Struggling with taxes? When should you bring in the pros?

Ralph
00:00:00

Do you feel like you're drowned in a sea of tax forms, receipts, and confusing rules? Are you worried about making a mistake that could cost you money or even triggering audit? Listen, tax season can feel like a nightmare for anyone. Small business owners, 9 to 5 workers, or those juggling multiple income streams, but here's the good news.
You don't have to do it alone. Today, I'll help you figure out when it's time to call in the pros to handle your taxes. Plus, we'll answer a powerful question from a listener Kassandra, who is struggling with this very issue.

Podcast Announcer
00:00:31

In a world where crushing debt keeps you trapped, where living paycheck to paycheck has become your new normal, and where the dream of retirement seems impossibly out of reach, there's hope. Join financial evangelist Ralph Estep Jr. A man who's walked through the fire of financial failure and emerged stronger on the other side.

Welcome to Ask Ralph, the show where real world experience meets biblical truth to break the bondage of financial despair.

Get ready to take control of your money, break free from the financial stress and align your resources with God's purpose for your life. This is Ask Ralph with Ralph Estep Jr

Ralph
00:01:12

Welcome to the Ask Ralph show, where we master your finances from a Christian perspective. I'm your host, Ralph, and I'm so glad you're here today. For new listeners,
this is the place where we combine sound financial advice with biblical wisdom to help you achieve financial freedom and grow in your faith. Now, before we get started, I want to take a moment to thank you for being part of the journey.

You know, every time you tune in, send in your questions, or share this podcast with others, you allow me to live out my calling and that's to help people like you achieve financial success while honoring God in the process. I'm truly blessed to have this platform, this chance to connect with so many hardworking faith-driven people.
So thank you for trusting me with your time, with your questions, and your financial concerns. It means the world to me to walk this road with you.

Well, let's dive into today's topic. I received a letter from Kassandra. Now Kassandra's a small business owner, and her words really hit home with me. This is what Kassandra said.
She said, "Hi Ralph, I've been running my small photography business for three years now, and every tax season feels like a nightmare. I try to handle my taxes myself, but I'm overwhelmed by all the forms and rules. I'm never sure if I'm doing it right, and I constantly worry I'm leaving money on the table, or worse, making a mistake that could get me in trouble. I want to honor God by being a good steward of my business finances, but I don't know if I can afford to hire someone to help me. How do I know if it's time to bring in a professional?"

Well Kassandra, thank you so much for sharing your story. And listen, I know many listeners will relate to your struggles. Well, let me start by saying this Kassandra, you're doing an incredible job. First off, running a business is not easy and your desire to honor God with your finances tells me you're already on the right path. And listen, this is the truth. Tax season is overwhelming. It's especially overwhelming for those business owners.

And I deal with those folks every day. I deal with the business owners, I deal with individuals and here's the thing is it's not just about forms and numbers. If it was, it'd be so much simpler, but it's about the fear of making mistakes. It's the fear of missing those deductions and it's this constant uncertainty, because so many people get into this that don't really know what they're doing. But here's the truth. Here's a truth bomb.

We're going to start off the episode with this. You don't have to do it alone. See, God doesn't expect you to carry this burden by yourself and asking for help is one of the wisest things you can do. Listen, and not just for your business, not just for your personal, but for your peace of mind. Now a quick reminder for Kassandra and all of our other listeners, this show exists to answer questions just like yours. And if you've got questions just like Kassandra, you can go to justaskralph.com and don't forget. Every Tuesday night at 7:00 PM, I host a live show to answer your financial questions in real time, and you can join me at askralphpodcast.com/live.

A lot of people ask me, Ralph, how do I get to it? It's real simple. Just go to askralphpodcast.com/live and you'll be right there in the feed. Well, let's turn to scripture for guidance. The Bible has so much wisdom about managing resources and more importantly, knowing when to seek help. So today's verse comes from the book of Proverbs, it's from chapter 15, verse 22, and it says this. "Plans fail for lack of counsel, but with many advisers they succeed." Well Kassandra, I thought about it.
I said, this verse reminds us of your story directly. Because here's the deal. God doesn't expect us to have all the answers. That's just the truth. He doesn't expect us to know everything. And that's why he places people in front of us. He places advisers and mentors and professionals. He puts those people in our lives to help us succeed. And see, here's the thing you need to understand.

A lot of people don't get this. Hiring a tax professional isn't failure. It isn't the you've been working all weekend at this tax return and you're stressed out, all your pencils are broken and your hair sticking straight up and you've seen the pictures online. But hiring a tax professional isn't failure. It's wisdom. And I love this verse because it shows asking for help is part of God's plan and we all want to live in God's plan.

So, let me share a story about James. Now James is a small business owner I worked with a few years ago. Like you Kassandra, James was trying to handle his taxes. He did this every year alone. He didn't want to spend the money. He thought he was saving money. He thought, you know what? I don't need to pay somebody to do this.

I can go online and do this myself. I can, back in the day, he would probably thought he could find the forms and he could do it himself. But then one year, James was working on his tax return and he made an error. And that error triggered a letter from the IRS. And listen, if you've ever got one of those letters, they are no fun.

And in fact, in the next couple of days, this is going to be tax week on the Ask Ralph show and I'm going to talk about what you do when you get one of those letters. So stay tuned this week. I'm going to be talking about that. So James had done his own tax return, and he got this letter from the IRS and they were requesting additional payments. Well not only were they requesting payments, they were asking for penalty, were asking for interest. And James you know, he share with me. You know, when he came in to talk about this, he said, Ralph, I honestly didn't know what to do.

I was sort of startled. And he said it stressed me out. And I didn't know where to turn out at the time. James had been doing his own stuff. Like I said, I didn't know James. He got on the Facebook and someone had mentioned my name and that's when James reached out to me. So he scheduled an appointment.

He came in and sat down. And when he first sat down, I could tell this guy was nervous. Like he wasn't sure about what to expect. And he sat down with me and he said, Ralph, he says, I don't really know where to start. I got this notice. And I just don't know what the IRS is even talking about.

You know, I'm good at my work. As I recall, I think he was a carpenter. Build houses or did renovations or something like that. And he was very good at that. I mean, he showed me some pictures on his iPhone about the work he had done. But when it came to taxes, you know, he was out of his element. Just like, let me be honest with you. If I was out there working on building a house, I'd be out of my element as well. I think the walls will be crooked and you don't even want to go there. I am not a handy kind of person. So anyway, James reached out to me and I did the same thing I do with most of my clients.

First thing I did say, I said, James, first I want you to do is relax. Let's take a look, let's digest what's going on here. I started by reviewing his past tax return. And when I did that, it was interesting because not only did I see the error that the IRS had found, but I also noticed that he had missed out on some deductions that he could have taken and other areas where he ended up over paying his taxes. Now the particular issue in question in this particular case was really something very simple. He had received a 1099 for a bank account that he had and he forgot to put it on his tax return. So, gets this notice. Looks at it, and the IRS was asking for additional money, they're asking for penalty and interest. And I said, James, I said, we can fix this. We can work this out. So what I did was, we actually prepared an amended return in this case, because there were some things he could have taken for his business that he didn't do. And we sent out amended return into the IRS.

And of course the IRS didn't, you know, send the squad out to grab him. They send them another letter and they said, okay, James, well, we've made these adjustments, but you still owe us penalty and interest. And I don't remember the exact amount. It wasn't a ton of money but I was able to write a letter to the IRS. I negotiated this on his behalf. We clarified the issue and I got them to waive the penalties completely. Which was fantastic. Now he still had to pay the interest because he did in fact, owe a little interest on the deal. But we got them to waive the penalties altogether. But more important to that, what I did with James, and this is one thing that I do with clients every time. We developed a strategy for future filings. One of the things that I noticed with James is he didn't have a good record keeping system. When he came in to meet with me, he was, yeah, he had those shoe boxes full of receipts. He wasn't making quarterly tax estimates and all those kinds of things. And that's part of the reason that he had that penalty from the IRS. So I helped James develop a tax strategy for his future filings and set up a better system. Now you might be asking Ralph, what was the result? Well, I'm happy to say James avoided future IRS issues. He's still a client. He saves thousands of dollars and every year he enters tax season without stress.

So Kassandra and anyone else listening, here are what I think the six main situations that signal it's time to hire a tax professional. Number one thing. And I think this is the biggest of them all. It's when your tax situation is too complex. Now complex for you and complex for me could be different, but here's some heavy hitters in that area. If you're self-employed, if you do your own side business where you're not getting a W2, I think this is a prime candidate for when you need help, because there are things that you can do to reduce or mitigate those tax things. You may have to pay self-employment taxes. That triggers quarterly filings.

That's one of the things that James was missing out on. Another thing that James was missing out on was depreciation. He didn't realize he could write off his truck. He could write off his tools. And then the other side of what James was missing out on is he was actually helping some people and they were, excuse me, they were helping him, and he actually had some subcontractors. And he didn't realize he needed to file 1099s for them.
And we're just now wrapping those up here cause they were due at the end of January. So that's number one thing. If you, if your tax situation is too complex. Another thing. And I see a lot of clients that come to me because of this. It's when you've experienced a major life change. Now that could be something like starting a business, like we talked about in the first one. But maybe you got married. Unfortunately, maybe got divorced.

I see a lot of clients when they're buying a home or selling a home. And another big one is when they receive an inheritance. There's a lot of times that requires special guidance. And I'm gonna be doing a show about that in just a week or so as well. So if you've had one of those major life changes, maybe like I said, you got married, you got divorced.

Maybe you had a child, maybe a child has gone off to college. Maybe a child is married themselves and are a little longer in the nest. Those things definitely trigger complications with your tax returns. And that's a time when I think it's great to reach out to a tax pro. Number three thing. And this is what brought James into the office.

If you receive an audit or notice from the IRS or another state, you don't want to navigate those waters on your own. Like James said, he said Ralph, I'm out of my element. If you give me a couple of two by fours and a claw hammer, I'm ready to go. But when he got that IRS notice, he just did not know what to do.

And here's the deal. A professional like myself. We can communicate with the IRS on your behalf to resolve these issues. We'll understand the process. We'll help you get your ducks in a row before it becomes too late. For example, I just dealt with a client last week. They were actually getting audited by the state of Delaware. This is an interesting situation. This particular client, him and his, I guess she's his fiance for lack of a better way of saying it. They moved into an assisted living facility. Well, the main reason they moved into the assisted living facility is because my client, he needs that 24 hour day assistance. Well, his fiance really doesn't need that assistance. So when we did the tax return, we were able to take a medical deduction for the hundred percent of the costs of his care. Well, when the state of Delaware saw this huge deduction, I'm talking close to a hundred thousand dollars. Of course though, the red flags go off and they say, well, wait a minute.

We want to understand this. So they dug in a little deeper. And they reached out to the client, said, Hey, we want document evidence to show what's going on here. Client gave me a call said, Ralph, you know I got my ducks in a row. This person is organized. Think I mentioned them on the show a week or two ago. So he sent me back their documentation.
And I sent that off to the Delaware auditor. And the Delaware auditor came back and said, yeah, we like what you sent us, but we're gonna make a huge adjustment because we noticed that your fiance lives in the, we'll call it an apartment, but it's an assisted living facility apartment. Lives with you. And I said, well, that's not really fair because that's not the way it works. So anyway, long story short, we were able to negotiate with the state.

We got them a hundred percent of the deduction he was looking for. But if he had tried to negotiate that on his own, he would have run into a problem and probably would have ended up paying the state some money or wouldn't have got as big a refund. So if you're audited or you receive an IRS letter or state letter, that's the time to reach out for help. Number four thing.

And James found, I found this when I was working with James. If you're missing deductions or credits. See, the truth is, there are deductions for home office expenses. Like James had missed. Equipment write-offs, energy efficient credits. A lot of people aren't aware of these because they don't fall into that normal category.
Oh yeah. I got my W2. I have my mortgage interest. I have my charitable contributions, but the thing is people who are professionals in this realm are aware of those things. You know, we do continuing education credits. I have to do 80 credits every two year cycle because we're always learning new stuff.

The IRS is coming out with new pronouncements, the Congress and the president are sending out new tax laws. So you may very well be missing deductions or credits, which could you know, the truth of the bomb. The truth of the matter is they could actually pay somebody like me 10 times over because you missed on them. Number five thing. If you've made mistakes in the past. You know, James had too many. Said Ralph, I was out of my element. I was working on this and I really didn't know what I was doing. Because as James learned, those errors can lead to penalties, they can lead to you missing refunds, and a lot of people figure, oh, you know, it's no big deal. I'll just send them the money they asked for.

But do you really know if it's correct? In James's case, when I looked at his return, he actually was, he actually had missed some deductions and yes, he owed them a little money because of some other issues. But he had been leaving money on the table. And the final reason. And this is James' reason like Kassandra.

I think this is yours too. If your stressed or overwhelmed. Because I meet with so many people, they say Ralph, the reason I come to you is really simple, man. I want peace of mind. I don't want to worry about it. I could probably do this myself. It probably take me all weekend to do it, but man, I don't want to be bothered with this. They don't want to be stressed.

They don't want to be overwhelmed. They look at it like, you know, yes, it's going to cost me a few bucks. I know it's done correctly. I don't have to stress about it all weekend. So that's the big deal. If you're feeling stressed or overwhelmed, it's the time to reach out. So let me go over those again, just these are the six situations that I think it's time to hire a tax professional.

Number one. Your tax situation is too complex. Number two, you've experienced a major life change. Number three, you've been audited or received an IRS or state letter. Number four, you're missing deductions or credits. And that's one of those ones you might not know until you ask somebody. Number five, you've made mistakes in the past. And number six, and I don't want to undersell this one. If you're stressed or overwhelmed, don't let tax season rob you over peace.

Well, let's talk about the benefits of hiring a tax professional, and I've told you why. Well, let's talk about the benefits and the first one might surprise you. I think you actually can save money. Now you might be saying, Ralph, wait a second. You're saying to me that I'm going to pay somebody to do my taxes. It's I want to come out of pocket with money and I'm still going to save money. Yes. That's exactly what I'm saying. I have many clients that have been doing their taxes themselves. They came in the next year because maybe one
of those life events happen.

They bought a house. Maybe they had a child, maybe, you know, one of those things happen. And I looked at their tax return from last year and I say, Hey, guess what? You didn't realize it, but you left this money on the table. You missed out on these deductions. So I, a hundred percent believe that you can save money because as a tax professional, we know those deductions, we know those credits and you may not even know they exist. So that's the first thing.

That's the first benefit. Second thing. Saving time. I've had many clients say to me, Ralph, you know, I used to sit there all weekend long and I was laser focused. My wife knew not to mess with me. My kids knew not to mess with me because man, I had to get this tax return done. And I was wrestling with forms and I was wrestled with calculations and you know, sometimes you know, we've got some good software out there, but even that software takes time. So, if you think that you're hiring a professional, it's going to save you money.
And I think number two, it's going to save you time. Number three thing. And I think a lot of people will understand where I'm going with this. It gives you peace of mind because there's no second guessing or worried about making mistakes. That stuff can rob you of your peace. And if you reach out and hire somebody, you can have peace of mind knowing that you're in good hands.

And I'm going to talk about what to look for when you hire a tax return person. I'm gonna talk about that tomorrow. And then the next thing, I'm going to talk about some huge red flags to watch out for, like I said, this is tax week. So make sure you stay tuned and I'm gonna talk about what happens if you get a notice. And then I'm going to talk about what happens if you get audited and what are the red flags for audits. Now, the final thing I think it brings, if you reach out and hire somebody. One of the benefits is IRS representation. And I can't undersell this. It's great to have a professional that can handle communication with the IRS or handle communication with the state. There are often times when the IRS will send out a notice and people get crazy. Like I said, I want to talk about that in a day or two. But you get that notice.

You don't know what to do with it. But if you've had somebody professionally, how you return now, I'm gonna talk about those people that go away after tax season. Those aren't the people to hire, but somebody that's a professional like me. I'm a licensed Delaware public accountant. I'm here year round. I don't know. How am I going anywhere? When you get those letters, when you get those notices, like my client with the medical expenses. He simply scanned that notice and he said, Ralph, can you handle this for me? Absolutely. I can do that. So those are the things that you benefit from. So, like I said, number one, save money.

Number two, save time. It's going to give you peace of mind. And also you've got that representative to help you in the event that you get some kind of notification.
Now Kassandra and everyone else, listen. Here's the thing I want to stress. You don't want to wait until you're drowning and stress or overwhelmed by the unknown. You know, if you're thinking about Ralph, do I really want to pay somebody to do my taxes because here's the deal. You deserve peace of mind. You deserve that freedom to focus on what matters the most, focus on your family, your work and your faith. Don't focus on tax preparation. And that's one of the reasons I founded Saggio Management. That's my accounting practice. And we're here to take the burden off your shoulders because listen, we don't just file taxes. It's an easy part. The things that I do with clients is I create a personalized plan to minimize what you owe or maybe help you get a big refund.

I help you save money, but most importantly, I protect your future. And that's the thing we're all looking for because here's the deal. Tax season doesn't have to feel like a nightmare. I've had clients say to me, Ralph, going to you is like going to the dentist. But I still come because I want that peace of mind. So let me help you guide through it. I'm going to encourage you to schedule a tax appointment. It doesn't matter where you're located. I do taxes for people all over the country. In fact, I do taxes for people all over the world. With zoom and other online tools, it's really simple to have me handle your professional tax preparation.

If you're interested in doing that, I'm going to encourage you. Go to askralphpodcast.com/taxprep. That's askralphpodcast.com/taxprep. And let's get started together today.

Well, let's move into our reflection questions. You know, at the end of the episode, I always like to talk about some things that we can reflect on so we can kind of digest what we learned. So here's the first one. Are you spending more time and energy on taxes than you can afford? You know, think about that for a second. What I just said there. Are you spending more time and energy on taxes you can afford? You might say Ralph, wait a minute. I see your fees and you start off at $400 for a tax return. That's correct.
I do because I'm a professional. This is what I do for living. But how much time, how much energy are you putting into doing it yourself? And it's taking you away from time with your wife, it's taken you away from time with your husband, it's taken you away from time with your kids. It's stealing your energy. Listen. Make an investment. And put this in the hands of professional.

It doesn't have to be me. Maybe there's somebody where you live that you feel very comfortable with. But ask yourself that difficult question. Are you spending more time on energy on taxes than you can afford. Second thing. Thinking back. You just finished your tax return. Are you wondering have you missed deductions?

Have you missed credits because you didn't know about them, you know those online tax software, they can't ask you questions. I mean, they can probe you for certain things, but they can't ask you and have that dialogue like somebody like myself. When clients come in and meet with me, we have a conversation. We talk about what went on during the year, because I know the questions to ask. That software is not going to help you on that. And number three. How would hiring a professional free you to focus on your priorities? I don't think taxes need to be your priority. Now they're certainly my priority. This is what I do for a living. But I don't think they need to be your weekend task. So consider those three things. Again number one, are you spending more time and energy on taxes than you can afford? Number two, have you missed deductions or credits because you simply didn't know about them? And number three, how would hiring a professional free you to focus on your priorities? And you've got to answer those questions and think about it. Ponder on those.

Well Kassandra, let me just say this. Thank you for trusting me with your question today. Now tomorrow, we're going to talk about who can you trust for your taxes and how to choose the right professional. Like I said, this is tax week and we're going to continue our discussion tomorrow. Remember this. My passion is to help you achieve financial success.
I want to see you live out your dreams, and I want to see you grow in your faith. And I know together, working together, we can master your finances from a Christian perspective. So as I always end the show, stay financially savvy out there and God bless you abundantly.

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