Episode 7: Certified Financial Planner Jeb Jarrell interviews EA Timalyn Bowens of Bowens Tax Solutions. An EA is an Enrolled Agent. As an EA, Timalyn is a tax professional who can handle returns and other related activities. However, an EA is also licensed by the IRS to represent tax payers in all 50 states. Let’s join today’s conversation.
Meet Bowens Tax Solutions
Timalyn started her company 5 years ago. She has a passion for tax law. In addition to preparing tax returns, she represents tax payers who are in trouble with the IRS and can’t effectively represent themselves. She handles audit representation and negotiating back tax payments.
Bowens Tax Solutions can help individuals who haven’t filed returns for a number of years. She’ll make sure the back taxes are filed and will engage in negotiations with the IRS, on behalf of her clients, in an attempt to minimize any interest and penalties.
Timalyn grew up in Evansville, IN. After graduating high school, she moved to Louisville and attended Bellarmine University. She’s been here ever since.
Avoid a Common Newly Married Withholdings Mistake
For people who were recently married, they need to review their tax withholdings. Some individuals assume they don’t make enough money to worry about this. However, Timalyn explains that the IRS considers both incomes. This could dramatically increase your tax bracket.
Timalyn recommends that these individuals have a consultation with a qualified, tax professional to review and evaluate their respective situations. You may need to update your W-4, before you get an unwelcomed surprise when you prepare your taxes.
You May No Longer be Eligible for Certain Deductions and/or Credits
If you have student loans, the loan interest deduction may have changed. If your adjusted gross income (AGI) has increased, you may not be able to take the full deduction.
The household deduction for student loan interest may have also changed, resulting in another unwelcomed surprise, based on your AGI.
Should We File Separately or Jointly?
Timalyn discusses how married filing jointly can have certain advantages (i.e. better tax rates) up to a certain income level. Again, it’s important that you consult a tax professional to discuss your specific circumstances.
If one of the spouses owes back taxes, unpaid child support obligations or other issues, married filing separately may be the best option. If the couple were to file jointly, the debt could absorb the other spouses tax refund.
Tax Filing vs. Tax Planning
Jeb explains that there’s a significant difference between tax planning and tax filing. Tax filing is looking backwards at what’s already happened. On the other hand, tax planning enables the individual or couple to take steps to address issues before they occur and to take steps to minimize any tax liability.
Impacts on Your 401(k)
If you or your spouse takes a promotion or accepts a position requiring a relocation, the other spouse may need to consider finding a new job. This may also necessitate rolling over an existing 401(k). Jeb touched on this topic in Episode 6 of his podcast.
If you or your spouse has worked for multiple companies, you may have several 401(k) funds. People often find it much more convenient to consolidate those 401(k)s.
Timalyn discusses how people often make mistakes by inadvertently taking a distribution, rather than performing a standard rollover. Making a mistake with your rollover can expose you to significant taxes and penalties. She recalled a client who accidentally took out $100,000. They came to her after the fact. Again, you need to consult your tax professional for advice.
In Episode 5, Jeb discussed end of the year tax moves. This is closely related to common 401(k) issues. In fact, you typically have up to April 1st to make an IRA contribution for the previous year. Note that you may also be hitting a phase out, based on your income.
Timalyn recommends that individuals and couples involve a team of professionals including tax professionals, financial advisors and a legal advisor. There’s value in the different perspectives. Remember, if a divorce is involved, the state law and the IRS have different rules. This can cause significant issues, if they are not considered ahead of time.
Beneficiary Designations
Newly married individuals may also want to update any beneficiary designations on life insurance policies, 401(k) accounts and various estate planning documents. This is especially important for blended families.
Jeb discusses the importance of really thinking through these decisions, based on your new situation.
Timalyn agrees and explains how business owners also have special considerations that need to be considered. If a business owner dies and the estate continues to make money from investments and or continuing operations, tax returns must be filed on an annual basis, until that estate is fully probated and settled. Failing to do so will again, result in substantial tax penalties and interest obligations.
Common Estate Planning Documents to Update
· Wills
· Trusts
· Living Wills (Advance Healthcare Designations)
· Life Insurance Policies
· 401(k) and Roth IRA accounts
To Contact Timalyn at Bowens Tax Solutions
Visit Her Website: www.BowensTaxSolutions.com (Use the Book Now Tab)
Timalyn does video meetings (via Zoom), phone consultations and face-to-face discussions. She offers a free 15-minute initial consultation.
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If you’d like more information about Jeb Jarrell and his firm, visit Jeb’s website at PlentifulWealth.com. You can also follow him on Facebook.
Thanks for listening!