Podcast Summary: Money Guy Show – "Are You In Trouble (With the IRS)?"

Release Date: March 26, 2025

Hosts: Brian Preston and Bo Hanson
Description: Bringing confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense to help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life.

1. Introduction to IRS Troubles

The episode kicks off with Brian Preston introducing the topic of IRS troubles, specifically focusing on underpayment penalties and how recent shifts in the gig economy have impacted taxpayers.

Notable Quote:

Bo Hanson [00:37]: "Sometimes we find ourselves in a situation where we might get a letter or a notice from the IRS that makes us say, yeah, now."

2. Understanding Underpayment Penalties and Estimated Taxes

Brian and Bo delve into the complexities of underpayment penalties, especially for those with side incomes. They explain the importance of making estimated tax payments to avoid penalties.

Key Points:

• Estimated Tax Payments: Required if you expect to owe at least $1,000 in tax after subtracting withholding and refundable credits.
• Safe Harbor Rules: Pay either 90% of the current year's tax or 100% of the previous year's tax to avoid penalties.
• Annualized Installment Method: A strategy to minimize penalties by aligning tax payments with income earnings throughout the year.

Notable Quote:

Brian Preston [04:12]: "You need to either pay 90% of current year's taxes as you make the money or pay 100% of prior year's taxes, unless you make $150,000."

3. Navigating Tax Challenges in the Gig Economy

With the rise of the gig economy, many individuals now juggle W-2 wages and side hustles, complicating their tax situations. Brian and Bo discuss how side incomes as independent contractors require proactive tax planning.

Key Points:

• Withholding Adjustments: Instead of making estimated payments, one can adjust withholding on their primary job to cover additional tax liabilities.
• Tax Preparation: Reviewing tax returns pre-filing to catch potential penalties and understand tax obligations better.

Notable Quote:

Bo Hanson [06:00]: "If you're just slightly owing at the end of every year and you make enough in your day job, you may not have to make estimated payments."

4. Educating Children on Financial Stewardship

Transitioning from IRS issues, the hosts address a listener's question about teaching children financial responsibility and an abundance mindset, especially when parents are financially better off than their upbringing.

Key Points:

• Teach the Money Flow: Implementing the "spend, save, give" model from an early age.
• Instill Scarcity Awareness: Balancing abundance with understanding resource limitations to foster appreciation and responsibility.
• Encourage Earning: Having children work, such as through lemonade stands or part-time jobs, to understand the value of money.

Notable Quote:

Brian Preston [10:55]: "Let them see how their money can work for them, comparing their earnings to what those earnings generate over time."

5. Roth IRA vs. Roth 401(k): Maximizing Retirement Contributions

Thomas W.'s question about contributing to a Roth IRA versus a Roth 401(k) opens a discussion on the differences, benefits, and strategic considerations between the two retirement accounts.

Key Points:

• Contribution Limits: Roth 401(k) allows higher contributions ($23,500) compared to Roth IRA ($7,000).
• Income Limits: Roth IRAs have income restrictions, whereas Roth 401(k)s do not, making them suitable for high earners.
• Investment Control: Roth IRAs offer more control over investment choices and typically lower fees compared to employer-sponsored Roth 401(k)s.
• Backdoor Roth: A strategy for high-income earners to contribute to a Roth IRA indirectly.

Notable Quote:

Bo Hanson [30:16]: "Roth 401ks have no income limits, so you can contribute regardless of how much you make, which is a significant advantage over Roth IRAs."

6. Deciding Between Lump Sum and Annuity for Pension Benefits

Heather B.'s inquiry about taking a lump sum versus annuitizing pension benefits leads to an in-depth analysis of the factors influencing this decision.

Key Points:

• Present Value Analysis: Comparing the lump sum against the present value of future annuity payments to determine which option is financially advantageous.
• Interest Rates and Market Conditions: Fluctuations can shift the better option between lump sum and annuity.
• Survivor Benefits: Considering the impact on beneficiaries and long-term financial security.
• Flexibility and Control: Lump sums offer more flexibility in investment decisions, while annuities provide steady income.

Notable Quote:

Brian Preston [27:23]: "It's all about the assumptions on how this thing was designed. You have to do the math to determine which one is most advantageous."

7. Balancing Homeownership and Education Savings with 529 Plans

Calvin Awesome's question about prioritizing a 529 plan for his first child's education versus homeownership addresses the challenge of setting financial priorities based on personal goals.

Key Points:

• Financial Order of Operations: Ensuring foundational financial steps (emergency funds, retirement savings) are in place before allocating funds to goals like homeownership or education.
• Assessing Goals and Timelines: Determining whether owning a home or saving for education is a nearer-term or long-term goal.
• Flexibility in Saving: Using resources like the Wealth Multiplier tool to evaluate how saving for one goal affects the ability to achieve another.

Notable Quote:

Bo Hanson [45:23]: "You have to think about what your goals and priorities are because money is a tool that allows us to achieve the goals that we have."

8. Evaluating Whole Life Insurance in Financial Planning

Julian D.'s query about navigating a partner's whole life insurance policy prompts a discussion on assessing insurance needs and the differences between whole life and term insurance.

Key Points:

• Policy Evaluation: Understanding the costs, benefits, and rationale behind maintaining a whole life policy versus switching to a term policy.
• Alternatives and Adjustments: Exploring options like converting to paid-up insurance or utilizing the cash value for other financial goals.
• Tax Implications: Considering any tax consequences when altering or surrendering existing policies.

Notable Quote:

Bo Hanson [52:04]: "Begin the journey of mutual education and mutual investigation. Let's look at the policy and determine if it makes the most sense for your financial situation."

9. Additional Insights and Personal Anecdotes

Throughout the episode, Brian and Bo share personal stories and experiences, illustrating the real-world application of financial principles. They emphasize the importance of disciplined financial habits, proactive planning, and adapting strategies to individual circumstances.

Notable Quotes:

Brian Preston [29:28]: "Financial independence is why you're saving."

Bo Hanson [41:14]: "You have to have a plan where your money starts working harder for you than you can with your back."

10. Conclusion and Key Takeaways

The episode wraps up with a reminder of the personalized nature of financial planning. Brian and Bo encourage listeners to utilize available resources, such as their Wealth Multiplier tool and downloadable guides on moneyguy.com resources, to tailor financial strategies to their unique situations.

Final Thoughts:

• Personal Finance is Personal: Strategies must align with individual goals, incomes, and life stages.
• Proactive Engagement: Regularly reviewing and adjusting financial plans is crucial to navigating changes and achieving financial goals.
• Utilize Available Resources: Leveraging tools and expert advice can significantly enhance financial decision-making.

Notable Quote:

Reby [56:18]: "Go to moneyguy.com resources because we have tons of free downloads and calculators that are all designed to help you dig into some of the details of what we've talked about."

Final Note: For more in-depth discussions and personalized advice, visit moneyguy.com/resources. The Money Guy Show continues to offer valuable insights every Tuesday at 10 AM Central, addressing a wide range of personal finance topics to help you build and manage your wealth effectively.