Tax Time Countdown: Essential Tips for Last-Minute Filers - Expert Edition Episode 18
About our expert: Atiya S. Brown aka The Savvy Accountant is a CPA, CA and a Certified FinancialnEducator Instructor. She is dually licensed in both Canada and the USA as a Certified Public Accountant. She has over 18 years experience in the accounting/finance world.
She is the owner of The Savvy Accountant® where she is savvy at solving tax issues for her #SavvyFamily aka clients. She has, to date, saved them over $7MM in tax savings with her tax strategy plans and tax help since 2021.
She has a goal of saving her #SavvyFamily aka clients $1 Billion in tax savings! She has a special place in her heart for women-led service based businesses. She has worked with the real estate industry and works a lot with agents and investors.
Prior to that she worked for 5 years at a Big 4 Accounting Firm before she went onto work in the Financial Services industry. She attended The John Molson School of Business (JMSB) in Montreal, Canada for both undergrad and graduate studies. She finished top 5 in her graduating class before completing the Chartered Accountancy examination to become a CPA, CA.
She has always had an obsession with numbers so she naturally chose accounting, Her passion for tax came about at the age of 20 when she was recruited to join a team of 3 and represent her university to compete against other schools across the country. Her team was able to finish third place in all of Canada their first year competing in the case competition. Her love for tax strategy grew from there, she loves figuring out each unique situation and how to best solve its case.
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TRANSCRIPT:
[00:00:00] Naseema: What's up? What's up? My financially intentional people? I'm super juiced to have Atiya Brown joining us. She is my personal CPA and she's gonna be an expert CPA on the Financially Intentional Podcast. So first and foremost, welcome aia. So happy to have you.
Yes. And we're going to talk about, as this episode is coming out April 4th, we're going to talk about things that last minute followers should be considering. Cause I'm one of them. Don't be mad at me, Atiya, you're probably like, oh yeah. Whatever special things that. People who procrastinate with their taxes like me should be considering
[00:00:47] Atiya: yeah, that's a great question. Very timely. I think what a lot of people who are procrastinators mm-hmm. They need to be considering is file an extension. A lot of times people don't think that that's an option or. They wait until after the deadline to be like, okay, I'll file an extension. And I'm like, yeah, that's not how that works.
So if you are a procrastinator, reach out to your tax professional, have them file an extension for you. You do have to realize that the extension is allowing you up to six months to file your return. So you're able to file it late, but it doesn't give you an extension if you owe. So if you do owe money, you're gonna be incurring interest from the April 18th date, but, You're able to file it up until six months with no penalties of late filing.
So that's kind of the difference people need to know. But there's nothing wrong with filing extension, especially if you're not ready, cuz you don't want somebody to rush and try to get it done when you could just take your time and file the extension and then make sure it's filed correctly.
[00:01:47] Naseema: All right, so that's good to know. So basically what you're saying is I need to call an extension
[00:01:54] Atiya: done.
[00:01:58] Naseema: So I don't think that people understand that though, like. If they do actually owe the taxes, like whatever they owe is going to be like charge penalties from the April 15th, eighth, April 18th, this year is correct. Date correct. So even though they might not figure out exactly how much they owe
[00:02:18] Atiya: that interest the best thing to do is, you know, to have an estimated payment submitted.
So at least you're covered. Something if you do owe there are ways that you can figure out approximately what you're gonna owe. So you can do that tax protection, but if you do owe, you just have to be aware that your interest is gonna be incurring as of the actual deadline. So April 18th, until you actually file the return and pay the amount due.
[00:02:44] Naseema: And where do we go to figure out like how much?
[00:02:47] Atiya: You can irs.gov. They have what they call like a withholding calculator. And so that's gonna tell you what you should be withholding throughout the year. And so a flip way to look at that is if you are a small business owner, that's gonna tell you kind of what your estimated tax payments should be throughout the year, and that should let you know what you should be submitting.
So that's one of the ways that you can do it. Mm-hmm.
[00:03:13] Naseema: But if you've been paying taxes like outta your W2 income, do you still recommend
[00:03:18] Atiya: that?
You have your withholdings coming out and your withholdings are up to date, so the way I just talked about the withholding calculator, because a lot of times people don't update their withholdings, so they're not withholding the right amount, or they're withholding too much or too little too much or too little.
So one of the ways to make sure that you're withholding the right amount on your W2 is with that. I don't think it's necessary. If you're only a W two employee and you have your withholdings and it's sufficient, you don't have to submit estimated payments at that time. But it does come into play if you do have extra income sources that weren't incorporated in your W two withholdings.
[00:03:53] Naseema: So like someone like me who has W2 income but also has a business income, that's something that you would recommend because obviously with that business income, a lot of it is not taxed. So you have to estimate that end to those withholdings. I just find those withholding calculators a little bit tricky to use.
I don't know. I know you think like they're super straightforward, but I Yeah, they're, it's like so confusing to me. Oh, do you have any
[00:04:20] Atiya: tips? It used to be, I think it used to be a lot more complicated because it talked about exemptions and all of that stuff. So they kind of revamped it in what I call like a streamlined.
So it really takes your actual situation into play. So it's gonna ask about your w2. It's also gonna ask you do you have other sources of income? So that's where you can kind of put your projections for what your freelance business is going to give you. And then it's gonna calculate what your withholding should be so you can actually adjust your W2 withholdings at your job to incorporate your income that you're gonna be getting from your side.
So it does kind of make it a little bit more simple. The form does kind of go in the, what you're gonna make at your job, what your spouse is gonna make at their job, and then if either of you have extra income it's gonna kind of go in those silos. But I do find it helpful cuz you can actually adjust your withholdings at your job to incorporate your side business.
Right.
[00:05:17] Naseema: I've, I have done that in the past. Okay. So besides making sure that we file our extensions to, oh, I wanna talk about actually, what is that penalty?
[00:05:30] Atiya: If you don't file, so there are gonna be a couple penalties that you could be incurring. One is going to be late filing, that could be 5% up to 25%.
So it's gonna be like 5% each month up to 25%. And the late paying that interest can actually vary, and I believe it's at 25.5 every day until it hits 25. But don't quote me on these because I kind. Try to get them in on time and, but the interest rates can be found on the IRS gov.website to figure out what your actual penalties are gonna be if you're late filing.
[00:06:09] Naseema: Is that the percentage of your income or percentage of, so, that's
[00:06:13] Atiya: a good question. It's actually a percentage of what you refunded. So people that are getting a refund, they don't have to worry about those interest rates cuz it's based on what you actually owe. Mm-hmm.
[00:06:25] Naseema: Okay. Okay, Any other considerations that people need to think about? Yeah, like in this last month, last two
[00:06:32] Atiya: weeks, so last two weeks actually, because we're kind of at the end of it, I think a lot of people need to realize that they need to have a picture of their situation. So a lot of times people aren't paying attention to what tax form they should be getting.
You need to know what your situation is. If you own a home, you should be expecting to get a 10 98, and if you don't get that, you should, you know, contact your bank to make sure that maybe they are what they went paperless and it's in your portal, but you should be aware of what type of forms that you should be getting so that you can submit them to your tax unprofessional so that you're not missing forms.
Because a lot of times what people don't understand, The government knows all of these forms. That's the purpose of them having numbers. It's kind of like an inventory system. So if a forum was issued to you, even if you don't report it, chances are the government knows about it, and by you not reporting it, it's just gonna increase your chances of you getting a notice because they are gonna be doing their comparison checks and saying, well, you got this 10 99 here, but I don't see it on your tax.
So really just being aware of your situation, knowing what, or it's supposed to be reported so that you can be proactive to figure out why you haven't received something yet.
[00:07:43] Naseema: Okay. So that's super important. But for people who are self-employed and get 10 99 Yep. And might be getting 10, like tons of 10 90 nines, when was the last date for people to send out? 10 99.
[00:07:57] Atiya: So what the date that you should have received your 10 99 N E c. Was January 31st. But there are ways that people could be submitting 10 90 nines up until March 31st if it was a 10 99 miscellaneous.
So there are different timeframes that you could get, 10 90 nines. So you can still get some within the next few days trickling in if they were, you know, they waited until the March 31st deadline, and then they're gonna be submitting it to you by mail. That's something to look out for, but it's also great for you to keep records of your own information because sometimes people just don't file what they're supposed to, right?
So you can't rely on the vendor that hired you, the person that hired you to submit your 10 99, cuz if they're not keeping up with their tax records, they might not issue a 10 99. That doesn't mean that you didn't earn the income and aren't supposed to be reporting the income. So there are such thing as late files late.
So somebody could be catching up on all of their bookkeeping and they can issue their 10 90 nines late. And that just means that you'll get a late 10 99 and you might have to amend your return, but it doesn't mean that you have to wait for them if you know what your 10, what your income is supposed to be for the year.
[00:09:08] Naseema: Got it. So if so if you submitted a W four with that person, and you know, you've made over correct me if I'm wrong, it's you get a 2 99 if you make over $600
[00:09:20] Atiya: and you said you would've submitted a W nine. Correct. Okay, so you, yeah, no. A W nine.
[00:09:26] Naseema: I'm sorry. Yep. That's W four for your w2, right? Yes.
See, thanks for catching that. Yeah. So you submitted W nine for these people. So if you submit a W nine, it doesn't automatically. Like preclude that it doesn't automatically mean that that person is going to create your 10 99 for you. Right. So it's just something you have to keep an eye on, something you should be keeping records
[00:09:50] Atiya: on.
Exactly. Oh, black. So I tell people good practice is to collect the W nine from every contractor you're gonna work with, but that doesn't necessarily mean that they're gonna hit that $600 threshold. Mm-hmm. So for one, they might not hit the threshold, so you're not gonna have to issue a 10 90. And on the flip side if you issue a a W nine because you know you're a contractor and you're working with this particular person that hired you, and if they're not keeping up to track and they're not submitting their 10 90 nines, but you made a thousand dollars from them, your records still should still show that you made a thousand dollars.
Even if they don't do what they're supposed to do on their part and submit that 10 99.
[00:10:25] Naseema: Okay, so if you file your own taxes or you as a tax preparer, when you are reconciling these things, like do you actually go in and say, okay, you're looking at QuickBooks. You're looking at my QuickBooks and say, I know you got paid like a thousand dollars from this, you know, company. Where is the 10 99? Do you do that?
[00:10:47] Atiya: We submit list of. Who should be submitting 10 99 so that they have it for the records and they kind of have an inventory. But like we said, we know that because we see that the income is there, so the client is gonna be covered. Like they're gonna be reporting yes, the correct amount of income, but it's really just to do, you know, close that loop of we made this income and we should get a 10 99.
Yes, but we can't. Like you can't force that person, right? It's a part of their requirements, but there's no way for you to enforce that they submit that 10 99 before without you just requesting it and you know, hoping that they are doing their due diligence to submit it.
[00:11:25] Naseema: So when you submit your tax returns, are the 10 90 nines part of those tax returns or is it just something that you should just be keeping for your records and
[00:11:34] Atiya: casement audit? Both are valid. So you do issue your 10 90 nines with your tax a returns you included mm-hmm. In your income. But for the most part, because there are some people that okay, fall off and don't submit your income that you're reporting for your business chancellor, it's gonna be higher than the 10 99 list that you actually have.
So, and the reason for that is cuz some of those, some of those vendors, you're not gonna hit 600. So it's still included in your income, but you don't get a 10 99. Mm-hmm. So for multiple reasons mm-hmm. Your income will be higher. And so in that case it's covered with all the 10 90 nines. But you do wanna make sure that you're reporting all the 10 99 s that come because that's a tax form that the government gets a copy.
[00:12:15] Naseema: Got it. Okay. That makes a lot of sense. All right, so what I wanted to talk to you about is actually like, what is the difference between like if you're filing last minute versus you're trying to get like a tax preparer, like you to work with you last minute.
What are some
[00:12:32] Atiya: things? So some things to consider that I like to tell people is that, The tax professional you're gonna work with, they probably have internal. So, while the deadline is April 18th, our internal deadline is actually March 31st for you to get everything to us. So any clients that come in after March 31st, they're going on automatic extension and we'll work with them like, you know, as time goes on, we will in order that they're coming in, but they're gonna go on automatic extension because we're, we don't try to rush our returns.
So you can work with a professional, but just know that they might have internal deadlines that while it's not April eight, They probably are still gonna put you on extension because of the timeframe that you came in. So you're still gonna work with a professional. It just might not be rushed to get filed by the deadline.
So,
[00:13:21] Naseema: yeah,
[00:13:24] Atiya: but if you're doing it on your own, so you're doing it on your own, you have until the 18th, April at midnight were you are located, you, whatever software you're using, it should give you no issues to submit up until the 18th. I wouldn't wait until that last minute. Like everything technology-wise, a lot of people are submitting and so things might get delayed.
So you know, you wanna make sure that you give your it enough time to work.
[00:13:49] Naseema: And I actually remember the point I was gonna ask earlier. If you like me, I have contractors that work with me. One of the, my saving graces is I usually pay my contractors mm-hmm. Through a service like PayPal and then it automatically generates a 10 99 for them if they make over $600. Are there other software that does that as well?
[00:14:13] Atiya: You're gonna have PayPal. Stripe. Those are gonna be softwares that are gonna, that are gonna do that. But you wanna make sure that, because there was something that the government actually issued recently And it was that some processors are going to be having to issue 10 90 nines for the 600 level.
They changed it to give it an extra year because Stripe, PayPal Cash app, now, they used to have to issue 10 99 Ks for anything that hit. I think it was 20,000 for 10, like 300 transactions. It was like a big number, so a lot of people didn't get those 10 99. So they changed the reporting requirements that if anybody generated $600 and a lot of people had this whole panic, but it really was just coming into alignment with what the regular 10 99 s had to be issued.
So I keep telling people it was no change for the actual person getting it. You just might get more, but nothing changed in the way the process should work for. But so that has been put on pause. So if you pay through PayPal right now, you didn't have to issue a 10 99 to them because PayPal was covering that.
So that was one of the changes that for the individual you issuing a 10 99. But starting next year, PayPal, Stripe Cash app, they should be issuing those 10 99 Ks for anything over 600. So if you pay via that method, you won't have to issue it.
[00:15:44] Naseema: Got it. Got it. And then For those. I, I remember that whole panic about the $600 thing. I think people were thinking like if they had more than $600 in these institutions, like they had a balance over $600. Yeah. It was gonna get reported to the irs. I don't know where that came from. Social media. I think
[00:16:03] Atiya: something, every time there's a.
People like jump on the bag People like jump on the bag wagon and just post about it, but they don't really post the way it works. So I kept telling people, this is a reporting requirement. You know who should be upset? Right. PayPal strike. Because now they have to issue a ton more 10 99 Ks when they used to have to do it for the 20,000 level and now they have to do it for 600.
But they're the only, like their reporting department is the one who is getting more work added to them.
[00:16:31] Naseema: Yeah. People have this irrational feeling, everything that the government is like watching. Every dollar that comes in news flash. Like, you know, any government, do you know any government employee?
Do you know how overworked they are? Like there is like Exactly no way they could possibly be watching and you Exactly. I'm like, people not on their radar whatsoever.
[00:16:53] Atiya: Strikes me up. Let's just, Call us. Fade a spade here at all.
[00:17:01] Naseema: At all. And I wanted to address like if you have contractors that are overseas, like does a 10 99
[00:17:09] Atiya: still? No. 10 99 is like a US-based tax form. That's like a US-based tax form. That's gonna be for state stateside contractors. Depending on the country that you're working with. You might have to have them fill out a W eight bin or something.
I don't remember the. Naming of that form, but that's a separate form that's separate from the W nine. Because certain contractors, you might have to withhold taxes from them because you know how typically with contractors, you're not withholding taxes, but certain contractors, depending on where they're stationed, you might have to withhold taxes for them.
And that's where those other tax forms come into play. But typically, no.
[00:17:46] Naseema: Yeah, that makes sense. What usually happens for me is I have some contractors that are abroad. Is that. They get withheld taxes on their end, so then I have to like overpay them and compensate them for the taxes because then they don't get like shorted on how much they're going to get paid. But it's a calculation.
Yeah, they're pretty good. They usually know how to do it. But just, yeah, just something to consider. Cuz when you're like, no, I said I was only gonna pay this much for the service. It's typically factoring in that they have to pay taxes on those things. So, Yeah. All right. What other things att What's one last thing I
[00:18:28] Atiya: think we should, what people should be thinking about that we should, what people should be thinking about that they don't like to think about is tax planning.
And while we're in tax season and people are trying to get their tax returns done, they need to figure out how they can actually reduce what they're paying. And so now is the great time because your tax season is going to be looking at January, December, and you wanna make sure that when you come to this time next year that you know what you're supposed to be paying.
You know that you're not overpaying and you can reduce what you have to pay. So start working with your tax professional to make sure that you have a plan in place to reduce what you actually have to pay. So start getting proactive so that next year, what we're in 2023, now you can actually get some savings in 2020.
So when you have to file your 23 tax return that you actually get savings because right now there's not that many savings that we can hit get for you in your tax return.
[00:19:20] Naseema: What do you say to people who are like the perpetual, you know married filing zero people that just do that so they can, they're, because they're scared of paying taxes and they wanna make sure that they, oh, that's a great refund.
[00:19:35] Atiya: I tell people all the time, if you are getting a, a large refund every single year, and it's not because of a credit, like there's not a credit that's giving you this, it's just because your withholdings are.
You need to adjust your withholdings because what that means is that you gave the government an interest free loan throughout the year, so the government held onto your money and they're just giving it back to you. You just, when you filed your tax return, you calculated what you owed. They were like, you paid us too much.
So here is the difference. You don't get any interest on that. So you wanna consider adjusting your withholdings so that you can have a bigger take home check so that you can do other things throughout the year. You can invest, you can put your money to use in other ways, but really you should not be getting large refunds year after year after year unless a credit is involved.
But you shouldn't be getting large refunds just because your withholdings are too high. So you wanna adjust your withholdings.
So for people
[00:20:30] Naseema: who are self-employed and don't know how to predict how much income they're gonna have, what are some things that you tell them to? That's a good, good question. So
[00:20:41] Atiya: when it comes to estimated taxes, there are a couple ways that you can calculate it. And the easiest way is taking your tax liability of the prior year and submitting that throughout the.
So taking a hundred percent of what you, your liability was last year and submit that throughout the year as your estimated payments, and that'll make sure that you're covered with your estimated payments. So even if it, if it's you owe less or you owe more, you'll get that refund or a liability, bless you.
But you'll get that difference and at least you know that you submitted an, a good estimate. So if you can submit an estimate of a hundred percent of what you're, what you paid last year, that's a good benchmark for you to go.
[00:21:22] Naseema: And as somebody who's self-employed, you should be submitting Yes.
[00:21:30] Atiya: Quarterly. It's definitely That's correct. Recommended. Just so that you keep, because the government works on an earn and pay system, so you're earning income throughout the year. They need to collect tax dollars throughout the year. And when you're an employee, that's happening with your withholdings.
But when you're self-employed, you file your tax return at the end of the year. So that's where the estimated taxes come into play. You earned income, you should submit taxes, and so you should be submitting estimated taxes if you owe if you owe a thousand dollars at the end of the year, you should be submitting throughout the year.
[00:22:00] Naseema: Right? Mm-hmm. So for me, because I have both, a way that I, I typically do it is, is that I, I do have my yep, my taxes taken out of my paycheck, every pay period, just like everybody else. But if I know I have to pay more in estimates, then I'll just add, like, if you say like, you're, you a thousand dollars a year, like maybe a hundred dollars extra a month to the pay par, to my Extra withholdings to, to cover that.
So that's a way, if you have both for people who are employed and self-employed to kind of cover those estimated taxes. But if you are in that situation, you don't necessarily have to file exactly a separate
[00:22:43] Atiya: estimated estimated tax. So you would, what you're doing is perfectly fine. Yeah. And I recommend that because it makes it easier, right?
You don't have to submit anything extra. Your withholdings is gonna cover it. So if you're in a situation where you're dual and you have w2. Y I would suggest that you adjust your withholdings and that'll cover you submitting the estimated payments.
[00:23:03] Naseema: Perfect. All right, so Tia, whenever people have tax questions for me, like this is like, So outta my scope, but anytime people do always refer them to you. So if people wanna work with you, not for this tax season, cause she's busy, she's done, it's closed. Or people wanna do tax planning.
[00:23:25] Atiya: Yeah. So they can work with a taxi,
[00:23:28] Naseema: planning.
[00:23:28] Atiya: Yeah. So they can work with a taxi, they're just gonna be on extension and then we'll get to them.
But, so they can still definitely work with us. They can schedule a free call. And I, I guess you, I'll give you the links, but they can schedule a free discovery call and then they can get put on our calendars. If they wanted to get started with their tax return right away without the call, like they know they just wanna work with us, they can go to bit dot lee slash tax prep signup and that'll get them signed up into our portal and then we can just go from there.
[00:23:59] Naseema: Awesome. And I'll have all the links in the show notes for you to sign up and work with aia. But as you can see, she has a wealth of knowledge, a great resource to have. Thank you. I love having you as a resource, so I appreciate you being on this show. And you know, if you guys need to reach out to Tia, don't hesitate because she has all the gems when it comes to taxes.
So thank you again, aia. Thanks for having me. I definitely appreciate you.
Hey there I’m Naseema
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