Menu #5: Tax prep tactics to minimize stress this season

STATS STACK 🥞

$8,188 is the “cheapest” ticket for this year’s Super Bowl, which is more than 50% more expensive than the cheapest ticket price of last year’s Super Bowl. (Source: CNN).

38% of recent homebuyers under age 30 used either a cash gift from a family member or an inheritance to afford their down payment (Source: Redfin).

$28 Billion is what Meta boss Mark Zuckerberg made in one day after an impressive earnings report on Friday (Source: CNN). We asked him to invest in Money Menu and this was his response….

DEEP DISH 🍕
Tax prep tactics to minimize stress this season

Oh, it's that magical time again – tax season! We know, it might make you a bit anxious, but imagine turning this whole ordeal into a golden chance to boost your finances and learn a ton in the process.

That's where a stellar tax advisor comes into play. But just having one isn't enough. Are you really squeezing all the wisdom you can from them? Let's chat about the key things you should be talking about with your tax guru to make the most of their smarts:

How do we tackle tax prep? Get on the same page with them about logistics. How are you going to communicate? Emails, calls, coffee dates? It's all about setting those expectations straight from the get-go.

What do they need from you? Make sure you've got all your ducks in a row – IDs, last year's tax return, W-2, 1099, and those receipts you've been hoarding for deductions.

Life's curveballs and your taxes? Did you get married, move cities, or buy a house? Let them know about any of your big life moments because they're a big deal tax-wise.

Any smart moves for your tax situation? You’re aiming for that sweet spot where you’re not owing a ton but also not getting back too much — you don’t want to be in the business of giving the government an interest-free loan. It’s all about getting your withholdings just right.

Can you bug them all year? You’re looking for someone who won’t ghost you after the tax filing deadline. Being able to reach out any time means you can make smarter money moves and be on top of your game for the next tax season.

6 Reasons Why You Might Owe Taxes

After filing taxes, discovering you owe the IRS money is enough to make anyone's heart skip a beat. You might be wondering, "Why me?" especially when it feels like a big chunk of your paycheck is already disappearing due to taxes. Let's dive into why this might be happening and how you can dodge it (legally) down the road.

At its core, owing taxes boils down to one thing: you didn't pay enough throughout the year. Here's a closer look at why that might be:

1. Your W-4's a Bit Off

Got a new job? That W-4 form you filled out is the star of the show, determining how much tax gets pulled from your pay. If you don't get it quite right, or if your situation changes (like no longer being able to claim a child as a dependent or a adding a new side gig), you might not be paying enough tax upfront, leading to a bill later on.

2. The Freelancer's Puzzle

For the self-employed folks, taxes are a whole different ball game. You've got to juggle income tax and self-employment tax. Stashing away some of your earnings for tax time and paying the IRS every quarter can keep you from owing when the year wraps up.

3. Life Throws You a Curveball

As we mentioned, big life changes can all mess with your taxes, often leaving you with a bigger bill than you expected.

4. Shrinking Deductions

If you're used to itemizing deductions and suddenly have less to claim (because you’ve paid off loans or your house), your taxable income goes up, and so does your tax bill.

5. Climbing the Income Ladder

Making more money is awesome, until it nudges you into a higher tax bracket, which can mean owing the IRS.

6. Investment Wins

Sold some stocks or a property? The profit, aka capital gains, could mean you owe more taxes, depending on how long you held onto the asset and how much you made overall.

Dealing with a Tax Bill: First, make sure you file your return on time to dodge late fees. If you can't pay in full by Tax Day (April 15, 2024), the IRS is open to payment plans.

When in Doubt, Talk to a Pro: If you have a complex tax situation, a certified tax advisor can be your guide, helping you navigate through and making sure you're taking advantage of any perks. They're great for advice on handling multiple income streams, investments, or big life shifts.

Taxes are a part of life, but getting blindsided by a hefty bill doesn't have to be. By staying on top of your tax situation, adjusting as you go, and seeking expert advice when things get complicated, you can step into tax season feeling ready and maybe even a bit excited about what's to come. Here's to making this year less stressful and more financially savvy!

SWEET LINKS 🍰
Digital bites we think you’ll like

Does money really buy happiness? — NYT best-selling author Morgan Housel shares how people get so wrapped up in the status game that they lose sight of what really matters, like spending money wisely for true fulfillment.

The bank of mom and dad — 14% of parents support their adult kids with household expenses, such as phone bills and subscriptions to streaming services.

Does home warranty cover stupidity? — Try playing with Apple’s new VR device in the kitchen (of all places) and see if your home warranty company will approve your claim.