Steps You Can Take To Lower Your Tax Burden Every Year
This week, Maggie is chatting with Tammy Trenta, the founder and CEO of Family Financial. In this episode, they are talking about lowering your tax burden. If you worry about overpaying your taxes, this episode is for you.
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As founder and CEO of Family Financial, I empower successful families and business owners to keep more of what they earn, preserving and growing their wealth. I take a holistic, 360°approach to wealth and financial management, integrating financial, tax, and legal guidance to deliver optimal outcomes and achieve my clients’ financial goals while often saving them time and money.
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To learn more about Maggie and her coaching and speaking services, visit www.maggiegermano.com.
The theme music is called Escaping Light by Aaron Sprinkle. The podcast artwork design is by Maggie’s dear husband, Dan Rader.
TRANSCRIPTION
Maggie Germano 0:05
Hi, and thanks for listening to the money circle podcast. I’m your host, Maggie Germano, and I’m a feminist and a financial writer, speaker, educator and coach for women. I’m passionate about making personal finance less scary and more approachable so that women can improve their relationship with money and take control of their finances. Every other week, I will interview an amazing, inspiring woman to talk about the issues that impact our money, our health, our independence, and more. We will touch on the societal and structural issues that we need to work together to change and the actions that we each have the power to take in our own lives. If you’d like to learn more about me and the work that I do, visit my website at Maggiegermano.com or follow me on Instagram @MaggieGermano. Thanks again for listening and I hope you enjoy.
Maggie Germano 0:56
Hey there, and thanks for listening. I’m your host Maggie Germano. And this week, I’m chatting with Tammy Trenta, the founder and CEO of Family Financial. In this episode, we are talking about lowering your tax burden. If you worry about overpaying for your taxes, this episode is for you. Enjoy.
Maggie Germano 1:23
Welcome, Tammy, thanks so much for being here today.
Tammy Trenta 1:25
Thanks, Maggie. Good to be here.
Maggie Germano 1:28
Great. So why don’t you tell us a little bit about who you are and what you do?
Tammy Trenta 1:34
Sure. Well, I’m the founder and CEO of family financial, which is a full service wealth management firm. And I got into the business sort of by accident. I basically help families and business owners keep more of what they earn. And I help them to navigate their Path to Wealth Creation.
Maggie Germano 2:07
That that’s great. I love that. And so you said that you’ve you found this kind of by accident, what did that kind of path look like for you?
Tammy Trenta 2:16
Well, ever since I was a little girl, I thought I would be a lawyer. I just envisioned myself doing law things with a briefcase walking into courtrooms. And when I got to college, my parents split up. And they went bankrupt when I was a sophomore, and my dad took the money out of my college account to pay for lawyers. And so I was left across the country with no money and was forced to take out student loans. And so you know, that was scary because I grew up in a middle of maybe upper middle class family. And so it was just strange not to feel provided for taking care of it at that stage. I wasn’t ready for it. But it forced me to be calm, resourceful. And so I started waitressing and I got in state tuition and figured it out. You know, we’re still left with a bunch of student debt. But at the end, you know, I think it’s apropos because Biden just kicked the can another six months with the student loan interest payments. But knowing that I was going to have to shoulder the burden of all of that, before I went forward with law school, I decided to get out and work. And you know, one of my I would say most meaningful jobs at the time was working at an investment firm was Dean Witter. It was a long time ago. And they it was in downtown LA, I really liked I really resonated with the stock market. It was so different, it was dynamic. And I thought to myself at that time, well, maybe this is a career that I could choose. I’m interested in it, it’s exciting. But most importantly, I really want to learn how to manage my own finances, so that I can help myself and then the side effect of that is that I get to help other people. And so that was a defining moment, I think, in my career, where I pivoted, did not go to law school, but instead I went back and got an MBA in finance. And during that time, also took my CFP CERTIFIED FINANCIAL PLANNING credentials. And so when I graduated from business school, I was basically ready to go and, you know, continue my career in becoming a financial planner. So, you know, that’s, I didn’t really They intend for that to be my career. But I think when you’re paying your own way, it makes you put a lot more thought into what your career path should be. And, and obviously, the return on investment.
Maggie Germano 5:14
Yeah, absolutely. And thank you for sharing that story. And I, it’s, it’s funny, almost every lawyer I ever spoke to, especially when I first started off and my career, they were like, don’t immediately go to law school, like get out in the world, see what you really want to be doing and see if that’s really you know, the path that you want to go down. So it sounds like that was the right decision for you, if not immediately going from college to law school, so that you could actually get into the workforce and see that it was actually a different path. And then you really wanted to go on,
Tammy Trenta 5:48
I think we’re so largely shaped on what we see on TV and the actual practice of law. So it’s just a lot different than that, you know, it’s more boring. And, and that’s okay. And I had always thought to myself, well, maybe I would go to law school or learn about the law, but not really, because I want to do it for a living, but more just because I value the education.
Maggie Germano 6:17
Yeah, that’s really interesting. So it sounds like you made the right decision, and you’re still working in the financial field. So it sounds like that ended up being what was, you know, most important to you?
Tammy Trenta 6:30
I think, when you love what you do, you don’t work a day in your life. And that’s, that’s how it feels. I’m very passionate about helping other people. I think we get a little bit jaded being in the industry, because I think we assume that everyone else has that same level of knowledge. And it’s not the case. And there are some very successful people who have no financial knowledge or expertise. And so, you know, it makes me wonder why because I feel like it is is so important, why they don’t make that part of every high school curriculum, and every college curriculum, I feel like it should be a mandatory course that should be taken. And if we could accomplish that, I mean, imagine the change that we would see, you know, we maybe wouldn’t have these insurmountable student loan debts that, you know, people are grappling with right now. So, you know, I know, it seems like an easy answer to me, maybe it’s not? I don’t know.
Maggie Germano 7:43
Ya know, no, I’m definitely with you on that education piece. I think if people had more of that preparation, in that education before they were thrown into the real world, they’d feel a lot more in control of their lives, and they wouldn’t feel so overwhelmed and frustrated and get into a lot of, you know, bad financial situations that might have been avoided. So I’m definitely with you there. Yeah. And so when you were introducing yourself, you one of the things you said that you help your clients with, is getting to keep more of the money that they earn. And so, you know, kind of what we’re focusing on on our conversation today is, you know, our tax burden. And it is, as we’re recording this, we are in tax season Tax Day is coming up and not too long from now, actually. And so what are some of the top things that you see your clients worry about when it comes to their taxes?
Tammy Trenta 8:42
I think the biggest the biggest area that they worry about is well, we all do, how much are we going to owe? And that’s a question that nobody knows, oftentimes until it’s your right at the filing deadline. And you know, there’s a reason for that. The reason for that is that the people that prepare our tax returns are just that they are tax preparers. They are not tax planners. And when it is done at the last minute, there is no time to do any sort of planning. There’s limited things that you can do. And so I’ve I have always felt I’ve maybe for the last 10 years, I have felt that, why why is it? Why is that? And in talking to a lot of accountants, I discovered that many of them have hundreds and some 1000s of returns to prepare before tax them and they’re working around the clock. They need to make sure their clients are in compliance with law. So they’re just looking at what has happened, and they’re putting it on paper. So there is no time to be asking questions or strategizing. You know, there is a group of practitioners, they’re called, you know, certified tax coaches or certified tax planners that actually do planning. And so you know, if you’re lucky enough to be able to work with one of them, they can be more forward thinking. So I think that there’s an expectation by the general public that their tax preparer should be doing more, they’re oftentimes disappointed. And, you know, that was one of the reasons why I decided to start my own firm because even with an in house Tax Practice, there was still a lack of collaboration on the planning side and the tax preparation side. So in my mind, those two really need to be integrated together.
Maggie Germano 11:07
Now, that makes sense to me, and what does that kind of look like when you’re integrating the to what, how does that sort of work and process and practice.
Tammy Trenta 11:16
So it’s different for different types of clients. But if you take, for example, just a regular family, they have w two income, I think it is important to have a call with them at the beginning of the year, once they receive all of their 1090 nines. And we assemble things and we get them organized. And we can ask them for things that we’re missing. So it’s more proactive, as opposed to, if it’s if the file is not full, we’re not looking at it until it’s full. And then at the end of the year, I would say in the third quarter, before open enrollment, looking at those things, and helping clients to figure out what they could be doing to help them going forward. For a business owner, it’s different. I think you need to have four meetings a year, to be able to have that collaboration. You know, we need to know how their business is doing. Be able to advise on what they should be paying themselves. Why what type of strategies we can, we can implement and in? I think one big distinction between a tax preparer and a tax planner is a tax preparer will say, Oh, well, you don’t qualify for this, where a tax planner will look at that same law and say, Okay, how can we qualify for this? So it’s always looking at, like, how can we take advantage of the tax? How can we take advantage of the tax laws? How can we use the credits that are available to us? And how can we just be more resourceful in our thinking, you know, as we help them navigate it, and I’ve always seen it, you know, as a certified financial planner, I see those things coming together. And that’s what a financial planner is supposed to do. But I think you have to have a certain level of knowledge beyond just, you know, personal financial planning in order to accomplish that.
Maggie Germano 13:36
Yeah, I would, I would gather that too. You know, it seems like the US tax code is very complicated. There’s a lot involved in it. And it seems to change every year or every couple of years. So it sounds like you would need someone who is very well versed in tax code as well as the personal finance side.
Tammy Trenta 13:58
Yes, and, you know, so I became an enrolled agent, and not because I want to prepare tax returns myself, but because I wanted to learn and if I was going to own a tax practice, they had to have some level of expertise. But also, you know, I have a number of years of experience in working with business owners, which to me is another carve out because business owners are different and they’re different in that you can you have the ability to be a lot more creative with a business owner client than you do with someone who’s working for someone else and earning w two income. So it’s not bad or good. It’s just different. And when you can tap into that creativity it to me, it’s fun, and exciting, and I feel like I’m making a difference. But it’s not a skill set that I would say most financial planners have.
Maggie Germano 14:55
Right now, that makes sense to me. And I would also guess that most Do people like normal people out there? If they even have a financial planner, they probably don’t have a tax planner at the same time. And so in that case, do you feel like people are many people, if not, most people are likely overpaying on their taxes?
Tammy Trenta 15:20
Absolutely. I would say the majority of business owners are probably overpaying on taxes. And if if you could just it’s like with anything else, if you put the effort in, and you avail yourself of the right resources, then you’ll be able to maximize those opportunities. But if your expectation is, let someone else deal with it, they’re going to deal with it in the easiest way possible. And that’s reactive, waiting until the last minute, and you get what you get. And maybe you can ask some questions, maybe there’s a couple things that can be tweaked. But I would say once it’s past the tax year, you become a lot more limited in what you can do.
Maggie Germano 16:11
Yeah. Now, that makes a lot of sense to me. And so in that case, what are some steps you would recommend folks take now or just in the course of the year as the as the year is going along to be strategic and lowering their tax burden?
Tammy Trenta 16:28
Well, one thing that I notice is, when you let’s say the majority of people in this country that are adults have w two income, meaning that they’re working for somebody else, and they have benefits available to them. So you know, I can’t remember, in any of the jobs that I’ve had, where someone has sat down with me and educated me on the benefits, and how that might impact me, I feel like it is people just make a decision without putting a whole lot of thought into it. And so if you really start breaking it down, especially since they passed Obamacare, health care costs have become so dramatically expensive. And families of three pay the same amount as a family of eight. And I mean, to me, that’s shocking. I don’t know why that is. But that’s just how it is. And so, you know, if you’re paying $30,000 a year for health care costs for health care premiums, are you spending 30,000 in health care costs, and most families are not, but no one asked the question, they just want to make sure they have coverage. And maybe be it’s more of a decision that’s made out of fear or lack of knowledge, then you know, that they’ve put a lot of thought into it. So doing a cost benefit analysis on what type of plan. So no to that end. HSA accounts are a really easy way to get a tax deduction on money that would be earmarked for health care costs. And it’s not something that you lose, if you don’t use it in the tax here that money can be rolled over. So that is definitely one thing that anybody who’s a W two employee could take advantage of looking at their benefits, looking at a husband and wife and making sure they’re maximizing their 401k, making sure they’re keeping pace with the new IRS limits that go up every now and again, taking advantage of any Roth conversions that they could be doing so there’s there’s a lot of tricks. There’s a lot of tax credits. And most, you know, when I’m not trying to villainize the tax preparer, I think that in fact, I empathize with the tax preparer, because there is an insurmountable amount of tax code. And with the Cares Act and the secure act, all this new stuff is coming down the pike, and they’re just trying to stay afloat. So they don’t have time to be proactive. So I think it’s kind of up to us to be our own advocates. And if it’s not something we’re excited about, or we want to be knowledgeable about, then, you know, I think it’s our responsibility to enlist somebody who can help.
Maggie Germano 19:58
Yeah, and on that Point, who are the types of people that you recommend folks reach out to to get that support and that help?
Tammy Trenta 20:09
Well, I guess the short answer is it depends. You know, I think, you know, let’s take a college graduate, for example, who’s not taking the class and financial literacy and gets their first job? What could that person be doing? If they don’t have any money, then it’s unlikely that a financial advisor is going to want to work with them, because a financial adviser oftentimes get gets compensated on an investment product that is recommended. So if there isn’t any money for that, then they have no means to get paid. Obviously, there’s a lot of financial coaches that could probably help with that. Everyone needs to prepare their taxes. So many people use TurboTax, which I think is fine. There’s nothing wrong with it. I think when life starts to become complicated, is when you need maybe something more. And so you know, you get married, you have children, you buy a house, you’ve got all the sudden things coming at you in different directions, and each spouse has a full time job plus childcare, it’s really hard to balance all of those things. And so I think that’s a great point. That’s a great point in time to start looking for an advisor. And I mean, advisors are a dime a dozen. They’re everywhere. But I think it’s also important to figure out who the right advisor is for them. Because they’re going to have different needs. How much life experience does that financial advisor have? Does that financial advisor have children? Have they own a home? Have they ever purchased real estate? You know, are they a business owner? And and so, I think there’s so many situations, but but I think the best answer to that is finding an advisor who gets them.
Maggie Germano 22:21
Yeah, I think that’s good advice. And like you were saying, depending on the life stage you’re in, and how complicated your life is one financial advisor, one financial resource is going to be better and more helpful than at a different time in your life. That’s right. And so for folks out there who use started mentioning of like, if they’re, you know, recently out of school, or maybe they don’t just like don’t have a lot of money on hand, or they don’t have a lot of money kind of invested or things like that. So maybe they’re not ready or prepared to be hiring someone for help. But if they want to learn more about their taxes, and reducing their tax burden, taking advantage of those different credits and things like that, are there resources out there that you like to turn people to?
Tammy Trenta 23:10
I am sure that there are resources for those people who are proactive in finding them. I have thought about creating a curriculum for you know, those that are in that demographic, because they I think that is that critical point where if you could start off, not being credit card debt, make thoughtful decisions about the college you attend, if you’re if this the cost of education is on your dime, that could be so significant in helping someone get off to a great start. And the number one thing is that they pay themselves first. And so, you know, today, we were so into immediate gratification. Like I can order my groceries right now on Amazon, they’ll show up at my door in two hours. And just that immediate gratification is is convenient, and it’s nice, but when it comes to investing, it can be catastrophic. And you know, the best advice is to the earlier you start, the easier it is the more you make, increase the amount that you pay yourself. And it takes a long time but you have to be patient. And at some point, that investment account will spin off income that equates to an entire salary before you know it. And, and but if we’re so focused on immediate gratification, we’re never going to get there. So you know I think that that is the biggest thing that separates maybe the spenders from the savers.
Maggie Germano 25:05
Yeah, that makes sense. And so as far as the tax side of things goes and you know, reducing your tax burden, preparing for tax season, you know, before taxes are actually do, or is there anything else that you haven’t covered that you want to make sure listeners take away from this conversation?
Tammy Trenta 25:25
Well, with, you know, a week left before the tax filing deadline, I would say a lot of those decisions need to be made before year end. But definitely going forward, you know, making sure that you’re maxing out your 401 K, making sure that you’re looking at a cost benefit on your insurance and benefits that your employer gives you. If you’re a business owner, you know that, you know, just, again, it’s, there’s not a whole lot that can be done at the last minute. And so I guess the best advice is start preparing for the next tax year and make sure you don’t let December 31 go by without having a plan. And knowing what you’re going to pay on April 15.
Maggie Germano 26:26
Yeah, I feel like preparing ahead of time and having those numbers in mind, it’s going to make for tax season and be much less stressful too. Because I think, I think that it’s kind of viewed as as like really stressful time. But if you are pre planning and you are preparing for the whole year ahead of time, hopefully it won’t be as bad.
Tammy Trenta 26:46
Well, and I think so there’s a psychological component to it as well, everyone has to file taxes, almost everyone, and no one looks forward to it, nobody is excited about it. And so it’s very easy to just ignore it or not pay attention to it. But if you want to keep more of what you earn, you’ve got to pay attention to it.
Maggie Germano 27:08
That’s true. That’s definitely true. It’s not some magical thing that you just get to keep if you don’t do anything about it. Exactly. Great. So is there anything going on with your company right now that you want to promote to listeners?
Tammy Trenta 27:26
So I, I started my firm, to be able to integrate tax and Investment Management B and financial planning, because I think they all fit. And you know, whenever we make one financial decision, it could adversely impact it definitely has an impact on another financial decision. And so weighing those and prioritizing them are important. If the best advisors, I think do a great job in the integration and communication between the professional team, you know, whether that’s a CPA, or a financial planner, or a business attorney or an estate attorney. So my recommendation I mean, we we target business owners, you know, high achieving business owners, and high achieving business owners pay a lot of money in taxes, and it’s a pain point for them. And so if for the same cost of hiring a normal financial advisor, you can have that tax component integrated in mean you have immediate impact on someone’s bottom line. And so that that’s something that we do that we excel in, and it’s a passion of mine. So if there are any listeners out there who want a second opinion, want us to take a look at their tax situation. You know, we’re happy to do that and provide some guidance.
Maggie Germano 29:00
That’s great. And how can folks reach out to you or learn more about you?
Tammy Trenta 29:05
So we have a website, FamilyFinancial.biz. You can also find me on LinkedIn, Tammy trenta Knowlton. And there’s a place where you can reach out on the website for contact or to schedule an appointment.
Maggie Germano 29:23
That’s great, and I’ll be sure to link to that on the show notes as well. So thanks so much for taking the time to share your expertise and advice. It was a really interesting conversation.
Tammy Trenta 29:34
Thanks, Maggie. Have a wonderful day.
Maggie Germano 29:37
You too.
Tammy Trenta 29:38
Bye.
Maggie Germano 29:42
Thanks again for listening to the money circle podcast. If you want to learn more about my financial coaching services, my speaking and workshop offerings, or just to read my blog visit Maggiegermano.com. To get in touch with me directly email me at [email protected] You can also follow me on instagram and Twitter @MaggieGermano. I look forward to hearing from you. Bye bye
