Episode 27: Tax Prep vs Tax Planning with Wendy Barlin, CPA

Hunter Kelly, CFP and Wendy Barlin, CPA discusses the differences between tax preparation and tax planning, emphasizing the importance of understanding tax laws and maximizing benefits for small business owners and individuals. She highlights the need for education in tax matters and the value of seeking professional advice for tax planning. Wendy also touches on the changing demographics of clients seeking tax services and stresses the significance of setting clear expectations with clients.

Wendy's LinkedIn

Tax Boutique CPA 

Check out the Palm Valley Wealth Management Website
PalmValleywm.com

Check us out on
Instagram
LinkedIn
Facebook
Listen to the Podcast Here!
Apple
Spotify

Transcript

Microphone (6- Shure MV7): 0:02

And today we're going to talk about the difference between tax prep and tax planning with Wendy Barland.

Track 1: 0:24

Welcome to the retire early retiring out podcast. And I have Wendy Barling. she's a CPA with us local here in the Jacksonville area. So I'm excited to have her on today so that we can get a different perspective, a different from a financial advisor about taxes and, and all the things and nuances with taxes that. Go on between the prep, itself, and then also tax planning, which gets very construed, and not very understood most of the time. So I wanted to talk about that, but really focus on Wendy and what she does in her practice. And, Wendy, why don't you introduce yourself and tell

wendy-barlin_1_03-25-2024_143209: 1:00

Thank you. It's great to be here. So my name is Wendy Barlin. I've been in this business for almost 30 years. That sounds crazy. I can't believe it. That's almost 30 taxis. But most of my experience has been, uh, in California, where I spent a lot of time, uh, working with, uh, And that's really where I learned all the ins and outs of how to maximize the tax code for the benefit of small business. And that's what I focus on today is helping taxpayers, some with small businesses, some individuals, uh, keep more of their hard earned money. And, uh, I believe that everybody can learn taxes. I don't think you need a college degree. I don't think you need to be super smart. Um, I think it's really important for everybody to understand their tax situation and keep asking questions. That's really why I come out and do these podcasts. I believe we need more education.

Track 1: 2:02

Yeah. Yeah. And so when we've known each other, at least for a few months now, and I didn't realize that you were, Focusing primarily on the entertainment

wendy-barlin_1_03-25-2024_143209: 2:10

Not anymore. No. So since I moved to Florida, my client base is much more diverse. but I did spend a significant time in my career in Los Angeles and, and the value of that was I was fortunate enough to be exposed to the very best, tax attorneys, tax lawyers, tax planners, and that's really where I learned. And, and, you know, even though the clients that I deal with today are mostly service based professionals here. On the east coast and certainly east of the Mississippi, the principles are the same. So it's about who you are, what your comfort level is with deductions, how aggressive and conservative you want to be, how much you want to learn, the good principles of business, good principles of Investing good principles of cash management and taxes don't change just because you're in one industry versus another has been my experience.

Track 1: 3:12

Yeah. No, no, that makes sense. and I guess where I was getting at with my question is more of like, what, what were some of the unique challenges that those type of professionals, had that maybe you can translate to, the more service based, uh, Professionals that you deal with

wendy-barlin_1_03-25-2024_143209: 3:28

So I think it's about understanding what's possible because tax law is very, very broad. In fact, it says any Expenses deductible for your business that is ordinary and necessary. That's what the code says. And so on the most conservative level, that would be supplies that you use in your business. On the most aggressive level, that would be your car and travel and meals and all kinds of things. And so only by being exposed to different plans, different professionals, was I able to learn strategies that I can then offer up to my client, with a huge breadth of anywhere from extremely conservative to extremely aggressive. Whereas some of my colleagues who always worked in one particular area, one particular geography, Seem to have a more limited scope of what they're able to offer their clients not through any fault of their own other than Some demographics just offer a greater Opportunity to talk strategies than others,

Track 1: 4:39

of course, of course. and so I, I find that, and no surprise to, to you or I guess, but I find the business owners tend to be a little bit more aggressive than maybe a run of the mill employee because they just don't know what they don't know. and generally their tax return is much. but there are still some planning opportunities for those types of folks that are maybe just employees, whether it be, transitioning and retirement, maybe doing some Roth conversions or, understanding asset location, whether they should be doing Roth or post tax or pre tax contributions. And so there, there's a lot of different areas that people just don't. Think about because maybe they just assume their situation is simple and they get their match at their employer for one K. but when you really dive into the nuance there, there's a lot of opportunities there. And then if you jump into the business owner side, well, that, that can just be overwhelming. So the

wendy-barlin_1_03-25-2024_143209: 5:32

is and google is not always our friend, right? Google is not always our friend I I find a lot of people come to me as i'm sure they do to you With things that they found on the internet and i'm like, well, it's not wrong. It just doesn't apply to you And so I think that's, you know, circling back to education and really what you're doing here by educating people. I think it's so valuable.

Track 1: 5:55

Yep. And I, and I think that's, that's where we add the value is, is yes. Anybody can Google the answer, that we would probably give them where we can kind of separate ourselves is having the practice of doing the repetition with client after client after client and knowing how to apply that answer to that, person's given situation or whatever their goals are. Right. So what has it been like transitioning to Florida and kind of, I don't know if you're necessarily starting over, but starting a new practice and getting

wendy-barlin_1_03-25-2024_143209: 6:25

yeah, no, it's been, it's really interesting and, and I'm enjoying it, and as I say, you know, at the end of the day, the same principles apply. who are you as a person? What do you want to learn? Do you want to be aggressive? Do you want to be un conservative? Do you want me to teach you? Or do you want to just drop your stuff off and come back a week later? And so it's really important to find out. To know who our clients are, what they need, and what we can do to help them.

Track 1: 6:51

Good. Good. and like I said before the show, I really wanted to jump into or talk about, the differences planning and tax prep. why don't we jump into that and, And one, I guess, define the difference between the two. I guess I'd like the listeners to hear from a CPA's mouth and not a financial advisor. what do you consider the difference between prep and planning?

wendy-barlin_1_03-25-2024_143209: 7:13

I love this question. I think that's one of the reasons that I was so anxious to get on this podcast and have this conversation because I think there is so much misinformation in the world about what CPAs do, what tax preparers do. And, and it's also really important for listeners to understand that you don't need a CPA to necessarily do your taxes. There are There are CFPs who do taxes, there are enrolled agents who do taxes, there are lawyers who do taxes. So, anybody with certain credentials who pass a test can apply to the IRS to sign tax returns. And it's really important to know because that test is really difficult, really difficult. So I often recommend enrolled agents to taxpayers because enrolled agents have taken this very stringent test and are allowed to sign your tax return. And sometimes hiring these people to prepare your tax return for you is more cost effective than hiring a CPA. So some CPAs specialize in tax. Some in audit, some in accounting, some in, planning. We have a much more general degree, and the kind of insurance we have to carry is extremely expensive. So when it comes to tax preparation, and actually creating an annual filing for yourself, your family, etc. Your business you have a lot of choices. So yes, you could go to a cpa You could go to an enrolled agent or there are a lot of softwares out there that will do it for you I love tax cut. I love tax pro and the reason I love those softwares is they spend millions of dollars Perfecting their system. So if you just follow the q a process You'll file a beautiful clean tax return. So it's really up to the taxpayer. What are you looking for? If using one of those systems makes you nervous, then don't do it. Then find a CPA or an enrolled agent to file your return for you. But I very often refer people to those systems if you are good at keeping your documentation, you are not looking to be aggressive, you are not looking to dive in, just want a clean, safe. Accurate tax return? You're fine to use one of those systems. So tax preparation is really about gathering your documents, putting it into the format required by the IRS, and time your filing. That's it. Nowhere in there is there a promise for your tax preparer to offer you any planning advice. And this is where I think the biggest disconnect is. And we keep People sign up for tax preparation that then they're disappointed because they didn't really get any planning or any advice But they didn't pay for it. They paid for and asked for tax preparation and so I I have that conversation so often with people when they call and say let me file We prepare and file my tax return. I say sure but would you also like some tax advice? Now that's separate. That's different. and planning specifically to your point of all the ways that we can work with your advisor your estate planner to Minimize your taxes. That's something completely different. Does that make sense?

Track 1: 10:44

Yes, that makes complete sense. I guess it's just the age of technology. And to me, those softwares. Have allowed, the CPA or the tax professional or the financial advisor to become more valuable because now they're not worried about doing the, the administrative work of collecting those documents and then filing the tax return and all that. Now we can use technology to, make that. process more efficient and be able to focus on that planning piece where now I don't have to look at if it's 2024. I'm not only looking at 2023, but I'm looking 345, 10 years down the road, to help, you Make sure that that lifetime tax liability is minimized as much as possible. Right? so I think that that is a great explanation. And I guess from your standpoint, what are some of the strategies? What are you actually doing? Essentially, when we start talking about tax planning, like, what are you doing for your

wendy-barlin_1_03-25-2024_143209: 11:46

That's fantastic. I totally agree. I think ai and the advent of adobe readers no one on my team has done data capture and probably the last You And the computers are so awesome and the software reads your documents, so it really has become hands off. So that has created a lot of opportunities to do planning and looking forward with clients. And what's interesting is that taxes are calendar based for the most part. Most taxpayers are calendar based, which means that the last quarter of the year is really intense for planning. Because any strategic decisions you make have to happen before December 31st in order for that to be counted for the current tax year. So I always recommend that everybody meet with their tax preparer or their tax advisor. Before December to take a look at what are you likely to have? What are you likely to owe? What strategies can we deploy to do better before the year end closes? And especially those people who work with a financial advisor. Do you have the cash to put into an IRA? Is a Roth IRA a better choice for you? Is selling loss leading stock to create tax losses a good idea? And most importantly, to understand what your investments are going to kick out by way of taxable income, because I see a lot of people who come in to see us in the new year. And they are horrified about the dividends that their investments have earned because they don't see them. The dividends don't come out to their checking account to be spent. They get reinvested into their portfolios and very often that's a big surprise. So I always recommend That taxpayers meet with all their professionals during the year to stay on top of how much how much dividends have I owned? Is that taxable? Is it not taxable? Is there a better way to do this? And that's where working Looking forward planning with an advisor with a separate fee engagement. It's not free. I want to be clear It's not free. It comes with a separate fee engagement I think of the dollars it can save you. I mean, it can literally save thousands for you and I to sit together and look at a client's portfolio from a tax perspective, make some changes in the last quarter, and greatly affect the tax savings that they get to enjoy.

Track 1: 14:22

Yeah, two things that come to mind there is, I always try to meet with my clients, in October, November, because of that reason, because a lot of these, strategies have to be done by 31st. So if you're, if you're in, if you're in, like a Roth conversion, Cycle where you're reevaluating that every year for someone maybe that has retired early and they're in a low income bracket. we have to make sure that we get that done by December 31st. Right. And then also, it always amazes me when you start running those projections and you're doing some of that tax loss harvesting, you really can see, okay, we have saved this client thousands of dollars that will stay in those investment accounts or, or move over to Roth accounts. And now, You're, you start adding that year over year, that compounding interest effect, can really add to their net worth significantly over that time. So me charging a fee and you charging a fee should be well worth it to, to that client to, to make sure that those strategies are implemented

wendy-barlin_1_03-25-2024_143209: 15:19

And for me, it's always a money back guarantee. So everything I do, comes with a money back guarantee. So I am not guaranteeing I can save you money, because I never know that, right? I never know till I dig in. But what I am guaranteeing is that when you leave that planning session with me, you feel relieved and confident. Those are the two things. Can we save you money? I hope so. But if I can't save you money, I at least want you to walk away going, okay, phew. I learned something. I'm relieved. I'm not going to owe hundreds of thousands of dollars or even one dollar come, tax filing time. And I'm confident that every possible tax strategy has been deployed to save me money. And that's where we offer our value in paying for services. how it prices out really depends on how much work it is. Right? How many investments do you have? How many rental properties do you have? You just have one, then you're probably looking at about 500 dollars or so for a tax planning session. People who have multiple assets with a lot more work then you're looking, you know, a thousand to two thousand. And most CPAs and preparers are somewhere between the 500 and 5, 000 dollar range for tax preparation. and I apologize for tax planning. Depending on the assets, that we're talking about, but I think it's important to people to know that you are going to pay for it, but go in with very clear expectations of what you're going to get. You can ask your advisors, if I pay for this planning session, what will I get? I think that's a fair question. And any advisor should be able to clearly explain to you the value of the service. It's complicated,

Track 1: 17:03

of course. And you kind of took the words right out of my mouth when I was waiting for you to finish talking. That is the key I think to this business is setting expectations for the client. They may read something on Google and I keep going back to Roth conversions because that's one of the things that I do a bunch, but they may read that. Oh, I should do Roth. I can do Roth conversions and maybe they're in their early seventies and they have R and D's coming down the road. And it doesn't make sense for them to do that because it's such a Short time window, right? Versus setting the expectation. If that person is 55 and they have 20 years until they have R. M. D. S. Well, then, and they don't have much income at that time and things of that nature. Well, then you can set the expectation of this is a big opportunity. Or, hey, maybe we need to look at something else because, it's just not feasible. But. But in any case, I find that the relationship is a lot better when, when those expectations are

wendy-barlin_1_03-25-2024_143209: 17:57

even goes to buying a house. Like I do a lot of those too, where people will come to me in the middle of the year and say, I'm about to buy a house and my realtor says, or my mortgage broker says, or I read on Google or I saw a check GPT, I'm going to save this amount of money if I buy this house. And so very often I can, run tax projectors, planning software to see what their exact savings would be, if any. Same with buying rental property. Before you do anything, I always recommend you check in with your professionals, your lawyers, your accountants, your financial advisors, to make sure that before you commit resources, assets, hopes, dreams, That you check with the professionals, make sure everyone's on the same page, because there's so much fine print in the world that we deal with today. My general answer when people ask me a question is, It depends because it really does there's so much gray area and so much fine print It is not a one size fits all and if you are working with anyone a realtor a mortgage broker insurance broker A lawyer and accountant and advisor who tells you That there's only one way and this is the way it is I would run scared because I think it's very important to get a second opinion And understand the nuances for your particular situation

Track 1: 19:16

Yeah, I would say that's probably the most difficult situation about our, our profession is the answer is

wendy-barlin_1_03-25-2024_143209: 19:24

Exactly, I know it's so frustrating to people, right?

Track 1: 19:26

you mean? And you have to ask more questions to, to get more information. And eventually we get. Get to the advice, but, that is always, a challenge, at least for me is someone will ask me a one off question. I'm like, well, it depends. Let me

wendy-barlin_1_03-25-2024_143209: 19:39

as in they're most frustrated. I get it. I get it. It's frustrating. But I would rather someone say, it depends. Because that means they know and understand the fine print and the gray. As opposed to someone that just blurts out an answer. and that's what I tell clients or referrals that call me and say, but can't you just tell me, should I be an S Corp? Should I be an LLC? I say, it would not be. In your best interest for me to give you a blanket answer like this over the phone and any provider who does I would be very wary of because I don't think that's in anyone's best interest. We have to keep asking and keep looking and there's more to it than just pick one.

Track 1: 20:20

Of course, of course. let's transition to another question I think would be valuable to people. I, I think that often Most people are, if they haven't worked with a professional before, they're confused on when to hire someone. So I guess generally, when do you see, um, professionals or families coming to you to say, all right, I need someone to do my tax prep or tax planning, whatever that case may

wendy-barlin_1_03-25-2024_143209: 20:45

that's interesting. It's really changed over the years. So it used to be only people who had a lot of money. Everybody else would somehow figure out how to get their taxes done. But now I see all sorts of people. I will have a husband and wife, two kids and a dog who ordinarily, I would say to them, use TaxCut or TaxPro. It's fantastic. You'll be fine. That they would rather pay me. For peace of mind that they have someone to ask and they're nervous about hitting go or submit on that return in case they missed something. So it really has the types of change and I've actually found it become more and more of a younger demographic because they have questions. And they want to understand, you know, my mom's generation will go to a doctor. And if the doctor says, here, take this pill, my mom goes, okay. And I come home and I'm like, mom, why are you taking that pill? And she says, cause the doctor said so. And I'm just horrified. I'm like, you didn't ask why, what kind of pill is this? And is there an alternative? Well, the next generation is asking those questions. They're asking, is there a different way, Wendy? How, why, why are we doing it this way? Can I do better? Can I do differently? And so that's, I'm starting to see a real change in the demographic of people looking for professional services like ours in that it's not necessarily only wealthy people or only these kind of people. It's anyone who's curious and wants an answer and they're actually getting younger and younger. And they're willing to pay for it because they value that personal solution and personal discussion and interaction.

Track 1: 22:32

Yeah, I'm, I'm always amazed by the curiosity, even if it. If I know that the client is, not necessarily like in their wheelhouse when they're at, they're, they're just always so curious, which helps them understand, which makes me feel better. Cause then they leave better educated and all of that. But, it's always fun to see like how, how much they want to dig into the nuance of what we're doing. obviously you have some clients that just go, Hey, handle it. and leave me alone, but. But, I do see the trend of more people being more curious, but then they value the time that you're giving back to them because you're, you're doing prep or the

wendy-barlin_1_03-25-2024_143209: 23:07

many years ago, people literally used to drop off an envelope at my office, pick it up a week back, you know, a week later, sign, and never even have a conversation. Never wonder what they owe, why, just how much do I owe, where do I pay? And I really found that has changed. So some of it is the world we live in, you know, with access to the internet. some of it is just curiosity and the value of education and professional services. So I enjoy that part. I actually want to have those conversations with clients. I know there are some professionals who don't. And so we all find our people, right?

Track 1: 23:42

course, of course. And I've said this a number of times over the years, and even in the podcast, that You can have whatever credential you can have. CFA, CFP, CPA, whatever it was, if you don't trust them, none of that's worth anything anyways. Right. I think that's, that's, that's, changing as well that we're not changing. I think people are still finding the people that they trust and just be more curious, but, let's turn, to your business. and I don't know that we mentioned your business name, but Tell everybody

wendy-barlin_1_03-25-2024_143209: 24:15

Yes, so my business is You can find us at TaxBoutiqueCPA. com And we are working with small business owners and individuals to fill this gap of people that need help with their tax returns. Those that are not comfortable using online software. Those that are not large enough to warrant thousands and thousands of dollars with, larger CPA firms. There are many firms today who are not even doing individual tax returns anymore. It just was not cost effective. but I've been doing this a long time. I know how to run and manage my business. So we are still able to do individual tax returns for 500 and, small business returns for 1, 000. And, and that's because I'm also very clear. We are preparing your tax return. We are not offering tax planning advice included in that fee if you want advice Love it. Yay. I'm thrilled. Let's do it. But that's a separate meeting with a separate fee attached and a separate conversation

Track 1: 25:17

awesome what I appreciate it. And, I think this has been a very positive conversation. like I said, I really wanted to have that discussion around tax prep and tax planning. So I appreciate you coming on today, having that discussion and obviously I'll, I'll link all of your information in the show notes so that people can find you and, thank you for coming on and we'll see you in the next one.

Microphone (6- Shure MV7)-2: 25:40

Thank you everybody for listening to that interview with CPA Wendy Barlin. Like I said, I'll link her information in the show notes. If you like what you're hearing, go ahead and leave a review on your Favorite podcasting app, and then also share this with a friend that you think would find this particular episode valuable. If there's something or someone you want to hear from, go ahead and let me know either through my email hunter at palm valley, wm. com or through Instagram at palm underscore Valley underscore WM. This podcast is for educational purposes only. This podcast is not financial advice. It is not investment advice. This communication should not be relied upon as a sole factor in an investment making decision or financial planning decision. If you would like help, please seek a financial tax legal or insurance professional about your specific situation. Please keep Palm Valley wealth management in mind when making those considerations.