --> 00:48:14,280
Speaker 2: take twenty thousand divided by four. Because it's quarterly taxes

951
00:48:14,760 --> 00:48:17,799
Speaker 2: and that's a five thousand dollars payment each quarter, and

952
00:48:17,840 --> 00:48:19,279
Speaker 2: that will meet the safe harbor for.

953
00:48:19,280 --> 00:48:21,560
Speaker 1: Me, which is great for not running a foul of

954
00:48:21,560 --> 00:48:24,200
Speaker 1: the IRS. But if you make a lot more money,

955
00:48:24,320 --> 00:48:27,120
Speaker 1: you could still find yourself short shrift at the end

956
00:48:27,160 --> 00:48:28,440
Speaker 1: of the year when it comes to or when it

957
00:48:28,440 --> 00:48:30,120
Speaker 1: comes down to file taxes and having the money to

958
00:48:30,160 --> 00:48:30,520
Speaker 1: pay what.

959
00:48:30,520 --> 00:48:33,279
Speaker 2: You actually out absolutely, and I think that that is

960
00:48:33,360 --> 00:48:35,680
Speaker 2: the hardest part for people to realize. I think a

961
00:48:35,680 --> 00:48:39,400
Speaker 2: lot of times people get their head around the retroactive

962
00:48:39,440 --> 00:48:41,720
Speaker 2: part of taxes. They look at last year's tax return

963
00:48:41,760 --> 00:48:44,279
Speaker 2: because that's the only one they've got and they can

964
00:48:44,320 --> 00:48:47,080
Speaker 2: get a handle on last year. But meanwhile, this year

965
00:48:47,200 --> 00:48:50,920
Speaker 2: is happening, right, and this year's taxes are not actually

966
00:48:51,000 --> 00:48:53,560
Speaker 2: going to be based on last year. They're actually going

967
00:48:53,600 --> 00:48:56,680
Speaker 2: to be based on this year. So the IRS lets

968
00:48:56,719 --> 00:49:00,560
Speaker 2: you estimate based on last year with the assumption that

969
00:49:00,600 --> 00:49:02,719
Speaker 2: this year looks like last year. But sometimes this year

970
00:49:02,760 --> 00:49:05,960
Speaker 2: doesn't look anything like last year, and so that's where

971
00:49:06,000 --> 00:49:08,680
Speaker 2: it gets much more tricky. There is a safe harbor

972
00:49:08,719 --> 00:49:11,279
Speaker 2: rule that helps you. You can pay ninety percent of this

973
00:49:11,360 --> 00:49:14,960
Speaker 2: year's tax, but you know you're paying ninety percent of

974
00:49:14,960 --> 00:49:18,200
Speaker 2: an unknown total, so that's much harder to get your

975
00:49:18,200 --> 00:49:21,839
Speaker 2: hat around. I'll tell you the cheat code, though, Jel

976
00:49:22,000 --> 00:49:25,759
Speaker 2: is just you have to do bookkeeping once per quarter, okay,

977
00:49:25,800 --> 00:49:26,200
Speaker 2: and that's.

978
00:49:26,040 --> 00:49:30,080
Speaker 1: How you know, maybe we'll end there. Bookkeeping is how

979
00:49:30,120 --> 00:49:32,480
Speaker 1: difficult is that? And I know that there are so

980
00:49:32,640 --> 00:49:36,800
Speaker 1: many It's funny we do it ours in house. Matt,

981
00:49:36,920 --> 00:49:39,799
Speaker 1: my co host and best friend, it loves to do it,

982
00:49:39,840 --> 00:49:41,800
Speaker 1: like he just is thrilled to do our own bookkeeping,

983
00:49:41,800 --> 00:49:44,919
Speaker 1: which is rad god bless, I know, Right, But then

984
00:49:45,200 --> 00:49:48,640
Speaker 1: there are these bookkeeping softwares out there that seem to

985
00:49:48,640 --> 00:49:52,480
Speaker 1: be relatively inexpensive. So is it pretty simple to use

986
00:49:52,520 --> 00:49:55,320
Speaker 1: those for small business owners? Is that typically the best solution?

987
00:49:55,800 --> 00:49:57,839
Speaker 2: I honestly think the best solution is the one you're

988
00:49:57,880 --> 00:50:00,280
Speaker 2: going to stick with and the one that works for you.

989
00:50:00,280 --> 00:50:02,719
Speaker 2: You know, like, if it's really complicated to set up

990
00:50:02,760 --> 00:50:05,319
Speaker 2: and expensive and you don't have the money, maybe that's

991
00:50:05,360 --> 00:50:08,520
Speaker 2: not the best one for you. You can absolutely do

992
00:50:08,600 --> 00:50:11,799
Speaker 2: your bookkeeping on a spreadsheet. There's nothing wrong with that.

993
00:50:12,120 --> 00:50:14,799
Speaker 2: Just understand, a spreadsheet is going to be manual, right,

994
00:50:14,800 --> 00:50:18,040
Speaker 2: It's not going to pull a feed from your business

995
00:50:18,040 --> 00:50:21,319
Speaker 2: bank account and start putting those into categories for you.

996
00:50:21,719 --> 00:50:23,960
Speaker 2: If you want some of that automation, it's going to

997
00:50:24,000 --> 00:50:27,520
Speaker 2: be worth it to pay for some software. So yeah,

998
00:50:27,560 --> 00:50:30,839
Speaker 2: you really. I think the number one thing to think

999
00:50:30,840 --> 00:50:35,359
Speaker 2: about if you're going to pay for bookkeeping software is one.

1000
00:50:35,480 --> 00:50:38,120
Speaker 2: If you're not paying your being sold, you are the

1001
00:50:38,160 --> 00:50:40,400
Speaker 2: product you're being sold, right, that's a thing to know.

1002
00:50:41,800 --> 00:50:46,080
Speaker 2: But you want to look for the automation of pulling

1003
00:50:46,080 --> 00:50:49,640
Speaker 2: in your bank statement, so if you're bookkeeping software won't

1004
00:50:49,680 --> 00:50:52,160
Speaker 2: play well with your bank. And I've had this happen.

1005
00:50:53,360 --> 00:50:55,719
Speaker 2: I use Fidelity, and I tried to set up on

1006
00:50:55,719 --> 00:50:59,160
Speaker 2: a bookkeeping platform that wouldn't pull a Fidelity bank statement.

1007
00:51:00,160 --> 00:51:02,000
Speaker 2: Was a waste of all my time and all my work.

1008
00:51:02,280 --> 00:51:04,320
Speaker 2: I was like, oh, this is going to be manual anyway,

1009
00:51:04,360 --> 00:51:07,480
Speaker 2: and I'm paying for automation that I don't get, So

1010
00:51:07,520 --> 00:51:08,560
Speaker 2: that's what I would look for.

1011
00:51:08,680 --> 00:51:11,440
Speaker 1: Okay, wonderful Hannah. Thank you so much for taking the

1012
00:51:11,480 --> 00:51:13,680
Speaker 1: time today. Where can how do money listeners find out

1013
00:51:13,680 --> 00:51:16,960
Speaker 1: about your awesome new book that demystifies taxes and makes

1014
00:51:17,000 --> 00:51:19,960
Speaker 1: it all just super reassuring to know that you can

1015
00:51:20,000 --> 00:51:20,600
Speaker 1: do it yourself.

1016
00:51:21,400 --> 00:51:24,439
Speaker 2: Thank you too, It's so fun to be here. Yeah,

1017
00:51:24,480 --> 00:51:28,320
Speaker 2: the book Taxes for Humans is available anywhere books are sold,

1018
00:51:28,840 --> 00:51:30,920
Speaker 2: and if you go to my website, I made a

1019
00:51:30,960 --> 00:51:32,960
Speaker 2: page for how to money listeners. You can go to

1020
00:51:33,000 --> 00:51:37,120
Speaker 2: Sunlight Tax dot com slash how and you can you know,

1021
00:51:37,200 --> 00:51:40,440
Speaker 2: get a link to buy the book at any independent

1022
00:51:40,440 --> 00:51:43,520
Speaker 2: bookstore or your favorite you know, large retailer.

1023
00:51:44,120 --> 00:51:46,120
Speaker 1: Amazing. We'll put that link in our show notes too,

1024
00:51:46,160 --> 00:51:47,719
Speaker 1: off on the site of how toomoney dot com.

1025
00:51:47,960 --> 00:51:50,440
Speaker 2: Awesome. Can I also tell them tell you that you

1026
00:51:50,480 --> 00:51:53,120
Speaker 2: know on on my website at Sunlight tax dot com,

1027
00:51:53,120 --> 00:51:55,920
Speaker 2: I have a visual guide to tax deductions for small

1028
00:51:55,960 --> 00:51:58,720
Speaker 2: businesses and self employee people. So that's a really cool

1029
00:51:58,760 --> 00:52:02,839
Speaker 2: free download for those like visual learners among us, with

1030
00:52:02,880 --> 00:52:05,920
Speaker 2: all the tax rules written out. So if that, if

1031
00:52:05,960 --> 00:52:08,480
Speaker 2: anybody's interested in that, Sundly Tax dot com is a

1032
00:52:08,520 --> 00:52:09,640
Speaker 2: place you can get that too.

1033
00:52:10,000 --> 00:52:12,080
Speaker 1: Wonderful Hannah, this has been great, Thank you so much

1034
00:52:12,120 --> 00:52:12,640
Speaker 1: for joining me.

1035
00:52:12,719 --> 00:52:14,880
Speaker 2: Thanks for doing this, Joel. It's just awesome to talk

1036
00:52:14,920 --> 00:52:16,640
Speaker 2: to you, and I love what y'all are doing over there.

1037
00:52:17,120 --> 00:52:21,200
Speaker 1: Oh man, such a great conversation with Hannah Cole. I

1038
00:52:21,320 --> 00:52:26,319
Speaker 1: just I love it when somebody has the ability to

1039
00:52:26,440 --> 00:52:29,960
Speaker 1: talk about something that most people feel where it feels

1040
00:52:29,960 --> 00:52:32,280
Speaker 1: like another language, and I think for a lot of people,

1041
00:52:32,440 --> 00:52:35,560
Speaker 1: taxes feel like another language. And this is why we

1042
00:52:35,680 --> 00:52:39,239
Speaker 1: spend so much money hiring other people who understand that

1043
00:52:39,320 --> 00:52:43,720
Speaker 1: language to do tax work for us, right is because

1044
00:52:43,880 --> 00:52:48,239
Speaker 1: we don't want to take the time to dual lingo taxes.

1045
00:52:48,680 --> 00:52:53,399
Speaker 1: We just don't and so we pay the price one

1046
00:52:53,480 --> 00:52:56,760
Speaker 1: in terms of not understanding how they work. And maybe

1047
00:52:57,280 --> 00:52:59,759
Speaker 1: so I think the price gets paid many times over.

1048
00:53:00,200 --> 00:53:04,560
Speaker 1: Sometimes it's in the deductions we don't take, or maybe

1049
00:53:04,680 --> 00:53:09,160
Speaker 1: it's in the fact that we don't really understand that

1050
00:53:09,200 --> 00:53:12,800
Speaker 1: we're a business and so we're not paying those quarterly

1051
00:53:12,920 --> 00:53:16,600
Speaker 1: estimated taxes, which costs us, like Hannah was saying, in

1052
00:53:16,680 --> 00:53:20,280
Speaker 1: terms of interest and penalties. And then it also costs

1053
00:53:20,320 --> 00:53:24,680
Speaker 1: us when we pay the professional to not just file

1054
00:53:24,719 --> 00:53:26,680
Speaker 1: our taxes, but maybe we're paying for advice as well,

1055
00:53:26,719 --> 00:53:30,160
Speaker 1: and so there can be a lot of money sunk

1056
00:53:30,200 --> 00:53:35,439
Speaker 1: into paying for tax help. And it's not that it's

1057
00:53:35,600 --> 00:53:37,759
Speaker 1: never a good idea, Like we even talked about the

1058
00:53:37,760 --> 00:53:42,120
Speaker 1: complexity of being a real estate investor, and especially once

1059
00:53:42,120 --> 00:53:44,840
Speaker 1: you get past a certain point, maybe it makes the

1060
00:53:44,840 --> 00:53:49,279
Speaker 1: most sense for you from an ROI perspective to hire

1061
00:53:49,320 --> 00:53:53,200
Speaker 1: someone to help. But similar to I just think I

1062
00:53:53,239 --> 00:53:56,040
Speaker 1: always think of this as a real estate investor, when

1063
00:53:56,680 --> 00:53:59,360
Speaker 1: you are getting started out, we always talk about not

1064
00:53:59,560 --> 00:54:03,440
Speaker 1: hiring someone to manage those properties for you, because there

1065
00:54:03,520 --> 00:54:07,120
Speaker 1: is something about the learning curve of at least doing

1066
00:54:07,160 --> 00:54:10,440
Speaker 1: diying it for a couple of years that's going to

1067
00:54:10,520 --> 00:54:12,759
Speaker 1: be really good for you. You're going to have this

1068
00:54:12,880 --> 00:54:16,480
Speaker 1: hands on approach. Yeah, it doesn't mean you're fixing everything

1069
00:54:16,480 --> 00:54:19,160
Speaker 1: that goes wrong at the house yourself, but you're managing

1070
00:54:19,160 --> 00:54:23,280
Speaker 1: the tenants, you're finding tenants, you're learning what it looks

1071
00:54:23,360 --> 00:54:25,799
Speaker 1: like to be an effective manager. And then when you

1072
00:54:25,840 --> 00:54:29,080
Speaker 1: do hire a manager in the future, you have a

1073
00:54:29,080 --> 00:54:32,480
Speaker 1: lot better understanding and knowledge to hire a good one.

1074
00:54:32,600 --> 00:54:35,000
Speaker 1: You know what questions to ask, you know how to

1075
00:54:35,000 --> 00:54:38,480
Speaker 1: hold them accountable. And I think the same thing is

1076
00:54:38,760 --> 00:54:43,480
Speaker 1: true of especially in those early years, di wying your taxes,

1077
00:54:43,920 --> 00:54:47,480
Speaker 1: and I think it's wise, it's very wise. Just like

1078
00:54:47,520 --> 00:54:52,160
Speaker 1: we're learning about your personal finance and DIY investing so

1079
00:54:52,200 --> 00:54:54,719
Speaker 1: that we don't have to pay somebody, you know, one

1080
00:54:54,800 --> 00:54:58,279
Speaker 1: percent assets under management fee every single year to do

1081
00:54:58,320 --> 00:55:00,680
Speaker 1: something that we now feel confident that we can do

1082
00:55:00,760 --> 00:55:04,920
Speaker 1: on our own. Maybe the same is true especially early on,

1083
00:55:05,400 --> 00:55:08,759
Speaker 1: that a little bit of knowledge, garnering some wisdom in

1084
00:55:08,840 --> 00:55:12,760
Speaker 1: this space can avoid us having to pay a fee

1085
00:55:13,239 --> 00:55:16,640
Speaker 1: that can be pretty significant to somebody else. And then

1086
00:55:16,760 --> 00:55:19,239
Speaker 1: when we do feel like that's the best place for

1087
00:55:19,320 --> 00:55:21,239
Speaker 1: us to go to hire a professional to be in

1088
00:55:21,239 --> 00:55:24,400
Speaker 1: our corner on the tax front, well, now we know

1089
00:55:24,440 --> 00:55:26,520
Speaker 1: what question to ask them, and we know how to

1090
00:55:26,520 --> 00:55:29,040
Speaker 1: hold them accountable, and we know how to look at

1091
00:55:29,160 --> 00:55:34,520
Speaker 1: our own tax return and tax information and say, well,

1092
00:55:34,520 --> 00:55:37,120
Speaker 1: wait a second, you what Hay and I alluded to

1093
00:55:37,160 --> 00:55:39,520
Speaker 1: early on in the conversation, My tax pro missed this

1094
00:55:39,600 --> 00:55:43,959
Speaker 1: massive deduction. And I knew that because she brought enough

1095
00:55:44,000 --> 00:55:46,560
Speaker 1: to the table in that conversation to know this tax

1096
00:55:46,560 --> 00:55:48,560
Speaker 1: professional is not right for me, and they're missing out

1097
00:55:48,760 --> 00:55:50,719
Speaker 1: on some really important things. And if you don't know

1098
00:55:50,760 --> 00:55:55,040
Speaker 1: those things, you're assuming your tax pro is doing everything properly,

1099
00:55:55,239 --> 00:55:59,120
Speaker 1: is taking advantage of all the deductions that you are

1100
00:55:59,160 --> 00:56:02,480
Speaker 1: eligible for. But you don't actually know that right until

1101
00:56:02,560 --> 00:56:05,879
Speaker 1: you actually know something about taxes yourself. So I do

1102
00:56:06,280 --> 00:56:08,759
Speaker 1: recommend her book Taxes for Humans. I think it's a

1103
00:56:08,760 --> 00:56:11,640
Speaker 1: great one, and I think Hannah has just such a

1104
00:56:11,680 --> 00:56:18,160
Speaker 1: great perspective on taxes and the empowerment in that space

1105
00:56:18,320 --> 00:56:20,920
Speaker 1: because we could all use a little bit of it.

1106
00:56:21,360 --> 00:56:23,400
Speaker 1: All right, that's gonna do do it for this episode

1107
00:56:23,440 --> 00:56:26,560
Speaker 1: if you want. If you want links to Hannah's site

1108
00:56:26,640 --> 00:56:29,799
Speaker 1: and where you can buy her new book, you can

1109
00:56:29,840 --> 00:56:32,520
Speaker 1: find that up on the website at howtomoney dot com.

1110
00:56:32,600 --> 00:56:34,520
Speaker 1: Until next time, Best Friend Out.