Navigating The 2024 Tax Season with Fernando Torres

This week we welcome Fernando Torres of Serro Taxes as we traverse the evolving landscape of tax preparation and the shifts awaiting us this 2024 tax season. Fernando, a first-generation American turned CPA, shares his remarkable transition from humble beginnings in Upstate New York to crunching numbers under the Florida sun. From discussing the 1099 threshold adjustment that affects digital payment platform users to tips for maximizing tax refunds, this episode is packed with valuable nuggets for anyone filing taxes.

As we sift through the complexities of tax law and the importance of maintaining meticulous records, Fernando offers his expertise on how to stay ahead of the game. We tackle topics like the end of the EIDL program and the unfortunate spike in loan fraud that came with it, providing a sobering look at the challenges businesses face. 

If you're looking for practical advice, you'll find Fernando's tips on navigating IRS correspondence and optimizing tax deductions particularly useful. 

Visit us at jenniferannjohnson.com and learn how Jennifer can help you build the life you dream of with her online academy, blog, one-on-one coaching, and a variety of other resources!

Transcript

Jennifer Johnson: 0:37

Today we welcome into the studio Fernando Torres and he is with Serrano taxes, is that correct?

Fernando Torres: 0:42

Serro Taxes.

Jennifer Johnson: 0:43

Oh, Serro, see, I messed it up already. Welcome.

Fernando Torres: 0:47

Thank you. Thank you for having me.

Jennifer Johnson: 0:49

Absolutely so. Tell us a little bit about your background, how you got into this, how long you've been doing this Sure sure, I'm first generation American.

Fernando Torres: 0:57

I grew up in Upstate New York and I went to school up there for community college and then I transferred to University of Miami and I stayed in sunny Florida. That's a sense. I was not a fan of the cold. I didn't want to be an adult in the cold, driving in black ice and all that fun stuff. So, but yeah, so I stayed in Florida, I became a CPA, then I became a Godfrey and man have a family and I made the move to Naples in 2019.

Jennifer Johnson: 1:24

Oh, wow, so sort of recently, yeah, in a way yeah. And what. What drew you to the tax field? Because, I have to be honest, I am not a numbers person, sure, and I would rather probably go to the dentist. I'm sure you hear that from people, right?

Fernando Torres: 1:41

Um yeah, dentist and accountants. Yes, they try to avoid us.

Jennifer Johnson: 1:46

But what? What brought you to that field?

Fernando Torres: 1:49

So originally I wanted to be a carpenter. Our high school had different programs. You had ROTC, you had mechanics, you had the beauty programs, and so I gravitated to Carpentry. One of the professors retired and we had a new professor and he just wasn't as fun, and so I was like I need to make a change, and so one of the offerings was business classes, and so one of the teachers taught accounting and I said, hey, I understand this. It's almost like math is black and white and you can make a decent living. You know my family coming from other countries, you know they didn't make so much money. And so me coming in and can say, oh, I can make $40, $50,000 right out of college.

Jennifer Johnson: 2:31

I'm like okay, that's going to be a better life for everybody. Very cool, and you like numbers?

Fernando Torres: 2:36

Yes, yeah, I'm a self-taught math man. I'm not like a savant when it comes to formulas and everything, but it comes easily to me, got it?

Jennifer Johnson: 2:44

And so with accounting, is it's your tax firm or your accounting firm really Tax company?

Fernando Torres: 2:50

So I am a CPA. I just never got the CPA firm because there's so many rules and regulations, more insurance costs and so I'm not doing financial, I'm not auditing financial statements, so that's the biggest difference. So that's the difference between what a tax preparation and auditing financial statements.

Jennifer Johnson: 3:08

So you're, tax preparation?

Fernando Torres: 3:10

I'm a tax preparation company, got it.

Jennifer Johnson: 3:12

Okay, so that's what we want to talk about today, because 2024, there's always new every year. I feel like, is this correct, that every year something new comes out?

Fernando Torres: 3:21

Pretty much yes.

Jennifer Johnson: 3:22

A new regulation or a new trick. Yes, maybe it's not a trick. Maybe I shouldn't say that word.

Fernando Torres: 3:28

I would say more guidance, ah, guidance, yes, more clearance, because Congress passes these laws and it's written by lawyers, and when it's written by lawyers, it's legal jargon, even jargon that I have to reread multiple times. And the great thing about chat GBT, I've been able to translate it to my level, which is.

Jennifer Johnson: 3:51

Is that funny? It's kind of like a it's taking basically a foreign language right the legalese and putting it into our language.

Fernando Torres: 3:57

Yes, yes, and so I take that. Put it to my level, or okay? Can I understand this? Where's the loophole and how?

Jennifer Johnson: 4:05

can.

Fernando Torres: 4:05

I give this to clients so that they understand it, so I have to put it in a different language for my clients.

Jennifer Johnson: 4:11

Because and there always is, you said, loophole there always seems to be that gray area or that loophole, yes, that people find, yes, correct. So what are the most important things that taxpayers should know about this new tax season?

Fernando Torres: 4:26

It's still a lot of the same. One of the big things that I was excited to bring but the IRS extended it again where it's not required was the 1099 threshold was previously at $600. Right, but now they again moved it up to 2024 tax year, not 2023.

Jennifer Johnson: 4:47

So what does that mean?

Fernando Torres: 4:49

Oh, so, so, for because we're in the 2023 tax year, when January comes, you would have to file those 1099s for vendors, that that you pay $600 or more for the 2023 tax year.

Jennifer Johnson: 5:02

But for next year what is it going?

Fernando Torres: 5:03

to so for 2024, they actually increased it to $5,000. So I think that's that's going to help a lot of people.

Jennifer Johnson: 5:10

From $600 to $5,000?.

Fernando Torres: 5:12

Yes, because if I transfer money to you as a gift. They don't know that. They just see that I transfer money to you, and so they might think it's revenue because I have a business, you have a business. They might say, okay, you're cloaking this $5,000 payment as a gift. So that's the reason why they created these threshold because they want to be able to catch people who are evading taxes.

Jennifer Johnson: 5:35

Wow, that's a huge jump though.

Fernando Torres: 5:38

I think it helps everybody, because I remember when I rented an apartment I needed a roommate. They're giving me money, so I'm not a landlord, I'm just sharing the cost of that apartment with this person. So if they're transferring money to me, then I'm paying the landlord. That could be considered income.

Jennifer Johnson: 5:57

And that all makes sense. Now, this actually brings up another point. What are they doing about Venmo? You knew I was going to ask this. Venmo PayPal, what is the other, I don't even remember Cash out, like what do they do with that? Because I could be getting paid by somebody under the table that way we're. You know, back in the day it used to be cash.

Fernando Torres: 6:19

Yes, now they're Venmoing. And that was the thing, because now there's a tracking mechanism, and so that's what Congress wanted to do. Is they wanted to be able to catch those people who were using Venmo Cash Shop on PayPal? Because I take the shortcuts, I don't use the business options for Venmo, because you have to pay a little extra.

Fernando Torres: 6:41

I'm trying to save a few dollars here and there because it starts adding up. So now those depository companies, institutions, have to report. But it also saves them time and money too, so that they don't have to pass the cost to you as a consumer.

Jennifer Johnson: 6:55

So those agent, those companies, those Cash App companies are now required to report to the IRS.

Fernando Torres: 7:04

Yes, everybody 2024.

Jennifer Johnson: 7:06

Oh, so, for this tax season.

Fernando Torres: 7:08

For 2025, it's going to be for the 24th calendar year. I see, oh, my gosh, yeah, so it's going to be for the year again, so that it helps everybody, from the institutions to the consumer.

Jennifer Johnson: 7:17

But that's for this. Is it for this year, for 2024,? Is that a fact, like if I get a Venmo payment of, let's say, $10,000,?

Fernando Torres: 7:27

right, it is, I believe, $20,000.

Jennifer Johnson: 7:30

Oh, it is.

Fernando Torres: 7:31

Yes, so they will report you if you receive $20,000. Yes, wow, yeah, and I forgot. There's a number of transactions as well. So there's transaction level and monetary level.

Jennifer Johnson: 7:41

Okay, but that's for the 2024 tax season.

Fernando Torres: 7:44

No, that's still applicable for 2023. Oh, it is. Yes, so that threshold of $20,000 is still applicable.

Jennifer Johnson: 7:51

Got it, but what's new with it in 2024?

Fernando Torres: 7:55

It gets lower to $5,000. Oh my gosh Wow.

Jennifer Johnson: 7:59

So, and so then that means because that's what the 1099 threshold is. Is that why they did that? Yes, okay.

Fernando Torres: 8:06

But for these institutions. But if you're just doing regular checks, regular cash, technically you're supposed to do 1099s all the time. This is just for the financial institutions to report you. I see yes.

Jennifer Johnson: 8:17

This is such interesting information. It was on the forefront of my mind. It was like the first question I was going to ask you, but I'm glad I didn't, because that explained what you gave as the beginning story. It kind of explains this as to how that works. Wonderful, yes. Is your closet overflowing? Or maybe your kids' closets are as well, or maybe you just want to redecorate your house. If you're wondering what to do with all that stuff that you've accumulated, bring it all to true fashionistas or even ship it to them for free. I'll sell your unwanted items for you and take away all the hassle and do all the work. All you have to do is sit back and collect your money. You can reach out to them at truefashionistascom. Come into the store or check them out on Facebook or Instagram and that's truefashionistascom. Welcome back, friends. We are back in the studio with Fernando Torres and he is with Saro Tax Services. I looked at your shirt because I'm like I kept wanting to put the A in there.

Fernando Torres: 9:15

We all need a.

Jennifer Johnson: 9:15

G-sheet. I have one because I can't remember what I'm doing half the time. We're talking about 2024 tax season. Really good information about using the cash apps and the 1099. What else is happening in 2024 that we should be aware of?

Fernando Torres: 9:33

We have to watch out for the reduction of the bonus depreciation. If you're a company who has assets, you can no longer do the 100%, I believe, for 2023,. It's down to 80%. It goes down another 20%, I believe, for 2024. It's just a roll down structure or a tier. Every year it goes down 20%. Congress is always trying to stimulate the economy. They usually extend different things. For example, the solar panel was supposed to go down to 26% credit but they kept it out 30%. That 4%. It could be beneficial if we depend on the value of the solar panels.

Jennifer Johnson: 10:15

What are some challenges that people are going to have in 2024?

Fernando Torres: 10:21

In 2024, I think it's still the elementary things, because I get new clients all the time and it's still the elementary, where you have your books in order, you have documentation, because, at the end of the day, you have to be able to support your income and your deductions.

Jennifer Johnson: 10:38

Thank you, you know, and talking about deductions, I remember, after COVID, the whole meals thing it was, wasn't it? 100%, that was awesome. Yes, and what so for 20,? That was for 20,? What 21 and 22. And so for 23, because people are going to be filing their 23 taxes in 24. Yes, what is it at now?

Fernando Torres: 11:01

So it's still 50%. Well, it's down to the normal 50% for in-person meetings If it's travel. So if you go to a conference or you go to any business event or you see a client that's over 60 miles away, you can write that off 100% because it's under the travel meal, I see, and you just have to classify it as that.

Fernando Torres: 11:24

Yes, and, of course, documentation. They always say that you have to write within the memo whether you use Excel, whether you use QuickBooks on top of the program. You say, okay, I met John Smith and we a brief discussion or a brief memo of what you discussed. Usually, if you talk to your CPA, that's kind of like okay, we talked about taxes.

Jennifer Johnson: 11:43

Right, exactly, wow, but you have to note that You're supposed to, yes. I mean, could you go? Oh, if you're getting audited, go back and enter it, because you're like I know. I went on that business trip and you have, you know, the flight and everything else to prove it.

Fernando Torres: 11:57

Yes, yes, yes, you have a timeline to be able to respond to these correspondence. Okay, so it's usually a letter saying, hey, please provide this information. It's usually when you don't answer those letters that it goes into an actual full scope audit where it can, maybe they'll make you bring that information to an office, and in the worst case scenario is that they come to your office, and so that's what you want to avoid. You want to be able to hit it when the letter comes.

Jennifer Johnson: 12:25

Right, oh my gosh. So anything else that people should be aware of or challenges that may trip them up?

Fernando Torres: 12:34

I would say timeliness. That's always another thing. They raise the fees every single year.

Fernando Torres: 12:40

So if you're not paying taxes, you're going to be late, they're going to penalize you. So they make the penalties for the tax repair more severe every single year because they want us to kind of actually be an auditor, even though we're just tax preparers. As a CPA, we have our due diligence. As a CPA, we have our ethics and everything that we have to follow. As a tax preparer, it's a little bit less that the IRS wants you to do. But yeah, there's systems in place and they want everybody to follow system because they're trying to raise money. Congress is trying to raise money to fund whatever it is that they need.

Jennifer Johnson: 13:15

It's a business. Yeah, it is, it's a business, and I guess if you know that you're not going to be able to get your taxes done, you can file an extension. That costs you as well, though, correct.

Fernando Torres: 13:24

Correct. But so I would say, if it's a client that I know it's going to use me, I don't charge them, but if it's somebody who comes in like, hey, I need an extension, I'm going to charge them for my time. So really it's free.

Jennifer Johnson: 13:38

So the IRS doesn't charge for it. It's the accountant who would the preparer. Yes, I see. Yes, I didn't understand that. All right, what tips do you have for our listeners to maximize their tax refund?

Fernando Torres: 13:54

perhaps. Yeah, I would say so. I've been able to develop some strategies. The IRS for vehicle write-off there's either the mileage or there is the percentage of business use, and people get those two wrong all the time. So I've developed a third option that allows you to write it off 100% of the time, and that's more of the proprietary where my skillset, I'm able to educate my client on that. But I think just knowing the differences between the first two can make a world of difference. Great thing with writing off your home, because a lot of people have home-based businesses and they're not properly educated on how that deduction works. So it's just knowing the right way to do it. And then for bringing in a specialist who, like me, or another CPA who knows how to go and find those loopholes to help you write off more of your home.

Jennifer Johnson: 14:46

So you're talking about home. Let's say you have a business and your business is two miles away, but your office for doing all of your accounting so your book work and your marketing, whatever you do is in your house. How does that work?

Fernando Torres: 15:02

So technically you you can't write off your home because you have a already an office that you're paying rent. So if you're working from home, that's kind of just you do an extra work at your house.

Jennifer Johnson: 15:18

I see.

Fernando Torres: 15:18

So, like I said, I've developed a proprietary solution to help you do that.

Jennifer Johnson: 15:23

With that too? Yes, that and the car, yes, oh.

Fernando Torres: 15:27

Yeah, because, being a God fearing man, I want to be able to pay as less taxes as possible but also be honest, right, absolutely, and I don't know. I just I do want to help the government to a degree because I believe in and funding certain things, but the government gives us loopholes and things that we can deduct, and so I take full advantage of that Right, absolutely.

Jennifer Johnson: 15:51

Who wouldn't write? Are there new tax credits this year? Like I keep hearing about tax credits, like I don't know what some of them are, but I keep hearing about this.

Fernando Torres: 16:01

So the big ones are the solar panel credits. So it's non refundable, so I'll use myself. For example, I paid $30,000 for the panels, for the electrical box to be upgraded, and so 15 percent sorry, 30 percent of that is comes to me as a credit. So what?

Jennifer Johnson: 16:22

would you OK, yeah, sorry, no, it's not. So what does that mean?

Fernando Torres: 16:25

OK, so 30 percent of $30,000, that's about $9,000. And so if I owe the government $9,000, this credit goes towards that. Oh, but let's say I owe the government $8,000 and my credit is $9,000. This $1,000 gets rolled forward into the future year.

Jennifer Johnson: 16:44

And how long does that stay? I believe that one's five years. So if you don't use it in five years, it's gone.

Fernando Torres: 16:49

Yes, so I would recommend, if you get solar panels, to have earned income or some taxable income, usually you have to pay for it. So I think people are making money because either way, you're paying for it with some type of money. Yeah, yeah, so what about this?

Jennifer Johnson: 17:06

Is there a child tax credit still there?

Fernando Torres: 17:09

Yes, so that's back in 22. They wanted to extend it to give, keep it to $3,000. So that was big for a lot of people. I, I, I enjoy that $3,000, but then it came back down to $2,000 per child.

Jennifer Johnson: 17:25

Is that credit again?

Fernando Torres: 17:26

or no Part credit, part refund. So that's the part that becomes confusing, because people think, oh, I get $2,000 per child, but not all of it's refundable. One other one that you probably hear is the earned employee retention credits. Yes, that's probably the big one. So there is a guideline that you have to follow before you qualify. I believe you had to be in existence for 2020, maybe 2019.

Fernando Torres: 17:56

I don't quite remember, because none of my clients qualified. I have smaller clients and most of my clients are the only employee and they don't qualify. And then you've had to. Your revenue had to decrease your you've had to pay for people's pay time off because of COVID. I'll use the client for example. They're a home based business. They do therapy, so they go into the home and they help the children. They March 2020, nobody could go anywhere. So she lost all this revenue. But she was a very gracious employer and she paid for her staff to continue to get paid. The problem with that one she was actually too early, so she got screwed. She qualified for a number of employees, so she actually paid them from March 1st through the 15th and the tax law was from March 15th forward. So yeah, so it kind of stunk for her.

Jennifer Johnson: 18:56

But basically it was. It was for the COVID time. If you were down in revenue, then you got a refund for pay. If you didn't pay your employees, you didn't get refunded.

Fernando Torres: 19:08

So it's a refund of payroll taxes, so there's a max to it. So let's say you have $100,000 of payroll, you have a 7.5% employer tax. That's $7,500. That 7,500 could potentially come back to you. So that's how they credited back the employer.

Jennifer Johnson: 19:29

So it's like more money in the pocket and I mean when is that end? Because I still hear people like you know, you get letters in the mail, you get phone calls, you get emails.

Fernando Torres: 19:39

I believe that one ends in 2024.

Jennifer Johnson: 19:44

I'm not 100% sure. I can email you and maybe you can add it to your notes after Right. Wow, that's very interesting that it's that long.

Fernando Torres: 19:51

Yeah, they're pretty. They always have the filing period as long as it's postmarked, because I don't know if you've heard like the IRS sometimes is super slow at responding. Oh really, so, yeah, yeah, right, so as long as it's postmarked by a certain date, then it's still in. So if the deadline, let's say, is December 31st and you postmarked by December 31st and it takes them a full year, then you're still qualified for that potential credit.

Jennifer Johnson: 20:20

And you know what, and I'm assuming that the whole idle thing is done, where the income, the with the loan, where people were getting the loans and they shouldn't be getting the loan. That's over.

Fernando Torres: 20:33

Yes, that was, I was over, I would say sometime in 21. Okay, yes, yeah, I had. One client was like can I get a bigger loan? Because he got the first one, the ideal number one distribution. And then he there's miscommunication. I asked him do you want to get number two? He wasn't sure. And then now he's like he wish he would have got it Right. So yeah, so that was a 4% 30 year loan. So that was great, because now interest rates are close.

Jennifer Johnson: 21:03

Oh right, it got a lot of people through and if you had that loan, you're hanging on to whether you've paid it off or not because some people needed it more than others, and that's why you saw the fraud.

Fernando Torres: 21:12

You saw a lot of fictitious people or fictitious companies be created so that people can get these million dollar loans, and it's screwed A lot of people needed it.

Jennifer Johnson: 21:21

Yeah, very interesting landscape, that's for sure, fernando. If our audience would like to get in touch with you, how can they do that?

Fernando Torres: 21:27

Sure Email. I use my phone, so it's my cell phone, but it's info at sarotaxiscom and in my phone number. You can text me. Call me 954-999-2300.

Jennifer Johnson: 21:41

Fabulous. It has been wonderful chatting with you today.

Fernando Torres: 21:44

Thank you so much for having me.