Today is the deadline for filing taxes, with millions waiting until the last minute. Tune in to hear tax filing strategies and procrastination tips from the founder and CEO of Evergreen Money. Learn about streamlining the process, hidden tax implications of investing apps, and more.

Opening Bell

Former TurboTax CEO's Last-Minute Tax Filing Tips and Strategies for Americans

Well, today is the last day to file your taxes. And according to a report, 35.8 million American households file their taxes at the last minute. So joining me now to talk about tax filing strategies and some procrastination tips is the founder and CEO of Evergreen Money and former CEO of paypal and turbo tax bill, Harris Bill. Welcome. Thank you very much. All right, today is an important day. I know we're going to talk about some long term strategies. But what should our viewers know today on the tax filing deadline? Well, the most important thing is you mentioned procrastination strategy. The strategy is do not procrastinate. And by the way, um if you're thinking about taxes for this year, it's too late. It was too late on January 1st because last year is history. But as everybody's thinking about taxes right now on April. April 15th now is the time to think about the opportunities to structure your investments this year. So the pain next year is not as high. What's the best way to structure this? Well, um there are a couple of ways. First of all, what's the baseline? The baseline is if, particularly if you're a high yield or high income person in some place like New York City, the city and state taxes can be as high as 13.5%. Put that together with federal tax and you could pay up to 54% in taxes. Now. So what do you do about it? The strategies vary depending upon the asset class, cash, fixed income and equities on cash bank accounts And cds are the worst place to keep your cash because they're high tax. And so what you really wanna do is if you're in a, if you're in a bank account and if you think you're earning 4% depending on your tax rate, you could be earning 2% not even keeping up with inflation. What do you do? Instead? I like short term T bills, treasury bills. If a high yield savings account might get you today, 4% maybe 4.5%. T bills. Short term T bills today are earning 5.3%. And most importantly, they're exempt from state and local taxes. So depending on your tax rate, it could be the equivalent of a bank account earning 7%. Ok. So you're talking short term about three months, right? Yes. Yes. Now what about money markets? Money markets are fine but most money markets, unless it's a pure government money market, you're still going to pay state and local taxes. Ok. So, t bills are the way to go. If you want to avoid taxes on what would be a cash or a cash equivalent, cash and cash equivalents. Exactly. Any other tips? Sure. Fixed income. Most people make the mistake of putting their stocks into tax deferred accounts. 401k, Ira. Roth Ira. You shouldn't do that. You should put your income generating assets in your tax deferred accounts and put the stocks into your taxable accounts Because once they're there, you have a tremendous number of opportunities to reduce taxes. And how would that work on stocks? First, both dividends and capital gains are taxed at a top federal tax rate of only 20% versus 37% for other types of income. So you're already winning. But in addition with stocks, the single most important thing is to time when you sell, you can delay defer offset and eliminate capital gains taxes for our viewers watching at home. And this is all very good information for them. I do want to go back to the fact that today is tax day and as the former CEO of paypal and turbotax, what our viewers I need to know in terms of streamlining the process of filing. Well, the most important thing is to start early and, um, and then use tax preparation software. I mean, I'm, I ran turbotax for 10 years, but I've been out of it for a long time. I don't have a dog in this fight. But it's a tremendous time saver to use a commercial tax preparation software package. The IRS is just now starting to develop their own technology and to increase their customer facing sensitivity, which is fabulous. But anybody who's an investor, anybody who has even moderately complex returns, you need something like taxation software and in terms of requesting an extension, if that is the reality for the tens of millions of Americans that we covered, what would be your advice there? Well, first of all, if you have certain sophisticated or complex types of investments, anything, for instance, with a K one, you're unlikely to get that K one return until after April 15th. So you have to extend, but you need to file the extension by April 15th. So if you have not done that, absolutely file your extension today and you can do that with tax preparation software as well. How do politics and policy play to the best strategy here? The tax code in the United States is horribly complex, wildly more complex than any other developed country. And so why is that? It's not because of the IRS and it's not because of tax preparation software. It is because of the US Congress and decades of both parties have been using taxes to attempt public policy goals and that's just not the most efficient way to do it. But in terms of current tax policy, right established by Washington, what do our viewers need to know about that. Well, many things including how tax deferred and tax accounts work. Um, but one thing to be aware of is that the tax Reduction Act of 2017 is currently scheduled to be eliminated at the end of 2025. Now, it will probably be extended. But if it is not, you're going to see top tax rates go from 37% to 39% you're going to see the standard deduction go down and for people with a very high estate big changes in, in the state tax. Interesting. So for anyone that you mentioned how complex, right? This is not because of the IRS, not because of tax filing services that are meant to help, but in terms of the process, some people, it might be overwhelming for them. Yeah. What should our viewers know in order to avoid an audit? Are there things that typically trigger an audit which could cause potentially more stress for filers? Sure. Um First of all don't file late? Um Second, um if you're, if you're selling crypto at a loss, they might, they might take a look at you because there is often the expectation that you have made gains on crypto that you have not reported. Interesting. So make sure that you take very, very um complete records of any crypto trades because for other types of investments, the brokerage houses, they're taking, keeping those records for you on crypto. They're not, it's up to you? Ok. Very good to know, uh, bill. Anything else in terms of minimizing tax liabilities, maximizing your money that our viewers should know the single most important thing is get going. Now, here's when I was running turbotax, we, we sold a lot of tax preparation software where you could save a couple 100 bucks with tax planning, you could save thousands of dollars. And the problem is nobody does. It. Tax prep. Tax filing is a must do. Tax planning is a should do. And we're humans, we do the must dos, we often ignore the should do. What would you say is the difference between preparation and planning? Well, preparation is an historical process. You are just record keeping for everything you did. Last year. Planning is saying ok, this year and next year, how I, how am I going to structure my investments in order to reduce something that could be as high as 50% to, as low as 0%. And particularly when you're talking about stocks, there's a lot you can do to reduce or even eliminate tax on capital gain. Anything else you need to know about stocks and capital gains? Yeah. One of the really important things unless you have a very strong reason to sell before 12 months, do not do that. Because if you have a gain and you've held it for less than 12 months, you're going to hit, um, back, back to the 37% as high as 54% tax rate. And so you're back to the same high tax rate that you would pay on simple interest. So, so delay, hold it at least 12 months. Then defer in addition, you can, you don't have to sell this year. You can sell next year or the year after and pay zero taxes this year. All right. Good for us to get your tips here. Bill down here on the floor of the Stock exchange where we talk a lot about money and investments. Today is the day that's Bill Harris C of Evergreen Money Bill. Thanks. Thank you very much.