We don’t know too many people who are fond of tax season and who understand all the intricacies of filing taxes. For that reason, we interviewed Louis Barajas, named by Mutual Funds Magazine and Money Magazine as one of America’s top financial advisors. We relayed to him some of the questions our readers may have pertaining taxes and finances.
Barajas is the author of books such as The Latino Journey to Financial Greatness, and makes complex and daunting money issues easy to understand and relatable to the layperson. Courtesy of Cricket Wireless, he recently hosted a workshop in Miami that taught attendees not only how to reduce debt and manage tax refunds, but how to grow refunds, fuel retirement, and create a financial future that’s predictable and less stressful. Following is our Q&A with him.Viva Fifty.- How can we make our refund bigger by investing in retirement?
Louis Barajas.- Many self-employed individuals think they only have until December 31 for tax planning, but that’s not true. In fact, small business owners can put money into a SEP-IRA (Simplified Employee Pension-Individual Retirement Account), which is a method to contribute toward their retirement savings and ultimately gives them an additional tax deduction. The great news is you have until the October 15th tax extension to put money away for retirement and save on your 2017 taxes. Also, take time to properly do your bookkeeping in order to track every expense. The expenses will create more deductions and you’ll owe less taxes or have a bigger refund.
VF.- Many people prefer to do their own taxes to save money. Is that a good idea?
LB.- If you don’t own rental property or a business, you shouldn’t pay anyone to do your taxes. For business owners, they absolutely need an accountant. I would hire a good CPA, because they will know way more than the average individual about tax deductions.
Also read: David Bach on preparing for retirement after 50
VF.- Entrepreneurs may find it more difficult to budget. Can prepaid services help us with that and how?
LB.- There are two ways to become more profitable – create more revenue or have less expenses. Tax time is when most small business owners analyze their expenses and itemize them on their tax return forms. For some of my clients who are scrappy small business owners with teams of people on phone plans, mobile can be one of their biggest expenses. It’s important to look at prepaid wireless plans that provide the unlimited talk, text and high speed data they need to do their jobs while lowering business expenses. For example, Cricket Wireless has 4 lines of unlimited data for $100/month with the Cricket Unlimited 2 Plan. It’s a fixed cost that gives them the transparency to clearly predict that business expense.
VF.- Does a 16-year old with a part-time job have to file taxes when she’s a deduction on her parents´ tax return?
LB.- Yes. If she earns more than the exemption amount of $4,050, she would have to file, but she would not claim herself as a dependent on her own tax return. Her parents will have already claimed her.
VF.- Most entrepreneurs who do not get a refund but have to pay are upset about this. Should they be?
LB.- People hate to pay taxes, but business owners who are paying taxes in 2018 for a 2017 filing should only be upset at themselves for not doing proper tax planning. If you do proper tax planning, you should not owe taxes come April’s tax deadline. You should understand your finances, project your earnings and pay your taxes quarterly. Just because you can start a business doing something you are good at, doesn’t mean you know how to run that business. You can learn by keeping a close eye on your finances and meeting quarterly obligations to the IRS.
VF.- Any tips for older readers? (45-65)
LB.- It’s simple. Whether you are a business owner or not, as you get older, it is critical to increase the amount you’re putting into your retirement plan every year. No question.