On this episode of 'Financing Your Future', Yahoo Finance's Rachelle Akuffo is joined by H&R Block Chief Tax Officer, Kathy Pickering, and Geltrude & Company Founder, Dan Geltrude, CPA, as they discuss filing taxes when you're self-employed, navigating taxes during major life changes, and tips to avoid getting audited. Rachelle also sits down with Yahoo Finance Senior Columnist, Kerry Hannon, and Yahoo Finance Personal Finance Editor, Janna Herron, as they discuss when to consider a tax preparer, how to lower your taxable income, and filing taxes as a retiree.

Video Transcript

RACHELLE AKUFFO: Welcome to Yahoo Finance's Financing Your Future, where we really explore both new and traditional ways of helping you meet your financial goals. Now today we're discussing a topic that's essentially unavoidable, which is taxes. Love them or hate them, we all have to deal with them.

So I am Rachelle Akuffo. And today, we're joined by our panel. We're going to navigate this with our expert panel Cathy Pickering H&R Block's chief tax officer and Dan Geltrude, Geltrude Company and Founder. Thank you both for joining me.

So first of all, Dan, you describe yourself as not the typical CPA. So why is that? And how do you find the right fit when you're looking for an accountant or someone to help you with your taxes?

DAN GELTRUDE: So from our perspective, know people look at accountants and tax preparers and they think, it's just about putting the right number on the right line, but it's much more than that. It's what do those numbers mean specifically? When it comes to tax returns, how do you minimize, legally, your tax obligations? So that's why I think we try to be strategic in how we prepare tax returns.

And I think that's what consumers should be looking for. It's not just about finding a professional to get it right. It's about finding a professional that can strategically help you.

RACHELLE AKUFFO: Now, obviously, life has become quite complicated. A lot of people like-- if they've taken on a gig, they're looking at the gig economy or they've taken on a side hustle-- what are some of the pitfalls-- Cathy, I'll first start with you-- that people should watch out for? And how do they maximize their returns if they do have these nuances?

CATHY PICKERING: We have seen so many people look to supplement their income or just create income after being out of work for a while with gig work. And if you've often worked for an employer, that first year filing taxes can be very educational, shall we say, because people don't realize that they are now self employed. They're a business owner, and so there's obligations around, perhaps, paying self employment and filing different tax returns than they've done so in the past when you're receiving payments from an Uber, or Lyft, or an Etsy.

They're not withholding your taxes for you. You're responsible for paying those taxes yourself. And a lot of first timers get caught by surprise for that. They really didn't understand that was an obligation. So that part of being a gig worker, being self employed, while it's really exciting to have the freedom, it's also educational for understanding the rest of the obligations that go with it.

RACHELLE AKUFFO: And, Dan, when you look at the big picture of how much our lives have changed, of course, we have to talk about whether people have become hybrid workers, full-time workers, W-2, sort of a mix of both. What should you do differently when you have these different situations if you're a W-2 workers say versus some of these other classifications?

DAN GELTRUDE: So one of the big questions out there that we hear about is, well, can I take a home office deduction? Now, keep in mind if you are a W-2 employee, that deduction is not available to you. So just because the world has changed and now you're working from home and that's your new office, it doesn't mean that you get the home office deduction.

However, for those that are self employed, meaning if you are doing something on the side, where you are your own boss, then those deductions related to that gig job let's say that you're doing or being self employed just, in general, now you do have the opportunity to take the expenses related to you performing those duties in self employment as a deduction. So that's an important distinction to think about because so many times people are saying, well, I'm employed at home now so I can just take these things. That's not the case if you're a W-2 employee.

RACHELLE AKUFFO: That's certainly good to know. I think a lot of people maybe don't realize because there are so much nuances of working from home, partly utilities, things like that. So, Cathy, as people really look at this and especially if they had major life changes, say you got married, or you got divorced, or you have children, when you add all that into the mix, how do you-- what's the best way to file? And how do you avoid sort of overlapping when you have so many different contributions going on?

CATHY PICKERING: It's so funny because life changes really do often mean tax changes as well. And when somebody is going through a major life change, they don't often think about, gosh, I should talk with my tax advisor now to get an understanding of what's going on. And all of those things that you mentioned, getting married-- during COVID, we saw so many people hold off on their marriage because of wedding plans and things like that, or maybe they had a child or after being in pandemic, constraints that now they're getting divorced, and all of those things absolutely impact your taxes. And so in the moment, the best advice that we would give is please make sure to have a quick consultation with your tax preparer.

We do these kinds of consultations year round because taxes don't just happen in January through April to really understand and plan forward because sometimes just a little bit of a change, either in your withholding to make sure that you've got the right amount withheld so that you're not getting surprised or understanding the implications of what filing status you choose can make a really big difference in the outcome of your tax return. And for a good 2/3 of Americans, that tax refund is the biggest financial transaction that they experience in a year. So it's important to get it right.

RACHELLE AKUFFO: And Dan actually you just said, we are expecting quite the wedding boom because of COVID. So you actually say that married couples could benefit from filing separately. How do people calculate and figure out which option is best, filing married, or separately, or head of household?

DAN GELTRUDE: Well, your tax preparer should be going through that process for you. And that's why it's so important to have a professional do your tax return because the assumption is, well we're getting married, so that's going to be an advantage in terms of lessening our tax burden. That's not always the case. There's something out there called the marriage penalty.

So depending on your circumstances, you could be in a situation where married filing jointly may not be as advantageous as married filing separately. So the only way to actually know that is to do the calculation. And that is what a tax preparer should be doing for you. Now those types of life changes, when they come up, as we've been talking about, this is something that you want to run past your tax preparer ahead of time so that you can strategize and be prepared when the time comes to file your tax return.

RACHELLE AKUFFO: So, Cathy, we know that some people are very good, very diligent. They file early. Some people are last-minute scramblers. But in terms of the timing of the filing of your taxes, what difference can that make filing early versus filing at the last minute?

CATHY PICKERING: Well, one of the challenges for deciding when to file is, when do you have all your documents ready? So W-2s are meant to be made available by January 31. And now people will be getting more 1099s than they might have in the past, 1099 for their gig work and things like that. Again, they should be getting those by January 31. However, if you get your documents early, then there's no reason to wait, especially if you're getting a refund, you want to access that money as quickly as possible.

The other thing that we see is from an identity theft and security perspective. Once you file, you've in effect locked in your Social Security number so that somebody else couldn't do a false filing underneath it. So there's a lot of benefits to filing early.

And we would always say file electronically. Take your refund electronically so that you get the quickest benefit. That said, oftentimes, people are waiting for documents, or they've got complex transactions that they need to spend more time on. And so any time during that January through April time frame is perfectly fine, depending on your personal situation.

RACHELLE AKUFFO: All right. So, Dan, obviously a big question for people when they're thinking of the idea of getting their taxes, how do I avoid getting audited? What are your top tips for avoiding some of these things that could really get you flagged and potentially audited?

DAN GELTRUDE: Well, the way the IRS goes about making their selections for audits is not exactly public information because there is a process of what they call the audit lottery. So people can be selected for an audit, but basically, winning or losing the lottery. But beyond that, the key in terms of not putting yourself in the IRS's crosshairs is to make sure that you're not doing anything on your tax return that brings attention. And some of this stuff is really simple.

You want to make sure that you're not making some obvious mistakes on your tax returns, sometimes as simple as putting the wrong Social Security number or having not matching up the numbers properly, meaning the input of your W-2 and other tax documents. Sometimes by inputting those things incorrectly, well, now the IRS is going to look at your tax return because there's an error. And many times these are errors that really don't need to be made.

So I would say the diligence in preparing a tax return to make sure everything is properly reported is one of the keys to not be invited to the IRS party. You want to file your tax return and have that be the end of it. Either you owe or you get your refund. See you next year.

RACHELLE AKUFFO: I'm loving the issues with the IRS lottery, which I can't think of a worse lottery to win, as well as this IRS party. And so, Cathy, as well for you in terms of best ways people could avoid red flags and if you do get audited and you have fallen behind, so you have tax debt, how do you get yourself back on track Cathy?

CATHY PICKERING: Well, so many questions in there. So let's unpack that. First, one of the best ways to avoid getting invited to the IRS party is to make sure that your information is correct and that it matches with whatever information documents you've received. Because a lot of times somebody, for example may have worked part time or change jobs and forgot that they would be expecting a W-2 from that other employer.

And so simple things like that missing income or incorrect information transitions are the kinds of things that are going to get you correspondence from the IRS. And then if you are receiving a notice from the IRS, a letter for more information, it's also a good idea to get some help from a professional just to look at the letter and say, OK, here's really what the IRS is asking so that if you do get correspondence from them, if you're answering it accurately, the first time, it helps to alleviate a lot of the concern and the issues.

And I would also say that if you do get invited to the IRS party, don't freak out. Don't try to go it alone, and make sure that you get that help in that guidance. They'll be able to hold your hand.

We do this all the time and make sure that you're getting through that process quickly, easily, and back on your way. And then if you do end up owing some money to the IRS, again, don't freak out because there are many payment options. And so if you can pay, if you can borrow money from a relative or something and pay it off in full, that's great.

A lot of people don't have that ability and the IRS does have a number of ways that you can pay balance due, either with a credit card or set up a short-term plan to pay that in smaller increments. So there's a lot of options. And the worst thing that you would do is if you owe money, don't just ignore it. Make sure you're coming up with some kind of a plan to address it.

RACHELLE AKUFFO: Well, I know this has been incredibly helpful for everybody watching. We do appreciate you joining us today. A big thank you to Cathy Pickering, H&R Block's chief tax officer, and Dan Geltrude, Geltrude Company founder, thank you both for this wonderful conversation.

CATHY PICKERING: Thank you so much.

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RACHELLE AKUFFO: Welcome back to Yahoo Finance's, Financing Your Future, where we're continuing our tax advice to put you in the best position to get your finances in order. I want to break this down with our Yahoo Finance panel. We have our Personal Finance Content and Content Editor, Janna Herron, and, of course, Yahoo Finance's Senior Columnist Kerry Hannon joining me now. So welcome back to you both.

So, first of all, if you're a sort of trying to figure out whether or not you need a professional accountant, whether you need one of these AI services or if you can just do it through an app, so, Kerry, what's the best way to figure out what kind of service you actually need?

KERRY HANNON: Yeah, that's a great question, Rachelle. The point is you need to really take stock of, do you need somebody? And I think a lot of us coming out of the pandemic people are working remotely. People are working on contract jobs. They're starting businesses.

These things have taken off. These are situations where you really might not want to go it alone this next tax season. So I think the best way is to start looking for someone who is a certified tax preparer. And your State Board of Accountancy can help you find a CPA.

Ask your friends and family. Ask people in your industry who they use if you have a business. And these are some ways to start kind of narrowing the field to who you want to work with. And it's important to realize that the IRS does keep a list of approved providers and preparers.

A good website that you can check people out also is called CPAverify.org. And they keep a list of really the ones that have their credentials up to date. So those are a good ways to get started.

There are lots of different kinds of people who can prepare your taxes. I would look for someone who is a CPA, in my opinion. That's the best way to go.

RACHELLE AKUFFO: And, Janna, what did you find most useful when you were sort of trying to navigate your taxes?

JANNA HERRON: Well, to tell you the truth, for several years, as my husband and I started making more money and we were further down in our careers getting bonuses, we were not withholding enough taxes from our paychecks. And so we would end up with a really nasty tax bill during tax time. And you know it was so frustrating because we're both financial journalists. And we're like, why can't we figure this out?

And we did everything. I mean, we even-- on the old W-4 form, we took zero allowances, which is what someone who's single might do. We manually try to calculate it, and nothing was working.

And finally, the IRS came out with this really, really fantastic tool. And it's called the tax withholding estimator. And it really can help you figure out, are you withdrawing, or are you withholding enough taxes in every paycheck so that you don't owe the IRS.

The other great thing about this tool is-- say you really want a tax refund, and a lot of people do. They love getting that like $2,000, $3,000 check from the IRS at the beginning of the year. This tool allows you to set I want to get $2,000 for my tax refund next year. So how much do I have to withhold from each paycheck to get that now?

The tool is a little bit complicated. You need to set some time aside to actually do that. You're going to need some your most recent pay stubs. You're going to need your last year's tax returns and any information you have on income from self employment from side hustles, from investments to be able to fill this out correctly.

But what it really does it gets you so close to that number. And so you don't have to go, oh, no, how am I going to pay this huge tax bill? So it's a really good tool. I think everyone should actually try it even now to see if they're on track for next year, especially if you've had a huge life event, including you got married, you got divorced, you had a baby that might change your taxes significantly.

RACHELLE AKUFFO: It's interesting, because most people think to avoid the IRS like the plague versus sort of looking at some of the tools that the IRS might already have out there. So then, Kerry, if you're going sort of the private accountant route or one of these other companies, obviously the fees can differ quite a lot. What would you say in terms of people who are wondering, is it worth the return on an investment to really go with an accountant or go with one of these big companies?

KERRY HANNON: Well, I personally think it is for many people. I mean, more than half of tax-- excuse me, more than half of the taxes filed at the IRS in the most recent surveys they have done, 53% of them are filed by tax preparer professionals. So I mean, a lot of people go this route. I personally find it peace of mind.

I ran my own business for 20-odd years. And to me, it was really helpful to have someone make sure that I was really keeping track of what were eligible deductions for me, what kinds of things I need to be paying attention to, how much estimated taxes I needed to be making. And so these are questions that can be really hard to navigate on your own. Certainly, people can do it on their own, but I would really encourage people to-- if you feel like you might not be right on track, definitely seek out someone.

But before you hire someone ask them, how do you charge are you charging me a flat fee? How does that work? Are you available to answer questions for me when it's not tax season? And really make sure you have a good reference to that person and you have a good-- trust them because there is a lot of fraud that happens in this arena.

So you need to be very cautious that you've found the right person and that you trust them. And so I think that that's something that's an individual decision of how you're going to-- whether to hire a professional. But I think that really, remember, even if you do, you are ultimately responsible. You were the one signing your return. So even if you kind of pass off some of these big questions, at the end, you are the one that is-- you're responsible for what is down on that return.

RACHELLE AKUFFO: And, Janna, a lot of people think they're sort of beholden to whatever they decided at the beginning of the year. But as you mentioned, a lot of things can change. You can have life changes. So what is the best way to talk about some of the changes that you can make though to lower your taxable income over the year?

JANNA HERRON: Sure. So the very first thing is we were just talking about your paycheck withholding, so checking that. And if you need to withhold more or less, you can change that at any time with your employer by changing your W-4 form. So that is something you can do at any time.

So that's one way just to make sure you're on track. But if you want to lower your taxable income, there's a host of things that you can do, mostly things that you need to do before the end of the year. And the big one, and this is also just because you really should be saving for your future, is maxing out your retirement accounts if you can, or putting as much money into those retirement accounts.

So what you put into your 401(k), traditional IRAs, that is going to be, if not all, partially tax deductible. Along those same lines, if you have a health savings account, you can also put money into that. And that also will be deductible as well. So I feel like those are two big ways to do it and also secure your financial future. Other things to think about, if you're going to be itemizing, get those charity contributions in before the end of the year because you want those to help you reduce that taxable income.

We've also had a really bad start to the year when it comes to the stock market. So you can capitalize on some of those losses by selling those losers that you might have. And you want to do this in a very smart way. You don't want to just sell them because they're losers, but you want to talk with a professional which ones that you might want to sell because those losses can offset any capital gains that you have elsewhere.

So those losses actually can help you and can be carried forward as well. So that's another way to get that taxable income down. One last way I would say is if you're itemizing, think about if you can pay your January mortgage payment in December. And so that would increase how much mortgage interest deduction, mortgage interest that you can deduct from your taxes.

Along those same lines, you can also pre pay your property taxes for 2023 this year if your state allows it. And then that will go to your state and local tax deduction as well. So those are a couple of ways that you can start thinking about getting that taxable income down. I would start with your retirement savings though.

RACHELLE AKUFFO: And speaking of retirement though, I want to bring you in, Kerry, because what if you retired over the past year and you're like, OK, now I can relax, and my taxes are fine. What do people need to do differently or keep in mind when they're moving into retirement and they're trying to pay their taxes?

KERRY HANNON: Well, absolutely. There's big changes there if you've already tapped into Social Security, or you've started to take required minimum distributions from your retirement accounts. You're going to have taxable income that's going to be different than what you had in the past. So, again, this is a good time to really pay attention to where you are, what your likely income stream is going to be moving forward.

And the other thing I wanted to add to not only just retirement, but people who are self employed this year, coming into next year, think about ways that you can really be in charge of your finances and understand what you're spending. Sometimes it's good to have QuickBooks or something like that helps you separate out your expenses. Find some kind of software that helps you separate personal from business expenses.

A business credit card can even help you do that so that you're in charge you're very clear on what your business expenses are moving forward into the year. It's a bookkeeping thing, but it's very, very important because you want to be sure that you're really tracking those expenses in order to have the tax advantages of some of them.

RACHELLE AKUFFO: Well, certainly, lots of good advice there and very useful for everybody. I know everyone's in a different situation. But I thank you both for breaking that down for us. Yahoo Finance's personal Finance Content Editor Janna Herron and Senior Columnist Kerry Hannan, thank you so much.

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