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Finance BROs Network (FBN)
Economic Empowerment & Self Development Strategies For All
Finance BROs Network (FBN)
S2 E5 “Taxes” - Unraveling Basic Fundamentals of Tax Planning, and How Proper Preparation Can Save You Money
Ever feel like taxes are a labyrinth you can't navigate? Fear not, because Anton Leftwich and I, Michel Dupoux, are here to be your trusty guides through this fiscal maze. We unpack the must-knows for everyone from salary earners to sole proprietors, shedding light on tax collection, the whys and hows of withholdings, and the self-employment reporting rigmarole. Sound tax organization and savvy planning can lead to substantial savings, and that's the kind of knowledge that can change the game for your wallet and peace of mind.
Gearing up for a future where you're not working doesn't have to be a daunting prospect. We quickly dive into short form knowledge to consider about retirement accounts like 401(k)s and Roth IRAs. For business owners, we lay out the roadmap for proactive tax planning with tips that could be a benefit for your bottom line. Plus, we drop hints about something BIG brewing on the horizon for FBN—We can't spill the beans just yet, but let's just say, it's worth sticking around for. So, whether you're streaming on the go, or tuning in from home, make sure to catch this essential financial finesse on your favorite podcast platforms.
Learn more about the FBN initiative and get access to all social media platforms at https://linktr.ee/fbnlinks
First and foremost, we want to be clear that what we are sharing with you are strategies and concepts that can be implemented by individuals who understand the logistics of how these techniques work. We are not giving you specific tax or financial advice. We are simply giving you three key elements of how to approach such platforms, as far as the literal, the mental and spiritual format needed to be successful with your aspirations.
Speaker 3:What's up world? You're tuning in to FBN and this is another episode of Finance Bros Network. I am the one half of Finance Bros and it's on LeftWitch and this is Michael.
Speaker 2:DePauw, the other half the other half we are coming to you live with Finance for everyone and everybody. We are honored to be here and to be able to serve diverse communities as usual.
Speaker 3:What are we talking about today? Taxes the only guarantee in life death in taxes, and we're going to be here to talk about it for a little bit, Just a little bit.
Speaker 2:We're going to try to figure it out. What about the taxes? But as usual at Finance Bros Network, we try to just look at the fundamentals. We're not going to go into this line item. This is what you should be putting on your taxes.
Speaker 1:You ain't getting that from us.
Speaker 2:And you actually heard our disclaimer and they actually said we don't talk about taxes, but we can talk about the fundamentals and what you should be looking out for if you're an employer or an employee. Or self-employed business owners working from home. All these different scenarios. We can touch base on Things with what you need to look at and how you can save some money on taxes or ways to organize and planning and all of that those things are above.
Speaker 2:So, without further ado, let's jump right into it. We're going to do a simple you know we're keeping it short now.
Speaker 3:We're taking you to work, and that's it.
Speaker 2:So the first thing, I wanted to just kind of define the few scenarios of being taxed or taxes. This is basically what the government in the United States and obviously in other countries. That's how they collect funds in order to run cities, governments and, obviously, the federal government, which is the.
Speaker 2:United States of America. So they collect taxes from us in order to pay for, let's say, on the city level, sanitation, roads, different tax programs that are out there to help fund and keep people going. So you get different benefits from governments, and that's what the tax dollars are for is to help run the government. Now, if we want to get into the weeds about who between Congress and the president, and city councils and county councils and government all these people who are collecting taxes from what they do and how your taxes are used so just know, if we're kind of at the bottom of the totem pole, we're not making those decisions. Only time we make decisions that really affect us is if we vote somebody in and they put a law in place to how they're going to use the money that they take from you for taxes. So, with that being said, you just need to know okay, when do I get taxed?
Speaker 2:And I think that's what's important for our demographics, our low income minorities. When do we get tax, or how do we get tax? Well, there's different ways of getting tax right. One way is if you're an employee, employee, you go for a job, you apply for the job and then you sign W-9. Actually, it says you're authorizing them to take money out of your paycheck to give the government for all the taxes that are due. Okay, and that's actually a law. If you're working for a certain type of companies, there are required to do that. Yeah, yeah, you cannot opt out.
Speaker 1:Hey.
Speaker 2:I know I'm coming to work for you guys, but can you not take any taxes out? No, no, that's gonna happen.
Speaker 3:Yeah, you can do. You can do some extra withholding right option for that right if you think you're gonna oh a lot at the end of the year, right, a little more withholding and then you know you can consider that. But right, yeah, you definitely got to be. You got to be on the books, right?
Speaker 2:so, and on average, with city tax, fica and social security and all that on average, you got to think that you're gonna get taxed between 30 and 33%. That's what it usually amounts to, just on average. It might be a little lower depending on the city or depending on where you are. Oh, your income yeah so, but on average is about 30 to 33%. So always think you make a hundred dollars, you're given the government about 30 bucks. 33 bucks would leave you about 767 dollars. Right, that's a hard one to swallow.
Speaker 2:Yeah, yeah, that's hey, that's the nature of the beast. Unfortunately, that's. That's our reality. So, obviously, people who've been working out there that's most of Of the population that they work for somebody and they get their taxes automatically taken out. And again, it's, it's. It's the way set up with certain corporations, with S corporations and other corporations, because if they have a certain amount of people or if they employ a certain amount of people, that's the law, how they should be setting up as far as collecting taxes. Okay.
Speaker 1:All right.
Speaker 2:So that's, that's being employed. So that's all you need to know. That's how you're getting tax. All right, that's one way of getting tax. We're gonna get in a whole other ways you get tax. All right, then you're a self-employed. Now, if you're self-employed, let's say you You're making cakes, right, and you go out and you sell the cakes, you collect cash. How do you pay taxes on that? Well, the government is gonna look at your books and receive and says, based on what you made, this is how much tax you got to pay me. And it's up to you, as a self-employed, to find deductions to pay as minimal as possible. Exactly, and that's why people would opt out of Working for somebody, because then they can control how much it have to give. Now, remember you're, you're not avoiding paying taxes.
Speaker 2:You're just now have to realize how much do I have to give the government, based on the cost of me doing whatever I have to do as a self-employed person and making things happen, and it also works in conjunction as a business. Same thing with the business. Exactly, business collect dollars and they have to figure out Okay, this is what's Business costs, this is expenses I have to do and all that stuff. So the government's giving you.
Speaker 2:Right, the government is giving you the autonomy To figure out everything that you have to do. Now, be mindful, there's something called the IRS Internal revenue service. They're the boys that come after you, especially all you self-employed and business owners. Don't try to fudge the books, because there's red flags and then they'll be knocking on your doors and there's penalties, and so all the above. Don't put yourself in that situation, please don't don't put yourself in that situation. And there's another entity where they don't really have to pay taxes, but they still do, right, but a Non-profit business Really doesn't have to pay tax, but they do pay taxes on certain purchase items and certain things like that. But for you to be qualified as a non-profit, you cannot make money, right, right? And somebody is like so why would I want to be a nonprofit? But if you're a nonprofit as a business, you still have to get paid to run this nonprofit.
Speaker 3:That's true.
Speaker 2:So so the 5013 C right, exactly so the business. The business doesn't make any money, but you make money. So think about that and guess what happens to that money that you make.
Speaker 1:So think about it.
Speaker 2:You know you running a business you want to do something and that's good, like let's say, you want to move forward and do something to help. The government does allow Businesses that are helping people not to tax them, but at the end of the day, you still paying yourself, which you still have to pay taxes on stuff that you know once you get to an income, you have to pay taxes on that.
Speaker 3:Okay, okay, got it.
Speaker 2:So I just want to jump into how and and and what you can do as as far as minimizing your tax liability, got it, got it. So we, as an employee for someone who's Working for somebody 30%, I mean I think that there's one thing called the 401k.
Speaker 1:Yeah, yeah.
Speaker 3:Yes, tell you you could put pre-tax dollars, pre-tax dollars before one K, and let that money grow. Right, you will. It's it's not paying taxes now. Right to Pay taxes later on down the road, at an undetermined time, at an undetermined rate, because we don't know what taxes are gonna be 10, 20, 30 years down the road. Right, but it is a way to you know. Limit, limit your tax liability today, right.
Speaker 2:And why would you do a 401k? It's a form of a retirement plan.
Speaker 3:Yeah, exactly.
Speaker 2:So if you go up to 62, I believe, putting money in there, then you could take it out tax-free well, you so 59, 59 and a half 59 and a half. Yeah, you can take that.
Speaker 3:You can take that well for a 401k. You won't be able to take out money until you turn 59 and a half without there being a penalty penalty. If it's before 59 and a half. Then there's a. There's a penalty for taking the money out, and they tax the money Obviously when you take it out.
Speaker 3:So you have to keep that in mind right for a raw, for a like things, different things like a raw Fire rate or whatnot. You can actually get After tax dollars and put that into there and let that grow Tax-free and take the money out tax-free as long as you've had it for five years and you're 59 and a half, you're good. There you go.
Speaker 2:Yeah, there you go. So, and for businesses, there's a different type of planning. You can actually hire a company that does tax planning for you to kind of forecast what tax dollars are you not, are you are you able to pay and what tax dollars you shouldn't have to pay. So what you do is you plan ahead Mm-hmm, and then you figure out what tax dollars you're paying for and what tax dollars you're not paying for. Okay, okay, okay.
Speaker 2:So with that planning that helps your business, it could forecast you with all the deductions that you could be taking. Mm-hmm is this is how your business is run, these are the tax deductions that you can make, and that's really money going towards the bottom line. Right, right, because if you know what you have to take up front, if you know what you have to do in order to Make sure you get those tax benefits, that's automatic money going bottom line on the onto the bottom line, because you're already planning your business. You already plan how much inventory you're gonna buy, how, how much you're gonna pay employees and all those different things, and there are companies out there that would go in and Evaluate your business and let you know how much money you could save. So if you do have a small business, and Again we're here, finance Bros is here for everybody.
Speaker 3:Absolutely, absolutely.
Speaker 2:So if you do have a small business, it might be intuitive to go out and look for a Tax planning company to plan your taxes ahead and See where you can save and you know what.
Speaker 3:I, what a good point. Yeah, yeah, then you're. Then you're planning for what's coming instead of looking back thinking did I do it right?
Speaker 2:Right. So, and I want to give a shout out to a business friend of mine who is the, and I'm gonna give him a shout out, let you know we.
Speaker 2:The depot paint store. Like the depot, I think. The paint depot Sorry, he's gonna kill me, sorry, danny, the paint depot. They're out there in on the East Coast, long Island, they have a paint business and you know he he listens to the podcast shout out to you and he said you know, hey, this, this is something very interesting. Maybe a lot of people don't know about that out there who have small business that could be planning all their tax deductibles before they even do it. So now they know what to do in order to avoid paying additional taxes and help save on paying taxes. So shout out to you, daddy.
Speaker 2:You know the Paint Depot out there. They're online If you want, it's auto, the Paint, the Auto Paint Depot. That's what it is the Auto Paint Depot. He's gonna kill me because he's like man. You chopped up my name, brother.
Speaker 3:Danny, you finance Bro's family brother. Right, right, You're okay. The Auto Paint Depot.
Speaker 2:He's out there and he does auto body paint, mix it, and you know you could go to his shop and pick it up and they're definitely online. The Auto Paint Depot where you can order different things to fix up your car, for paint, anything that's related to painting the car.
Speaker 1:So shout out to him.
Speaker 2:He bought that conversation to me and then you know, I was like, yeah, we should do it when we do a tax episode, we're definitely gonna talk about that, because it's a great idea to make sure, as a business, that you're planning for your taxes ahead and you could do it with your accountant, with your bookkeeping person, your tax preparer, or you could hire a company to do it if your business is big enough and you have the money and you could see whether the savings could be once they've been playing for you, and they should be people that are professionals and have the updated tax codes or whatever, to make sure that you can keep these things in mind throughout the year where you know when you finally do come tax return time you can ultimately benefit and just pay your fair share.
Speaker 2:There you go, there you go.
Speaker 3:You gotta pay taxes, but pay your fair share Right.
Speaker 2:So it's all about planning. It's all about making sure you know what you're gonna pay for taxes, and this is what this episode is about. It's just understanding the fundamentals of taxes, and you know, there are a lot of other scenarios where you could save on taxes.
Speaker 3:Yeah, I'll break some of these down too, mike. These are actually some really good ones here. So we kind of touched already on taking advantage of self-employment tax deduction schemes. There's a lot of different information you can find on there about that. Like you said, we're just gonna give you fundamentals. We won't go too deep into the woods, we just give you fundamentals, lanes to go in, you guys do your homework and take it from there. And then also we did deducting business expenses from your gross income on your tax return.
Speaker 3:We did contributing. We talk about contributing to a health savings account.
Speaker 2:No, we didn't, we didn't talk about that.
Speaker 3:Contributing to a health savings account is another way. Save money on your taxes. These are things that you can potentially write off. Also writing off things like your medical deductibles and stuff like that. So donating to a charity, of course, would have to be a 501-3C. So that's something also to keep in mind. And then, of course, the child tax credits. That's something you can also keep in mind. Another thing about working if you work from home Right, like I you know having, if you have a home business, right.
Speaker 3:There are certain things you can do. Look this up. You know about the, the percentage of the space that you can write off and and rather you can write off certain Utilities and things like that. There's also other things like that you consider. So these are some good ways to to research how you can, you know, take advantage of tax deductions. It's not like that because a lot of people are working from home. Now, right, you know, with COVID and everything right, a lot of people started home businesses or they or there, or they're working for a company from home.
Speaker 1:Mm-hmm.
Speaker 2:You know so right, and just remember, taxes also Come in the form of Purchasing stuff.
Speaker 1:Mm-hmm.
Speaker 2:You know, yeah, and it you know some people Will try to avoid those types. There's really no way of avoiding those taxes. Those city taxes and state taxes, yes, they charge. Whatever you purchase, they put a tax amount on it you know so so you also pay taxes that way too right, so not only you're paying taxes. After you make money, you're paying taxes when you spend money.
Speaker 3:I don't think we all think there's a way to get around it. It's unfortunate.
Speaker 2:You know, but you know it is what it is and this is why we're here to help you guys understand, like this is the the way tax work like and some people just forget about it, but you shouldn't again. Planning is your best way to avoid paying as much taxes because you want that extra Money in your pocket to your point. When we started the podcast we talked about as an employee, depending on your deductions, like if you have three or four children and put that in so you get more money out of your paycheck in the beginning of the year, which which are employer. So the employer usually has a form or has a way. Electronically it says how much of people you have at the home to deduct and then, based on that, they'll take out less taxes and you'll get that money up front, because sometimes you just need that money up front for groceries, for for just living, rent and stuff like that you have.
Speaker 2:You have Dependents, and it doesn't have to be your children. Sometime, you know, families have cousins and and nieces and nephews that they might have to take care. Yes, they are deductible too, because they become your dependent and then the government makes a you know, makes arrangements for that. So utilize those ways of getting more of your dollars in and Then, obviously, when it comes time to file your taxes, make sure you find a good tax preparer To file your taxes. That's using all the new laws because remember, we spoke about the politicians.
Speaker 2:Yeah, that's what they do every year bro, make new laws.
Speaker 3:It's. It's what it is, and if you don't know, about the new law.
Speaker 2:Guess what? You know, your ass a well, that's all I'm gonna say. S Well, if somebody don't know S Well, let's go find out your ass.
Speaker 3:A well, you know what I just? I just thought of it. I was gonna say one t-shirt when I got a new t-shirt, oh, you got it. Well, that's good. So, and look, look another thing to remember this consider, rather for married people, consider weather, filing joint or filing separately will benefit you. Not gonna go into detail, I'm just saying take a look at it and if consider if you and your spouse would be more beneficial if you file together or separately. So that's also something you might wanna consider.
Speaker 2:Cool, cool.
Speaker 3:So you know, we're just gonna go into the breakdown, going into the breakdown, all right bro.
Speaker 2:All right, so literal. What's the literal Planning for taxes? If you're a business or if you're doing it for yourself, Plan, plan, plan. That's the literal sense of it. Tax is gonna come around every year, you know. As the old saying goes, there's two things guaranteed in life.
Speaker 3:Tax In death, in death. And it's funny, when I was looking up this research on the lie too, I was looking for slogans for taxes. Every other one was like yep.
Speaker 2:Yeah, taxes and guarantee, guaranteed, guaranteed, the taxes in there.
Speaker 3:Oh man, I'm not gonna say who said, who supposedly said it first, cause I did see that too.
Speaker 2:But we'll leave that where it's at. And the next is the mental. The mental would be set up for your taxes at the beginning of every tax season, with your job or planning as a 1099 or as a business owner. You gotta plan. That's the only way you're gonna pay the minimum amount of taxes before you have to pay. Don't try to at the end of taxing. How much money am I gonna get? Did you plan for it? You should have known that.
Speaker 3:You would, you probably would be pretty darn close to a round figure, at least Exactly.
Speaker 2:You should have known that, so you should plan for your taxes from the beginning of the year or the beginning of tax season and, like, as we mentioned before I think we were talking about taxes the government doesn't start doing taxes February 1st, and then you like looking at people taxes from the year past, and then you have to April 15 to file your taxes. So April 15 is around the corner, ladies and gentlemen. Next month.
Speaker 1:Next month. Hey, wow, I think that's gonna come up Next month, so you should March already.
Speaker 2:Right, it's March and you should have already the changes. You should already have your planning and we're doing this podcast now Planning, planning, planning for the taxes. Again, we're here at Finance Bros Network. We're here to help your finance and this is why we're talking about the taxes. Yeah, yeah, planning will help reduce the amount of taxes that you're paying.
Speaker 3:Hit me with this literal one more time, Mike. Just make sure I have this straight for our audience out there.
Speaker 2:It's planning for taxes If you are a business and doing taxes yourself.
Speaker 3:Okay, gotcha, okay. Planning for taxes If you are a business and doing your taxes yourself, right, got it. Okay, gotcha, okay. We're good there. Now the spiritual, the spiritual. All right, I'll hit them with this one, okay, so do not let it overwhelm you or take over your life. Set it and forget it. Back to the planning.
Speaker 2:Set it and forget it. There you go, because if you're not, if you never set it up, you know it's going to mess with you. Yeah, eventually. And then you can pray to God all you want. As a matter of fact, set it and forget it. God said I'll help those who help themselves first. Yes, I said in the Bible, I'm not a spiritual man or anything, but I'm just letting you know. That's what the Bible said.
Speaker 1:Somebody told me well say, I will help those who help themselves first Wow, that's a good one.
Speaker 2:If I don't know that spiritual, I don't know what it is.
Speaker 3:I don't know what it is. I like that, and so I said they said about planning. He said pray like it's up to God, but work like it's up to you. Right, I think pray like it's up to God, but plan like it's up to you could also apply there, right? You know what I mean? That makes sense. That makes sense. So, which brings us to our t-shirt, which hit me in the middle. Ok so, and I just really like this. Ok so, when it comes to taxes, what you don't know can hurt you. There you go.
Speaker 2:There you go, that's really great when it comes to taxes, what you don't know can hurt you. That's a good t-shirt.
Speaker 1:I like it.
Speaker 2:And it all fits on the front.
Speaker 1:It all fits on the front.
Speaker 2:You know, we probably get a lot of tax preparers ordering that t-shirt.
Speaker 3:It's like yeah, why not? Shh, don't let me. If I had a tax place, I might put that up on the top of the rack. There you go, yeah, there you go. One of them little signs outside with an arrow pointing inside. There you go, that's it so yeah, ladies and gentlemen, that's taxes for you guys, that's taxes for you guys.
Speaker 3:We'll wrap it up. Like we said, we just want to get you to work or get you back home and wrap it up. Keep them real short and sweet. We actually got some big news coming real soon.
Speaker 2:Coming soon.
Speaker 3:Oh, I want to say something so bad.
Speaker 2:Nah, we let, let's wait, let's wait, let's wait.
Speaker 3:Well, we are really excited, looking forward to bringing you this new news. It's coming soon, so be on the lookout for that announcement when it does come. In the meantime, obviously, continue to check us out on all your social media podcast platforms Apple Podcasts, iHeartRadio, Spotify, Google Podcasts. It might be up down left right some on the screen, depending on which social media platform you might be on. But, like we said, don't forget to come check us out and keep tuned for that announcement soon and as usual. Mike, I appreciate you, you know it and we'll see you at the bank All right Take care.
Speaker 3:Take care.
Speaker 1:Thank you for watching.