Louis Barajas walks through 2025 tax prep: gather W-2s and 1099s, adjust your W-4 if you're getting a big refund (that's just an interest-free loan to the government), and know that self-employed people can still contribute to retirement accounts for last year's deductions. LA and Ventura have until October 15.
Hey everyone, welcome back. This is Luis Parajas and I'm your financial life healer. And we're here talking at the beginning of February. So what does that mean? That means that you will soon be receiving your W2s in the mail. 1099s for the interest that you've been receiving in the bank. Obviously you're earning more interest now that you've got more savings and earning a higher return. 1099 for the dividends that you have on your investments or your investment accounts for from like Schwab or Fidelity. And then if you have a house, your mortgage statements. And so you will be filing your tax returns really soon. And so I just want to share with you, as you file your tax returns this year, maybe you would want to spend a little bit extra time doing planning for what was hap. What happened last year. And you can still do some planning for last year. If you are a self employed business owner, you can actually participate or contribute to a retirement plan and make the retirement plan contributions right now and then still get a deduction for your prior year tax return. So sit down with your tax preparer, do a little bit of tax planning and think about what you could be doing better for. 20, 25. Okay? Now what does that mean? When you file your tax return, you want to make sure that you find out whether you got a refund or you owed a specific amount. Now here's the confusion. Whenever I ask people, did you get money this year? And he goes, no, I owed money. Or did you pay any taxes this year? And they'll say, no, I didn't pay any taxes, I got a refund. And so while you did pay taxes, you just overpaid and they're returning your money. So what happens is that a lot of people don't understand that if you get a refund or in fact a big refund, you just lent Uncle Sam and the state in which you're in money at a 0% interest rate loan, right? And I understand that some people enjoy getting their refund and they don't care if they got no interest. But if you want to be a savvy tax person or savvy financial planning person, you want to adjust your withholdings to try to break even at the end of every year. Okay? So if you're owing a lot of money, you can adjust it so that they withhold more and then you don't owe at the end of the year or don't owe when you have to file your taxes. Because I know some of you Hate getting your tax returns prepared. It's like going to the dentist. So you can adjust your W4 at work. Okay. Or have your tax repair help you adjust it as well. It's a little bit more complicated now to adjust that W4 than it used to be, so you might need some help. So again, tax season is not for compliance and just preparing tax returns. I know that you all have to do that, but this might be a best time of the year to do a little bit of tax planning. And if your tax repair is just too busy because they've got the April 15 deadline. And that reminds me, if you're in California, it's not in California. If you're in the LA county or Ventura county area and you're listening to me, you've been automatically extended till October 15 for this coming year. So what needs to happen, though, is if your tax repair is really busy and they don't have time for tax planning right now, which mostly they don't set the time right after April 15th to meet with them and go back and say, what could I have done differently? What could I do better? And how could I minimize the taxes that I'm paying every single year? Because that is one of the biggest areas in which you spend the most amount of money is paying taxes. Okay? And just like anybody else, I hate paying taxes. You should hate paying taxes and try to figure out what you can do to do and pay the. The littlest amount of taxes you possibly can. Talk to you next time. Hopefully I didn't confuse you with all the tax jargon. And I'll be doing some updates throughout tax season.
