Anna: Welcome back to the NOYACK Expert series. Today we are here with Karla Dennis, tax extraordinaire. She’s been in the field for a very long time and she knows her stuff. Karla, why don’t you tell us a little bit about you, your work, what drew you to this industry in the first place?
Karla: Absolutely. First of all, thank you for having me. I eat and sleep taxes. Taxes are really my passion, and I say it’s the one thing that I could figure out early on. Started my career off in a tax law firm. When I graduated college with my degree in accounting, I bypassed the traditional CPA firm. Went to the tax law firm, could sit in a corner, research. I was such a nerd. Love to be able to read and analyze and I used to do all of the support for the attorneys, do all the research for the attorneys. And then when I decided to start my family, years ago, I knew I couldn’t maintain that schedule and I knew that I did know taxes very well. So, I started my own firm so I could be a stay-at-home mom. From there, it has grown to 47 full-time employees, inclusive of my four sons now. And our entire goal is to help taxpayers keep more of their cash in their pocket by understanding how the tax laws can work for them.
Anna: Absolutely. Perfect. What about is it with taxes that you love so much?
Karla: I think for me it’s really a puzzle. It’s a puzzle that you figure out. I think the majority of people are intimidated because it’s the law, it’s the code, it’s IRS. But it’s like anything, you know, I equate it to sports. Once you learn the game and you know the moves, you understand it, then you want to perfect it. And so it’s the one thing that I learned how to perfect. And it’s I like to read and in order to really understand tax code, you have to be a voracious reader. But it’s such a underutilized tool that people can really use to lower their taxes, but they just don’t know it.
Anna: Gotcha. That makes a ton of sense. I think especially for a lot of our Gen Z or millennial listeners out there who might be like, “Oh gosh, taxes, that’s just a boring thing from a textbook. I have to fill out the forms every year.” Speaking of those forms that we have to fill out every year, it is July and we’re sitting down right now talking about taxes and tax optimization and how people can really get their stuff together. Why are we talking about this in July? Why is it so important for people to be prepared for taxes year round as opposed to that month or two right before they file?
Karla: I am so glad you asked that question because here’s the crux of the matter. Most people look at taxes during tax season, January through April, where we are filling out the forms. That’s really compliance season. They really need to look at their taxes all year long. And summer is a great time to do it because you don’t really have any major tax deadlines. It’s when you’re going to have at least six months worth of your income, six months worth of your expenses. And this is where you can stop, look at where you’ve been, and then formulate a plan to move forward. It’s an opportunity to course correct. It’s an opportunity to lay down goals. It’s an opportunity to try to learn one or two new things about the tax law and apply it and then see how those laws apply to you. That is especially with all how all of the laws right now, there’s a lot of change happening with the systems. It is important to take a look and see that’s a really good way to put it. Where am I right now? I think especially because it’s good. What would you say for people? What should they be looking for at this point in time?
Anna: Yeah. Well, we’ve had a major tax overhaul, right? We just had the one big beautiful bill act that just passed on July 4th. I think at this time it’s prudent for everybody to stop and say, “Okay, I am sitting on a opportunity to have a tax shopping spree inside of the tax code. If I had that opportunity to jump in, what are the things that I would grab out that would be beneficial for me?” So, it’s important for them to maybe sit down with somebody, get some education around the nuggets that can help them because I can honestly say, having done this for so long, having, you know, gone through so many tax law changes, there is something in that bill for everybody. And I am the nerd that read all 800 pages of it. And I can definitely say there’s something there for everyone. So, this is an opportunity to stop, assess where you are, and find something that you can utilize in that bill to help lower your taxes. And even if you don’t even go that far, this is an opportunity for you to just do a quick, you know, vital check of your taxes. Where am I? Am I going to owe? Do I need to change my withholdings at work? Do I need to pay in more estimated taxes? Do I need to not pay in more estimated taxes? Because you don’t want to be overpaid either because refunds are really not cute.
Anna: Why would you say that? I know a lot of people especially in in these in my generation in these younger generations, it’s a big deal when the tax refund comes. It’s oh look, I got 5,000 free dollars. That on the surface seems like a wonderful thing to have 5,000 free dollars from the government. Why is that actually maybe not as great as it might seem on the surface?
Karla: Yeah, I used to be like that in the very beginning when I was in my younger year. I’m like, “Oh my gosh, that tax refund.” But here’s the thing. If you have a tax refund coming, you have given the government pretty much an interest-free loan all year long. You’ve overpaid your taxes. What could you have done with that money? You could have maybe paid off some bills if you have them. You could have invested that money. There’s so many things you can do. You’ve lost opportunity cost to get yourself ahead of the game. So, what I like to say is that you want to be tax smart. You don’t want to owe the government more than $500 and you don’t want to get back more than $500. You really just want to be like a break even person. That’s the type of people the government wants when it comes to filing tax. They don’t want people to have to owe them and they don’t want people have to give people back money. So, it’s just not the thought process you want to have when you’re really trying to build wealth. Think about your financial situation. All your money is best utilized by investing are based on whatever it is you want to accomplish. And I don’t think any of us want to accomplish paying more taxes.
Anna: That’s actually a really good way to look at it because your taxes are in fact money that is going to the government and the government’s going to do with those taxes, whatever the government is going to do with those taxes. And if you pay them more money than what you’re supposed to be paying them, they have more money to do with whatever wherever those specific tax dollars are going. When it comes to where that money is going, I know there’s been a lot of change, especially with the one big beautiful bill act, boy, I wish it had a shorter name. That would make this so much easier. But when it comes to that bill that has passed, I know you mentioned there’s a lot of different things in there, especially pertaining to taxes. Would you say that even within tax, not even tax brackets, but income brackets that people think as the same? So like for higher earners who make over 100k a year, would you say there’s different things for those making 100k verse like 150k versus 200k? Are there different things that those people should be looking at even within that group of higher earners or is it all about the same?
Karla: I think that what you’re going to find there’s opportunities for everyone, but as you start getting up in terms of your income, I would say around 250 as a single person, 500,000 as a married couple, you’re going to find that you’re going to start losing out on certain deductions because a lot of these deductions have a lid in terms of a maximization on how much money you can earn to get them. But I can also say most people that are going to hit that lid, these individuals are probably investing. They’re probably getting into real estate. They’re probably getting into, you know, different types of investments. Wall Street, off of Wall Street, investing. They’re probably starting businesses. So then there’s a whole plethora of things that they can do as well. That’s why I say, and I know you talk about that name. I just love saying that name, that one big beautiful bill, because that name is probably one of the nicer names of all the different tax bills we’ve had in a very long time, that bill has something for everybody. So whether you are a W2 individual making median income, whether you are someone that is 100 upwards of 250, whether you’re 250 and above, that bill has something for everybody.
Anna: That’s really good to know cuz I know a lot of the media coverage on this bill, especially on social media, especially on the news, it’s not really going into the nitty-gritty of some of these details, especially pertaining to taxes, because it just encompasses so much. Yes, it’s impossible to get into everything in a quick one minute video, in a quick three minute news segment. What are some tools or resources that you would suggest for younger people who are trying to get a handle of this bill and what it could mean for them in their taxes?
Karla: Absolutely. So, I would say a couple of things. You want to get yourself an account on IRS.gov. They have breaking news. They have little snippets of things that they will put on their website that you should just read for your edification just to bring your awareness up. Now, I’m not saying go out there and be friends with IRS. No, no, no. That’s not what I’m saying. But they do do a great job of putting out some basic information. That’s the first thing I would do. The second thing I would do is I would find some YouTube channels of individuals that put out content on taxes. And when I say individual put out content on taxes, whether it’s myself or anybody else, find somebody that’s been in the industry for a while, because taxes have a pendulum to them. Once you’ve gone through tax law changes, this change, the prior change that happened in the last the prior administration and the administration before that, once you’ve gone through major tax law changes and been in the industry for a while, you understand how it goes. So that person can break down the bill very quickly and figure things out for you. I would also say make sure you fact check anything that you read on the internet. Fact check things that you read on the internet and you know follow professional people. Subscribe to their newsletters. There’s so many different individuals that have newsletters that they are putting out in print that has really good information in them. But above and beyond that, you want to make sure you’re keeping your books and records in order, your income and expenses. So, I like for people to use like the QuickBooks app. I like for them to use Mile High IQ. Anything that is going to help you pull your income and expenses together and aggregate it quickly, you definitely want to do that. But in terms of getting information, you got to be very careful because it’s so much misinformation out there that you want to make sure you’re getting the right information for your situation. And I if you’re so inclined to do so, just keep asking, keep asking questions, keep doing research. And another little good advice is when someone tells you something, ask them, “Can you tell me where that is in the code? Can you tell me where that’s the law? Can you point me to where I could research that myself? If they can do that, then you could go research, you know, that person knows what they’re talking about.
Anna: That’s actually a really good failsafe for advice like that. Ask them to pinpoint, okay, where did this come from? So I can look at it and they’re like, oh, well, it came from this person online who did it. Like, okay, maybe you should go hunting for it a little bit more.
Karla: Yes, exactly. When people start saying to me, “Oh, I got it off this website or I researched,” I’m like, “Okay, got it. Let’s let’s go to the law.” And that’s something I’m real big on even with my staff, right? I tell them all the time. I said, “You know what? We sites are not law. Let’s go to the source. We are sorcerers. Let’s go to the source.” And that’s what we want to do.
Anna: I think that’s a really big part when it comes to financial literacy, especially for taxes. You get a little bit less on that with things like, oh, budgeting or credit cards, but when it comes to taxes, things that are so deeply rooted in the law, it’s important to be able to go back to that and source back to that. Any person in the world can give you advice on budgeting and maybe maybe maybe they’ll be a person that has like iffy advice on budgeting, but if they have some experience, you’re like, okay, maybe they know what they’re doing. You need a little bit more when it comes to things like taxes.
Karla: Absolutely.
Anna: I’m going to give our newsletter a shameless plug. If you go to our website wearenoyack.com, we are noyack.com, you can subscribe to our newsletter. It comes out every Sunday. And we will, right now we’re doing a series where we are breaking down different parts of the one big beautiful bill act, whether it pertain to taxes or other things that might impact your financial lives. But right now we’re talking about taxes because taxes are one of the things that are important right now even though it is July. When would you say is a good time for people to really start getting into the nitty-gritty of their taxes? I know we just keep saying July because it’s July now and we’re having this conversation, but like when is a good midyear point to start reassessing everything.
Karla: Well, the time for them to get into their taxes is really now. And I like to say the time is now because when they’re thinking about it, I want them to think about it from this perspective. And I like to use analogies. When you are attending, for example, maybe a college course and maybe that course is going to be 3 months long or four months long, you’re going to find out, you know, the start of the class, the syllabus and things of that nature. The sooner you can get your material, the sooner you can get your syllabus, the sooner you can know what that class is going to be about and you can start studying, the better off you’re going to do on the exam. Taxes are the exact same way. The exam for 2025 is going to happen between January and April of 2026 when we file the tax returns. That’s the exam. That’s not the time to study. The time to study starts with January 1st all the way through December 31st. But if you didn’t get a chance to study, then start studying now because now we’re in July. We have six more months. You know, if we jump into August, we have five more months. Like, we lose time, but we still have time. So, I tell individuals, you need to get a real good handle on your taxes before you start jumping into your summer outfits. If you’re starting to head out to the beach and do those summer activities, okay, you still have time. If the turkey’s in the oven, we got to cram now. We got to start cramming because we are probably about a good 30 days to the year closes. Most of the strategic moves are made within the year. When I used to work at the law firm and even what I do in my practice right now, we have already broken down the big beautiful bill. We segmented it by different types of client types that we work with. Our investors, our real estate investors, our day traders, our W2 wage earners. We kind of broken it down in categories. And what we have done is we’ve gone through, we’ve identified those clients that we know are going to have opportunity. And we are already vetting out what the opportunity looks like for them. So they can start to make the moves. They have the runway time now to make the moves. So whether it is to purchase a piece of real estate, whether it is to buy their first primary residence, whether it is to start investing, whatever it is, they have time starting a business, get a business started, take the opportunity to utilize the 20% flow through income deduction. If you could carry your parents on your tax return, they’re over 65 years of age, you get another $6,000 write off. It’s just so many things we want to set them up to ace that exam when it comes January through April. And I think something else that is so important is I think that the majority of people think that spending time to reduce their taxes is not patriotic. So I want them to realize that the Supreme Court years ago ruled that man has the right to arrange his affairs in his best interest as long as he follows the law, follows the code. I want to teach them how to follow the law and follow the code because I can tell you a lot of wealth is built out of understanding that tax code. Money we’re not paying Uncle Sam, we can invest someplace else. And that’s a big deal. People looking for money to move, you’re probably sitting on it and don’t realize it.
Anna: What are some other things you can speak on to younger people right now? Because younger people have the most time right now to compound interest in their accounts. How I know that looking at taxes as just sort of a year-long financial endeavor kind of helps it feel like less of a year-end chore. What are some other things you can speak to that put taxes in more of a wealth building angle for some of these younger people that have decades and decades and decades for this interest to compound before their retirement?
Karla: Oh, absolutely. Gosh, that question gives me goosebumps. The younger people obviously have time on their side, right? But they got to make the best utilization of that time. So, one thing that I would say to them, and I call it my 12 by 12 system, take one month every year to look back on last month’s expenses and where you were. And the reason why I think they should do that is because start budgeting for investing. Investing shouldn’t be an afterthought. It should be part of the thought, part of the process. So, if you start to think and say, “Okay, I want to set aside $500, $1,000, $2,000, whatever that amount of money is,” don’t try to wait to the end of the year to get the refund or to aggregate that money. Start doing it right now. And one place where it’s sitting is inside the amount of money you’re paying in income taxes. So, I would look every single month at ways to cut my tax bill so it doesn’t have to be overwhelming for them. And realize you don’t need to go out and have this perfect timing of the market. It’s about time in the market. And that’s something else that people need to understand when you are doing anything. I didn’t learn all this that I know about taxes overnight. I learned it by having time in the industry. Therefore, all of your listeners, everybody, you’re not going to learn it, but pick up one or two things and let’s use these one or two things. Feel good about that. Next month, next quarter, pick up one more thing. But every time you save money on taxes, set that money in your wealth account because that’s what wealthy people do. They accumulate money in those wealth accounts. And a wealth account can be any account you name it a wealth account, whether it’s an account that you’re going to invest in the market, whether it’s in a savings account, whatever it is, put that money in that wealth account. If you get enough of it, put it in the parlay it to the next thing and then refill that account. That’s how you got to start doing it a little bit at a time. Because if you’re waiting to hit the lottery, you might hit the lottery, but you might not. And if you do, please call me because I can help you with the tax implications of that.
Anna: How this is this isn’t related to I guess it’s kind of related to what we’re talking about when it comes to this is just something I’ve always personally wondered. When it comes to winning like the lottery or winning a sweepstakes with like a really big like car or some absurd amount of money, is that a tax hell to be in?
Karla: So it could be, but it won’t be. And let me tell you why it won’t be. Anytime we can get income on our tax return, whether it’s a prize, whether it’s winning a lottery, whatever it is, we’re all about the income, right? Cuz that’s what we want. We want income on our tax return. Anytime that’s happening, don’t be so concerned about that. Think about the strategy. Strategize to mitigate it. You know, people will come to me sometimes and they will say, you know, I’m going to sell my house. I don’t want to invest in another house. Is there anything I could do? Is there anything I could do with the sell of my house to save to save money? Well, there may not be anything you could do with a sell of that house. That capital gains is going to come on your tax return. But what other strategies can we employ on your tax return and your bigger financial picture to lower your overall tax liability because the capital gains, your W2 earnings, your interest on your accounts, your business income, all of that is your total income. The strategy does not necessarily have to tie to the method in which you earn the income, right? Allow me to give an example of that. Let’s say that you won the lottery and you’re going to have this big gigantic windfall on your tax return. We can come over here and say, “Okay, Karla’s now won the lottery. What are some things she can do to reduce that tax bill and think about building wealth?” Okay, maybe I want to look at setting up my own nonprofit. I want to take some of my lottery winnings, put it into my own nonprofit. It’s still under my control. It’s my nonprofit. I made a charitable contribution to my nonprofit. I get a tax deduction on my return for it. And then I can figure out how I’m going to use the money in my nonprofit later. That had nothing to do with the actual acquiring of that lottery winnings, right? I could say to myself, okay, you know what? I want to go out and I’m going to buy myself some real estate, some rental properties, and I’m going to take advantage of the 100% depreciation that’s back in the one big beautiful bill, and I’m going to write off pretty much the majority of the cost of that real estate. And that’s going to that write off. And let’s say you won 600,000 in the lottery and the write off of your real estate is 300,000. I just dropped my winnings by 300,000. The key is don’t look at it as trying to create the strategy around where the money came from. The strategy is holistic. It’s holistic based on anything that we can do within the law that is according to your vision, things that you want to do that can help you reduce your tax bill. And to take it a step further, the tax code incentivizes investing. It incentivizes investing. That’s why wealthy people understand the tax code. Because if you think about it in the tax code, you have all sorts of things around investments. You can sell a small business tax-free. You have lower capital gains tax rates. You can write off, you know, the acquisition cost of investment property up to certain limits excluding land. You can go invest in opportunity zones. It’s so many things around investing that you could do. I wonder why. Because they want people to invest, which is going to help to parlay the economy forward.
Anna: And that seems like it’s a whole lot easier to figure out if you have been planning your taxes throughout the year. You know where you are. You’ve known where you’ve been for a couple years in a row. That’ll make that a lot easier to figure out. And even with smaller things like let’s say you get a sizable raise at work. You might suddenly be pushed into a different tax bracket. And that means you have to adjust your strategy a little bit. It’s easier to adjust your strategy if you’ve known where you’ve been all along.
Karla: That’s exactly correct. I like to say whenever money’s in motion, taxes need to be at the forefront because taxes is absolute. So, if you’re going to get more money in a raise, if you earn more interest on your bank account, whenever there’s more money, you got to think about the tax implications. Don’t let the taxes be an afterthought. Don’t let it be an afterthought. It needs to be the next thought. It really does. It needs to be the next thought when you’re getting money because most people think, “Oh, I got this money. Let me go spend it.” Okay, I don’t want to use the word go spend it. I want to say go invest it tax smart.
Anna: What advice would you have to younger high earners who aren’t rich yet, they’re not wealthy yet, but they want to become wealthy. How do taxes help get them there? Even though it seems kind of contradictory.
Karla: Yeah. But that’s a very good question for people that are, you know, making a decent amount of money and they’re aspiring to be people that acquire wealth and probably generational wealth. The thing that I would say is you got to get a handle on what does it mean to be tax smart. And the best way that I can explain it is with every you’re going to do something with your money, ask yourself this fundamental question. Is there a tax smart way to make this move? Is there a tax smart way to make the move? Let me give an example. Is there a tax smart way to make the move? Let’s say that you are thinking about maybe paying for college or maybe you’re thinking about starting a new business or whatever the case may be. Those things that you’re thinking about. If you’re thinking about paying for college, ask yourself, should I pay for college? Will I be able to get some college credits? Should I start my own business and write my college off as an educational thing through my business? How can I make this transaction tax deductible for me? How can I do that? Therefore, I’m getting a tax break and I’m not having to pay the tax on that money I’m using where I’m investing in my education or I’m investing in my bank accounts. Always think about it like that from that perspective.
Anna: That’s a really good way to look at it. Before we wrap up today, do you have any final words of advice or pieces of information that you want to share about year-round tax prep, about the one big beautiful bill act, about taxes in general? Anything you would want to share with the audience out there?
Karla: Yeah, absolutely. Yeah, I want to definitely let them know, don’t be afraid of taxes. Taxes is where the money is. That I will definitely tell you taxes is where the money is. If you so inclined to do so follow some people that understand taxes, get more educated around taxes and just make one tax move this year. Do a summer tax checkup. Say to yourself, “This is where I am. This is how much money I’ve made right now. This is what my potential liability is going to look like.” And what are some things that I can do to lower my tax bill? One thing that I put together is when the bill finalized on July 4th, I put together like a little cheat sheet that shows you by category some things that you could be looking at. So, for example, if you are itemizing your deductions, are you need to be looking at the fact that you can deduct your up to 40,000 in your state and local tax? If you don’t have your own home, you don’t have your own property, there’s other things that you could do. Get that right off of that charitable contribution. Are you in a category where you’re getting tip income? Know how to account for that so that you can get that tax-free because there’s not going to be any tax on tips. What does that look like? Are there tax credits? And credits are dollar for dollar. You know, if we have a tax deduction and let’s say we make $100,000 and a tax deduction is $5,000. Your taxable income becomes $95,000. But if I have a $5,000 tax credit, that’s like additional money paid in on my behalf. So, I would just say stop right now, assess your situation, understand your vision, what you’re trying to accomplish, and make those two things meet. And that’s when you’re going to start to see how you can lower your tax bill. But do not wait. Don’t wait to gather your income documents. Don’t wait to gather your expense document. Start jotting that stuff down now. Start making questions, your little questions sheet now. Don’t wait because I could tell you now that this bill has passed, tax professionals are getting inundated. They’re getting inundated because there’s so much around this, so much opportunity. It’s like someone threw out a million dollars on the highway and everybody’s jumping out their cars trying to get it. I want everyone of your listeners to get their fair share legally.
Anna: Well, thank you again, Karla, for coming on the show. Again, I’m Anna, our producer and production lead here at NOYACK – wearenoyack.com. If you head over there, we have hundreds of different resources, articles, newsletters about all sorts of finance topics, tax included. We also have our weekly newsletter that you can subscribe to to get updates like this as they happen right in your inbox. We’ll also be posting interviews like this there as well. Karla, do you have anything that you want to promote?
Karla: Yes, I would just recommend if they could go to my website kdainc.com. If you go to my website, you can opt into my newsletter where you can subscribe to that and definitely get up to date accurate tax information that you can use and how to utilize it. My goal is to educate and to make sure that we are saving taxes one taxpayer at a time.
Anna: Thank you again for coming on our show. Definitely go check out Karla’s website and thank you all for watching. Have a great rest of your day.
