Debunking Tax Myths, Avoiding Audits and Maximizing Savings with Jasmine DiLucci
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Navigating tax advice on the internet can be tRicky. So today we're digin into what most people get wrong about taxes and tax law, the miss that keeps spreading wildly on social media and how to avoid costly mistakes when you file. I'm joined by Jason deli, a season tax pro who became an enrolled agent while he was still in high school.

He knows this stuff inside and out, and we're going to dive into the strategies and tactics to help you save money and take control of your taxes. I'm crashes. If you enjoy this episode, please share with a friend or leave a comment or review, and if you want to keep upgrading your life money in travel, click follow or subscribe. Now let's get into IT right .

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Jason, what do you think is wrong with so much to the tax advice you see on the internet?

A lot of my criticisms keep coming back to people. Just look at the statute and then they make up in their mind with the lies, right? We think I will.

Statue, we've got a lot that's IT right. But if you watch any of my content, you know that we've got several layers of lot right? That has statue, treasure regulations, court cases. And then we even have more guidance from that, like revenue rulings, revenue procedures, people don't love. And I say this, people that are really deep in tax law just don't tend to post online.

So what I tend to see is people that post online tend to have a very surface level of taxi, know they learn a little bit and they're like, well, shoot, do I want to work myself to death and make one one hundred of what I could do? I do. I just want to post random thoughts online and make one hundred times more.

So then they butcher that basic stuff and say wrong. And I think it's genuinely like they don't know not like a malicious intent. When you read base level tax law, you get the wrong answer a lot of times and that's what they're doing.

Is there an example that we can just use everyone to understand something that you see posted all the time on the internet that just isn't correct?

Yeah, clothing is a big one. Fashion accessories, or even like haircuts, right? We think of all these personal things.

First thing that so fun for people to post there was this one video that I used as an example, where this licensed tax prepare is saying, I deduced all my haircuts because there are my brand and his all. I deduct my blue suits because blue is my vision. And that's your perfect example.

He's saying he's relying on irr seat one exceed to just our classic ordinary necessary business expenses. So you go there and you say, OK yeah, that is ordinary necessary business expenses. The mistake he's making is he's looking at IT and saying I think it's ordinary necessary to my business literally just like made up in his when obviously what we want to do is go to the taxi.

So then what we do, we look at treasure regulations for this one specifically. IT doesn't help us. So then we go to court cases.

Court cases say you're going to get a haircut anyways. They say personal glooming. It's just so inherently personal that can be for business purposes.

And then we get the same result for clothing. There's actually a three part tax for tests for clothing. And so the one that everyone violates is IT can be suitable for personal use even if you only use IT for business. So a blue business suit very suitable for personal use, therefore not deductable.

Now I remember one time my wife was selling to college campuses and part of their brand for the company was everyone bot big animal, almost halloween costumes, presuming that's not a personal use. So that might have qualified as a business extent, but I sued, assured a haircut, all these things or not, you obviously .

wouldn't purchase that for personal reasons. Then of the day tax all a lot of times, they just look to substance. We want to look at the laws, but they're almost always built in a way to go back to substance.

So why did you really buy IT? Well, probably bought a blue suit. Yeah, you're working in IT.

You can use that for whatever, and you're probably are using IT for whatever. And so they just draw a line there to prevent abuse. There is something like super unique. There's probably no way you would have gone on purchase that for any other.

And we're not just gone to talk about business related things in our conversation, but I want to double like a little here on what would actually happen if IT got to the point that you had to debate this. Is that kind of like innocent until proven guilty? Or like, do you have to be able to explain that? Will I actually live in the hottest est part of the country? I never wear suits outside of when i'm on video in my studio. So I actually think this suit is a business expense because I would never wear for personal reasons.

Yeah, there's always a practical element. And I think that's also why people have gotten so comfortable giving whatever advice because first off, they don't do too many, I resolved. And then when they do, honestly, I authors aren't super knowledges a lot of the time if you're a small business.

So practically speaking, if you just spend too much on clothing, that should probably just disallow IT. Now if they look into IT and they say, well, what were they? You're like suits at the lowest level.

They are always gonna deny IT. Now, not to say you couldn't. Then introduced what i've got my logo plaster all across the front of IT, and I made IT super ugly. I would never want to wear this thing for personal use. So they are like arguments you can start to pull out.

And the way I view IT is if you're on bad law, you want to be more careful, right? I think what a lot of people are doing online is they're pretending like it's a good law. And so if you get into the argument, you have to be super careful and you may still be able to get that through if you didn't of use IT so much because it's not gonna noticed. Otherwise you're gonna problems.

And by bad long good law, you've kind of highlighted before that there's the statutes, there's the treasury regulations in the court cases. Would bad law be where there's a statute, but it's been heavily scrutinised or clarified in other ways?

Yeah I would say bad laws like if I do a full research, I look up what the answer is. And unlike ow, everything is against us. The levels of authority typically want to have, we call IT like substantial authority.

Forty percent of what's out there gives you a good position. And if you think of haircuts i've pulled to all the court cases, they all say no, it's just little and is so then you thinking wall, it's yes, right? A lot of people like to use the example like botox or type of enhancements and stuff.

We've got the court cases and they just laugh at the taxpayer every single time. I'll see license prepares recommending IT. Although say all this is a case of first impression, it's like you're saying that because you haven't looked up all the carcasses that actually exists already.

So I looked at a handful of the most common things on social media, and one that i've seen a lot of is around hiring your kids. yes. And this one seems like both I understand IT and IT also seems a little skeptical. Do you have any thoughts on that?

But a lot of the themes, I repeat, one of them is substance. We know with tax core, we know a tax law, we've got substance of reform. And so whatever form you put IT in, IT will always go back to like what were you really doing? I think if you're genuinely working in the business, are genuinely adding value and then you also do want to keep in mind things like state laws.

If you were violating other laws, typically that alone can be a reason that irs could deny something? Or do you think to some extent, if you are careful in areas where the substance is light, then you want to be really strong on procedure, right? You're going to hire your kids.

We want procedure to be really strong. Well, what would procedure be that all those technical formalities, right, that I want an empyrean tract, I want an hours log, I want a calendar. I wanted know exactly what they are doing.

We want to actually issue A W two. So we have really strong procedure. The substance is is a little light that your kids we're like a little bit skeptical.

But we've got all this proof that actually we've got some substances there where people tend to go wrong in these types of areas as they deny the right. The substance is light because, you know what, it's my kid and i'm just kind of paying them to take out the trash. And I would never actually pay whatever fifteen thousand dollars year because I want to take out the trash.

And then, by the way, have no employing the contract, no proof, nothing whether that might hold in a third party arrangement, right? If I hired, I ran a person off the street and paid them twenty thousand a year, I may be fine with not having unemployment contract. I may be fine with not having all these technicalities, but because there's no related party nature, IT doesn't get the same scrumpy. Yeah, that make sense.

And one of the things that I noticed was interesting was, and a lot of these videos s talking about all these great tactics. They don't clarify that even if you were doing them by the book, even if they were appropriate, if you just have A W two income and you're working at a company, you can't write off your meals, you can't classify your cars of business expense.

And a lot of these things that i've heard people, one on one talking to them say, I work at google and taking a friend out to lunch. I'll just write that off. And I like, well, one, I don't know if you could write IT off even if you did on the company. And two, I don't think you can do this as an employee. So are most of these things even relevant to people who don't own businesses?

So ever the tax reform passed in twenty seventeen. That started in twenty eighteen. There were some that would apply at the time.

You have to still get over that atomised threshold. But things like home office, you could take some of those things. Actually had a professor who was a part of drafting all of the tax reform at that time.

They had to fit within a certain budget over ten year projections. And so because they made somebody cuts in other areas, they had to have certain areas where they increase the revenue. And one of those are basically eliminating all of the deductions for employees are right now. Absolutely not.

You get nothing what advice you have for people for how to handle and scrutinised tax advice on the internet. How do you think people should try to figure out what's good and what not?

At that of the day, you want to get real profession advice if you're gna rely on IT. So I deal finding someone that you actually trust that can apply to your situation. And I think social media serves is a great way to introduce the question, not necessarily that they have their answer.

And when you highlighted their statutes, their treasury regulations, there's court cases. All of these things can also be found. I would encourage people to go look them up.

I'm going to show one example is particularly relevant to the audience, which is i've often talked about how credit card points are treated as a rebate and they are not taxable. So i've recently heard some people questioning whether that's true and the argument being really more on the business side. Well, if you're using this to generate a profit, should IT reduce your cost basis in whatever you bought or not.

I looked that there was a revenue ruling that said a purchase incentive such as credit reward or points, is not treated as income, but as a reduction in the purchase Price of what is purchased with the rewards or points. And then there is this case where they actually decided. And what I thought was interesting was this couple had generated a few hundred thousand dollars in rewards on two credit cards, buying gift cards and then liquidating and reselling them, as well as funding money orders.

And the takeaway was, when used to directly buy money, which they only included the money orders, you are turning to profit and that would be taxable. But to buy a gift card, which they felt was more of a product, you're okay. And so yes, I could go online and look all these things up if you want to get clarity around IT, if you're doing a little bit of this, maybe it's okay to do a little bit of digging. But if you're generating hundreds of thousands of dollars of rewards a year, IT might be worth going to read .

these yourself yeah or reading them yourself realizing that maybe there is not full clarity and then maybe even hiring someone to give an opinion on IT. right? I don't view IT as like you're ever fully stay right like and then of the day you can have an awesome, easy, clear tax position with the arrest, not something as complicated as a credit card rewards.

And he still based issues in audits like the reality of people think i'll just be good, but there's just so much bureaucracy if to check so many boxes that even safe positions are questioned in an audit. So I just view IT as like you just want to protect yourself, like risk averse, if you're taking a slightly more aggressive position, you can rediscounts IT on the return on an eighty two, seventy five, and then you're allow to rely on less authority to take that position and reduce your exposure for irs penalties. And you quite literally disclose positions that you still have to have a basis for, but you're allowed to instead of having substantial authority at forty percent basis, you're allowed to have I think it's twenty percent basis and in your authority, so you're allowed to rely on less.

why? So whenever I have situations where i'm like, well, this is something that I feel comfortable with, we've got support for, but there is some support on the other side that I don't love. We can always protectively disclose IT. And I ve never seen that trigger and audit .

or do anything like that. okay. So that's basically saying, hey, i'm not as sure, but I want to let you know that I think .

i'm sure yeah saying i've got authority for this, but it's something you may disagree with. So i'm just going to proactively i'm not trying to hide anything like i'm trying to be really clear about IT tell you the authority that i'm relying on and it's worked every time i've done IT, i've never had a lot IT result IT.

So and let's talk a little bit about all IT. Almost everyone I know is scared of them but don't actually understand them. Can you talk a little bit about what happens if you get audited?

Yeah the other process i've been trying to provide a lot more clarity for IT because unless you're just doing IT like there's nowhere else you can learn about IT, to me it's not common sense. So when you get audit IT, that part is what you would expect.

I do think people assume the auditor is really sophisticated, which if you were a much larger business, like there's different divisions, right? So you're very large business, you're gonna probably get someone sophisticated. But most people are under that ten million million growth receive threshold, in which case they honestly like these auditors are in the middle of training.

They have so many checks, boxes to get through like they're just paper pushing. And I don't say IT to be mean, but it's just its government, right? Theyve been put into a position words, just collect this check the box, collect this check the box.

They're not really put in a position or trained to think too much. And so first off, I see people like way over explaining. If anything, I always make IT such that I don't want my client to ever even talk to the IOS.

Sometimes they are more insistent than others. There's never a positive that could come out of IT then you probably hear doesn't like every area of law, right? People think we'll just explain everything.

They'll just know that i'm not guilty, right? But they don't really care with their specific list of things they need to get through like they're looking for receipts. Missing the receive denied, missing the receive denied as IT.

And a lot of times they just try to get everything unless you control IT, they will ask for literally the back end of your books. They'll ask for every receipt known to man. And then that's what idea representation coming in being like. Okay, well, we're not going to give you the books because we actually printed everything out for you and we're not going to give you eight thousand receipts.

So why don't you choose a sample size list of ones that are representative of the things that you're concerned about? Rights, a channel limit that but even with great representation, I would say at the lowest level, we just have adverse decisions against us. And that's what I think a lot of people think.

Oh, no, I lost like it's so expensive to go the next level. What do I do? I'm pretty quick to say, OK, we're just not getting there with this person and we just go to appeals. And appeals is where you really get someone that is actually more concerned with the substance.

The big picture, not to say they don't care about IT at all, but they're less going to be like, I need that receipt for this forty dollar more and there more like, okay, well, is this person in a real, say, professional? right. And so then at that point, if you still don't get where you need to go, you can go up higher.

You go to I R S. Council before actually heading to tax court. We almost never actually go to tax. Like if you're actually going to tax score, you're probably a very large company because I would say they give more adverse decisions than negotiating with iris council and negotiating with irs appeals. So you weren't able to resolve with our appeals in council, you're probably going to lose.

obviously, is all subject to audit. But if there is something that looks a greedy, do they put scrutiny, that thing that looks a greece or as soon as you hit that out that they're we're onna, look at everything pretty.

look at everything they may have picked IT up for the thing that was agreeable right to one of you have like a massive loss or maybe too much terrible contributions that might have been the reason that was flagged every now and then an auto might be limited to specific items. But usually they're like all there's a schedule, see, give me all the receives. There's a schedule e giving me all the receipts. You did a rental, give me your literal participate in log.

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mobile for details. Just a personal question on the receipt side. Do you think the credit card transactions justify receipts? Or do you really need like the receipt receipt .

you there is at the lower level, like if the irs were up with the times, they would change their policy because it's just looked. But they're like very behind on technology. Just everything is very slow moving so they can barely find enough people to take the jobs that they need.

So no, at the lower level, I mean, I have a lot of erotic cases at appeals where what happens as people will not have the receipts. Literally the auditor will just deny everything. A lot of times this is a generalization, but a lot of them will just say I never seen nothing and they're just be like pretend like like there's not a business.

We ll just recognize the gross income and deny every single deduction known to man. And that's where appeals won't do that. There's what we call the coin rule, which is formed in tax court.

It's not a law formally, but it's a doctrine created by tax court that basically says we can see there's a business. We can recently estimate the expense that you had. We can reasonably estimate what I was on, which I would say credit or transactions that make statements can meet that thrush al the stem extent, then they allow the expenses.

But it's intended to be like a fairness doctor, not so much an offensive sort against the iris. So he usually works at appeals. And i'd never have IT really work at the lower auditor level .

in other common things that flag people for audit.

Yeah negative schedule sees. Negative schedule ease. Large losses will flag. I see a lot of oddity by association.

So if you are involved in something else that has a problem. So i've seen people with like a conservation ismet under scrutiny and getting audited. Dirs doesn't like those. You're thereby association. And I ve also seen audit jump from person a person in the medical area, especially like kickbacks. And you had someone that got audited because he was written a check from the person with the problem, and then they look at your file when they say this person got a check that checks at all, why this is a little sketchy, and they say you unfilled. But IT, what about when .

you're amending returns after the fact and making changes? Is that put you at higher risk if .

you are asking for lots of money? backyard? That's also one of the ways also see people audited. You think about common sense, right? You file your own return wrong.

You already got a wrong once and now you think whatever you're old, two hundred thousand dollars and processed SE at the amended returns actually lend on someone's desk. So it's not the same as a supercede ded return or an original return, which is basically automatically process and amended return. T is a much slower IT takes like honestly nine months up to a year sometimes because IT actually just get stuck on someone's desk. And then do you think about a human looking at something if you're like, i'm old at three thousand dollars, we got all of these lions wrong and we changed literally everything. I mean, it's is so easy to push IT to the audit.

And how long does this whole process take? Because I got a new cpa who reviewed my twenty nineteen return, found a five figure mistake right before the deadline to amend. We amended IT, I feel like over a year ago and we literally just got the refund check now. So but good. But twenty four, it's almost twenty twenty five IT was like eighteen months process when the irs does flag things for audit is that months later, years later.

edges varies. So you can check your IOS transcripts, you can actually see if you ve been flag for and on IT. So that'll tell you up to six months before it'll be like forwarded for an out IT.

So that's one way to check the amended returns. Take a long time. Sometimes they get stuck on people's desks like they literally just sit there.

We do this only after several months of past, but you could go through like the irs tax avoid and checking on IT and say no one's going back to me on this because the arrest doesn't have to process your amended return. In theory, they except on IT. So usually they don't do that. But there are instances where it's like, is anyone gonna get here? You know, at some point, you don't want to just wait .

when you do get IT wrong. I have one example where a friend of mine got what they thought was a gift from a parent. But what turns out was that parent had a business entity set up with all the children in the family as owners.

And so that gift was actually a distribution from a company, and they never got a ten, ninety nine or anything. Three years later, they found out that the gift they got when their parents was taxable, but IT took years and they owed penalties and interest on top of that. That seems like something that was flagged because the business entity submitted something.

Maybe they even filed the ten ninety nine with the state but didn't send IT to the children. So that seems like something where comes back to the transcripts? I want to talk about irs transcripts because that's actually the reason we're talking today because a really good friend of mine send me a video you made about irs transcript and was like, i've never heard about this strategy.

It's amazing you have to talk to this person. And so how are you using I S. Transcripts to make sure you get things right. Yes.

you wanted check them. So I was going to say in that instance, he just described the problem was a key one. If you're telling .

me they are an owner, let's even just define .

what they are for people. It's the file the irs has on you. So the irs has a file I knew why won't want to see IT as publicly available.

They may get electronic. You can literally just create account with the areas, log in and then there's multiple types of transfer ript. So you've got your account transcript, which is going to show the base level of your account.

It's going to say like what payments have you made to the I rs. For which tax year has your return actually been filed? Has your mended return been received, right? So it's very much those base level things, which a five thousand ament return. The first thing i'd be looking to see you know to the irs receive IT. If they didn't receive IT, you could wait two years and then be like or is my refund and then we'll say, well, we didn't get IT and now you're outside the .

statute limitations. And how quickly are those kinds of things updated if I find my return today, how soon will IT show that it's been filed?

Usually at least a couple of weeks. IT still takes a little time if you did a electronically now if you mailed IT would be like six months, nine months. I was after waiting a couple months.

If it's not there, I would be very concerned. And usually I was want to have proof that you already did. yes. So that's the account transcript. So I looked to that for like if you made a payment and sometimes they receive IT, they cash IT, but they don't credit to your account, right?

So because I did IT also get created to my account, then when you go to the wagon income trana script, that's the one that would avoid most of the problem. So that's the one where if A K one was filed with your social on IT, if a ten and nine was filed, every document with your name and social is going to be on there. The problem is, if you check to early, you won't have all the information.

So IT populates by the following years of for example, right now we're in twenty twenty four. If you want, you're twenty twenty four wagon income trans groups, you'll obviously to wait till next year because things like you're w two, all of that stuff has any mainframes. The arrest and then takes time to populate. Usually a safe time to check is going to be june of the following year.

So that means that in order to check, you would have to buy default file extension and not file in April.

So what I recommend is we wanted to one of two things, if you want to file early because you want to refund the usually the reason, the only reason. So for example, extend in february filed by April. But then if you notice a problem, you want to check in june or september, whenever before the final deadline, you can follow supercede ded return.

The reason we like supercede ded returns is, one, they process faster. And then two, do you know you have an amended return of that page of like original change difference? Like you're highlighting the problems that we're there. Instead, it's just literally submitting a new original return.

okay. And so it's not ending up on someone's desk like an amended return wood. yeah.

But the only reason you can do a supercede ded return as if it's timely. So if you never extended in the first place, you'd have to do an amended return if you are filing after April. But if you extended and then filed, you're still technically timely until october. Teen.

I think one take away for everyone listening w to employee business owner, even if you file in April, there is no extra cost or risk to just also violent for extension. You just have to find .

the extension before you actually found the return.

So file the extension, then file the return, and then they june, check your irs transcripts if anything is off, file a super sea to return. And you're in a way Better position than if you file an amended return. And if nothing's, then you're fine. You already filed, you're done.

Hopefully, the irs will start publishing transcripts earlier or right now they don't. So either you do that work yourself even though we could say, in fairness, you shouldn't have to, right? I think there's always this argument of like why should I have to do that? But if you're going to be the one holding the bag, you probably should just do IT. Because the alternative right now, based on the way that I rest Operates as they give you a good two to three years and then send you a notice with penalties yeah.

what happens on the flip side? Lets say, in my case, I fall in amended return years later, then they took another year and I have have to pay me. Do they have to pay me penalties and interest?

Now penalties there is some interest, but it's not for the time that passed. Its for once you've value or claim for refund, then the clock starts. They have I think it's like forty five days to process IT.

And if they go wildly out side of that, they will pay interest. To me, it's always very scarious being outside the status al limitations, right? So with refund request, which is what an amended return is, if IT has a refund on IT, you have to have specificity.

So what I see people do, especially with not great repairs, as you have found the amended return, you don't put enough detail, you blow the statute limitations if they were able to process that specific amended return to be fine. But if they say, hey, this amended return doesn't have specificity, we're rejecting IT. Now you're past the standing al limitations. You can no long grass for the money back.

And what is the statute .

of limitations? Is the later of three years from a timely filing or two years from payment.

does that fit into your favor in a way that filing earlier gives the irs less time? Because IT works both ways, right? If they wanted to come after you and you filed right on April fifteen th, they'd have less time that if you wait and file on october fifteen.

yeah so that is one consideration. By extending and then filing later, you are extending the natural limitations for them. Haven't seen him like correlation between them. auditors. Those people less are being less likely to pursue.

My argument would be if your banking on the statue limitations to allow you to do something you shouldn't do, you publish, have done in the first place? yes. Is there anything else you do personally with your taxes, like the I S. Transcripts, that you think people listening might benefit from hearing?

I personally extend, I always want simplicity in everything, not that we don't want to maximize the tax benefit. I do, and I care a lot about that as well. I care a lot about not just minimizing my taxes, but also minimizing penalties, interest and onest ly problems, right? The more busy you get, especially in business. But honestly, in any area, I know how painful IT is to work with the areas.

Like even if I got audited today, I would be stressed about IT now i'd be in the driver seat so i'm not onna crazy worry, but I would stress me out because I know just the time IT takes would be honestly a huge loss in money to me, right? Huge loss and energy ever. everything.

So everything I do is built around that. And obviously, transcripts is one of them I like to actually extend. I want one return submitted that's IT.

And then everything I do is clean. I'm going to assume that I was is looking at my return. If there's anything that doesn't look good, I would prefer to not make you stand out right without misrepresenting.

So if someone were to look at IT and you labelled meals as I don't know something, not meals, then I think that is representing. But you could also do like certain labels that just don't pull out attention, right? So I might not label gifts.

I may label, you know, a part of something else that represents what IT is. For example, actually have a client that have been working with, they're under audit and they're bets of file. So whatever you're under current audit, they're going to look at the return and then decide, do I want to audit this return? And so things like clearing out any schedule sees with a loss on them.

I don't care if you truly had a loss. I would rather not take the deduction at that point, knowing that it's going to be under scrutiny if the deduction is small rather than highlight the fact that we've got something that looks really interesting to look into you. So those are kind of decision. Sometimes it's aesthetic as well.

I was just thinking about how you look at the irs transcripts and you're probably comparing them to your set of documents you've received. How often are the documents the w to the ten ninety nine s actually incorrect themselves?

IT happens all the time, especially in ten. So w two are usually accurate because they have to match up with the rest of the irs records on actual with holdings from the employer. Ten ninety nine, I will see all the time I log in to someone's account and a ten and nine sea, very often incorrectly, just like issued in the wrong year, is something that client wasn't even aware of.

regular. Ten ninety nine, you have remember it's just another human issuing. On the other side, I was talking to someone that the book keeper added to zero to the ten and it's like overspend as tty nine s and other times it's in administration of assistance, right? If you were paid twenty five hundred dollars in that administrative assistance makes IT two hundred and fifty thousand dollars. That is what the arrest will have on file in the .

automatically ATS you return. What about ones from banks and brokers, firms showing mortgage interest or interest from your savings account or broker transactions if they're incorrect?

There's like not even much you can do about IT, yes, but I don't tend to see huge as on those.

Those tend to be correct. And when you find something that's not on A I S transcript, but you got a ten I S didn't, is that a cause for concern you looking into why? Or you just accept that they might have missed IT and you're going included no matter what?

IT probably wasn't the irs missing and I was probably the employer not filing IT with the area. That's what I would assume. And you look at and say, what did I receive income if I receive the income response?

So you still reported, of course, anything else that people should be thinking about high level. I want to hear if we're missing anything about how to think about violent and taxes.

High level. I think people tend to realize too much on there expert, especially when their experts, not an expert. And so to me, I was be IT as like you're the one holding the bag.

It's your tax return. You literally signing under penalty of perjury. The ira cares about you not you're prepared. That's why I like to put out so much information because it's actually just something you need to understand even if something you're not that interest.

Then I was talking to someone at a conference and he was interviewing for a job and into IT working on turbo tax. Do you think about this a lot? What you think of turbo tax? And I was like, look, IT can help you fill out the forms and they might have some policy where they're like we will defend you.

But the end of the day, if you use the tool wrong, you're going to fill out the forms wrong and that's not on them. What's your take on when someone could rely on a tool like that? Vers need to prepare verses, just fill out the form themselves without needing any soft .

yeah it's ideally an unbiased session of your own skills, right? Some people just have no business preparing the return even if it's on the simpler er side, they will find way to messed up, just not their thing being timely. I mean, this benefits to a prepare of beyond the actual and knowledge right about things is like piece of mind that just timely is actually just getting get done.

So assessing your own skills. And then at that point, I mean interview tax is great for whenever you ve got clear tax documents that just need to be in played able do IT perfectly right. But i've seen people miss use IT.

We had an arrest, saw IT. I don't know how they did this, but they use turbo tax and they input they are schedule sea stuff on both schedule c and schedule. And I think they don't know how to read the and they're the prepare.

I think when it's w two stuff like turbo tax is great. If anything, they're Better than hiring someone who doesn't care about their return as much as you care about your return. But once you start going into into business or for taking any specific tax positions, I would just find someone that knows what .

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those who support us. Alright, because it's october also come out before the end of the year OK. I'm going to share some of the things that I try to do before the end of the year, and you can let me know if there's anything else one which is not often possible but accelerating or deferred income or expenses.

And I would say this is sometimes possible care. If you've decided, okay, this year, i'm gonna itemize or i'm gna take the standard deduction, you might be able to make an extra property tax payment. Now with the current limits, there's ten thousand dollars of state, local taxes.

But if you are not at that limit, maybe you wanted to make extra tax payments or mortgage payments in one year and then the next year switch off. So that's one. Or if your company offers the ability to get paid a bonus and different IT for a few years.

So thinking about whether there's any income or expenses that you can move around, that was one making charitable donations with the coffee at that, I think everyone should be donating to charity. With appreciated assets, right? If you're making any donations to charity with cash, you're effectively leaving money on the table if you own any appreciated assets.

So if you own any stock that you bought for less than its worth today, those of the things you should be donating, and if that's not simple, because the places you donate don't take stock, you can pretty inexpensively set up a donor advice fund. People, they listen the show for a while. I know that daffy has been a partner where we use our donor advice fund.

There are other options. Not many are people. And good, in my opinion, for any equity. If you hold any stocks that are actually not at again, but are at a loss, you can harvest those losses now you can buy the exact same thing so you wouldn't wanna sell your google stock and then rebuy IT unless you wait thirty days.

But if you held A S M P five hundred index fund and IT was down and you wanted to buy a different index fund, you could if you're holding stock options. So specifically, I shows, depending on how many you exercise, IT may affect your taxes. But sometimes, and this is one way, I would say, work with the professional for sure, there might be a number of issues you can exercise that wouldn't put you into amt and cause your taxes to increase.

And so if you're trying to exercise some issues, that's possible. A common one is if you have an fsa, make sure you use IT all. Because if you don't use IT all, then you lose IT.

So F, S, says the employer is going to keep the money if you don't use IT by the end of the and I would say even if there's absolutely nothing you need, there are places online where you can buy things and donate them. So there are medical supplies that many shelters need at a minimum, buy some of those things and donate them even if you don't expenses. And then there, hs says, retirement accounts, five, twenty nine, all things that have annual limits.

So if you wanted to contribute to those, make sure you do that before the end of the year. You want to give any gifts. So if you're trying to give money to your children or family members, those gift exemption limits reset each calendar. And then if you own a business, think about whether there any business expenses that you want to get done before the end of the year. Sometimes you might want them this year.

Sometimes you might actually want them next year, but I have been able sometimes to ask vendors, hey, could we pay for this thing a little early right now? Or maybe you have thirty nine, sixty, ninety, but you want to pay for IT right away so that you can have the expense in that calendar. Did I leave any glaring thing off that jacket list?

No, that was great. I think the one that I like to talk about a lot is for business owners just because I actually seen no one talking about IT. If you have a business specifically for us corpse, but really for any type of business checking your tax basis.

So I know he doesn't sound like super exciting like some of us, but it's a timing difference. And so there's a situation. We're basically you take out the money in december from your business, you'll pay is quite literally a voluntary tax capital gains because you access that money versus had you just waited till jane, you would take the money out, there would have been no tax. So there's a timing difference, especially with s corpse that have lots of appreciation and third party dead where if you take the money out, you quite literally create an extra layer of tax just for fun.

Wow, that's one that I would say go check with your cps on. And then the only other one completely on tax related is that if you have credit cards to have all these annual credits, like an airline and credit or hotel credit, make sure you use those before the end of the year as well because those often reset. Some of them are on the card member year, some of them are on the calendar year.

I'm going to put together a list of all the things I just mentioned and a few other ones that I find in the newsletter. So all the hacks come slash email, and that will come out sometime before the end of the year. I wanted to ask about a couple business things.

Specifically, you've said as copes earn as awesome as people might think they are, and that people thinking they should just set up an L, C. To save money on taxes probably might be mistaken. And i've had a couple friend say, oh yeah, I run everything through my L, C, so I say money and i'm curious what you think about that yeah but I mean.

the taxi is the taxi, right? IT doesn't say if an L, L, C is treated at this other way. It's faced on the tax entities.

And L, L, C is a legal entity, not a tax entity. So just forming and i'll see does nothing IT doesn't make a business seduction. The business deduction is either already a business seduction or is just not and running IT through your L C.

It's that procedure versus substance. It's the procedure and it's not what's controlling. So the substance is like what did you spend in on? And do you actually have a business? I'd like to keep things simple.

If you don't have legal liability and you're not doing anything other than sole prop treatment, you probably don't need that will see or at least recognize it's not providing a tax benefit. And then as groupes, they work really well for businesses like service industry. Whenever there's not much equipment and not much third party debt, they were really well. And in the minute, you have more of business with lots of vehicles and usually those vehicles are finding and store or real estate, all of those typically to stay out of an ice court OK.

I feel Better because I like I saw you talking about escorts. I have an ice court, but don't have a bunch of vehicles, don't have a bunch of third party dead and don't have real state. So maybe i'm in the clear yeah anything people should think about with a little bit longer horizon than the end of the year?

Obviously, we have no idea it's going to happen with an election as right now in days, but the tax cut job act is expiring. Are there any things people should be keeping on their rates are in the next kind of fourteen months? Says things to consider.

I mean, yeah, a lot of stuff is going to expire. So even like all by business income reduction, I think there's lots of things that we've got used to lower tax brackets.

Who knows at this point what's going to happen? So planning for IT, maybe sometimes you think, oh, I want to push up my income for this year or for next year before Q, B, I explores, right? And so I could make a bit of a different decision if you account for the expression yeah.

the other one that will probably be relevant to a very, very small number of listening ers, but I do know some listening ers that meet this fireman, is that the estate planning gift tax limitations are going to be changing. And so I believe in something like thirteen point six million per person in a married couple is going to come down to about seven. I think I don't know the exact numbers, but if you're sitting on tens of millions of dollars that you one day would like to give away to your irs, now would be a really good time to figure out the estate planning to do that.

Yeah if you're going to be over the new threshold, ones that expire youd basically want to figure out now because there's no claud back. If you use up the fall, whatever twenty three, whatever million that now between a american couple, if you use that up by usually some type of like contribution to an arrogant trust, then there's no callback. So you'd want to hurry up and probably use IT up because almost in every scenario, we're expecting IT to go down.

yes. But similar to where we started this conversation with everything you seen on social media, i've seen a lot of people being like go you should set up this trust so you can give money to your children, not have to pay taxes. And i'm like, that is true.

However, if the amount of money in your lifetime you're going to give your children is, let's call IT, just really conservatively less than five million dollars, then you don't have to worry about any of this. Sure, that limit could come down even more in the future, but right now it's over twenty million dollars. So I don't want people to think I might leave five hundred thousand dollars to my kids.

Do I need to set up a complicated trust? And the answer is no, you do not. Yeah no.

We definitely hurt you to do that. I mean because there's was also cost of administering even knowledge able people. I just oppose the other day and someone's like saying how a revocable trust helps you get step up in basis like they're just making step up because you are to get stuff in basements.

So most of the tax benefit IT thorning built in and really IT just comes down to a state tax because income tax IT either stays the same, where gets worse depending on what type of trust you choose. And then it's only that, a state tax. And then like we just said, that threshold are huge. So if you don't have in a state tax problem, you don't want to pay to fix the problem you don't have.

Now the only thing we spend a lot of time at this conference talking about different trusts and all the crazy stuff, but for avoiding capital gains, you can potentially end up in Better situations with some charitable remainder trust and those kinds of things.

So if you're about to have a massive sale of a company or sell stock that you bought a really low basis, let's say you worked at in video the last five years, there's a world where you might not be crossing that ten, twenty million threshold, but you might save money setting up a trust for that purpose. I'm not the expert we did episode while ago on trust. You absolutely want to work with expert in this.

But outside of a few of those small scenario, I would say if you're not over these thresh holds, then you're making yourself and your life more complicated. That had a revocable living trust, a will and like basic estate planning documents, you should definitely set all of those things up. I'm strongly in favor of those. But more complicated, irrevocable trust are probably for very specific scenarios that are not common to most people.

And I always goes back to like, what do you trying to accomplish and does that actually get you there? And people talk about trust, the law, but the realities, they're really complex. Anybody that does regular domestic tax and just happens to like name drop random trust, they're probably not super familiar usually on social media.

When you think of like charitable remainder, trust is because your purpose is different. It's not to keep the most dollars possible is actually with a strong purpose for charity, right? So then of course, there are tax benefits for that.

So if you're trying to pursue anything wild and crazy, talk to someone. Where can people find everything that you've published? And where can I go deeper on all yourself?

Just watching my name on youtube, in an instagram, those my main platforms. I've actually got a video coming out today, but i'm trying to do every couple of weeks on doing a nice long form. I'm leally just going through court cases on a specific nh topic.

Yeah, for anyone interested, I propose that you go deep on the credit of stuff. And if so, and you do IT by the timeless comes out, look at the show notes and I will link to that and you can go get a little bit of deeper er dive there at all.

My less. Let me see what I can do.

awesome. Thank you so much. Been here.

of course. Thank you.

OK. I hope you enjoy this episode, and that is super helpful for your taxes in the future. Big thanks to my old cofounder and past guest Christal for turning me on the jazz's content. Email is podcast that all the hacks 点 com， I will see you next week.