August 5, 2025 • 32 mins
Join hosts Chris Picciurro, CPA, and John Tripolsky as they explore an often-overlooked topic: the tax implications of changing jobs or transitioning into retirement. With career changes on the rise in recent years—whether due to new opportunities, layoffs, or retirement—understanding the tax side of employment transitions is crucial.
Chris and John walk listeners through everything from retirement plan rollovers and benefit changes to withholding adjustments and self-employment considerations. They also tackle what you need to know about flexible spending accounts, health savings accounts, vested stock options, and group insurance benefits when leaving an employer. Wrapping up, the conversation shifts toward self-employment and retirement, covering key planning points like self-employment taxes, Social Security timing, and Medicare enrollment.
What You'll Learn:
• How to manage 401(k) rollovers and avoid penalties
• Why updating W-4 withholdings is crucial after a job change
• What to do about group life insurance and other employer benefits
• Key tax considerations for transitioning into self-employment
• Planning strategies for retirement income, Social Security, and relocation taxes
Key Insights:
Leaving a job involves more than just changes in pay; it requires proactive tax planning. Whether you’re switching employers or entering retirement, knowing these key steps can prevent costly surprises and help you navigate this major transition with confidence.
Notable Quotes:
• “I didn’t realize all of the considerations when you change jobs...that is a podcast episode.” – Chris Picciurro
• “Make sure your withholdings from your W-2 wages are proper.” – Chris Picciurro
• “Even if you have great life insurance through your employer, have coverage outside of your employment.” – Chris Picciurro
• “There are definitely some benefits for rolling it out of that former employer’s plan.” – Chris Picciurro
• “When you leave a job, there’s a lot more things to consider than just pay.” – Chris Picciurro
Resources:
• Teaching Tax Flow Website
• Defeating Taxes Facebook Group
• Teaching Tax Flow Hub
• Teaching Tax Flow YouTube Channel
Episode Sponsor:
Integrated Investment Group (IIG)
Wondering if you qualify as an accredited investor? Visit teachingtaxflow.com/iig to learn more.
- (00:02) - Tax Considerations When Changing Jobs or Retiring
- (05:36) - Managing Retirement Plans and Benefits When Changing Jobs
- (13:52) - Building a Non-Salesy Resource Hub for Tax Advice
- (15:09) - Tax Implications of Job Relocation and Stock Options
- (19:00) - Navigating Self-Employment Tax and Retirement Planning
- (24:19) - Alaskan Fishermen Deductions and Missed Opportunities
- (25:51) - Navigating Retirement Transitions and Financial Considerations
- (28:05) - Navigating Job Changes and Tax Implications
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
John Tripolsky (00:02):
Hey, everybody, and welcome back to the teaching
tax flow podcast episode 147.That's right. We're still
creeping up on that one fifty,that episode 150 here. And
today, we're gonna get into thattopic that everybody is bound to
do at some point in their life.Hopefully, you make it to the
last step of this.
We are gonna look at what to doas it relates to taxes when
(00:24):
you're leaving an employer formultiple reasons. But without
giving away too much, we aregonna dive into it on today's
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John Tripolsky (01:23):
Alright, everybody. You heard in the
intro, we are gonna talk aboutsome of those glorious,
hopefully glorious, stages oflife when you switch employers.
So what does that mean exactly?You could leave for a million
reasons, but hopefully, some ofyou are listening to this.
You're actually retiring.
So congratulations. You made itto the other road. The light was
there, and it was not a traincoming at you. So we're gonna
(01:46):
tie this into taxes for you,which some of the stuff you may
not actually have known is evenreally a thing. So I don't know
the answers to it.
I'm not afraid to admit it. Butthis guy, if you're watching on
the other side of the screen forme, Chris Pacquero, welcome
back, sir. Your own show. Hereyou are again. You have the
answers, which is why we let youback.
Chris Picciurro, CPA (02:08):
It's great to be back. I've and, you know,
John, we talk about it all thetime that these topics come to
us through the teaching tax flowcommunity. This is a true story.
We my family and I were back inMichigan for the fourth of July
holiday and went to an outdoormall that you and I have gone to
(02:29):
before in the Detroit area,randomly ran into some friends
of ours that used to live in ourin the neighborhood a decade ago
that we're still friends with.And and they're part of the
teaching tax school communityalso, defeating taxes.
But it was random that I raninto them. And the the friend,
(02:49):
she was telling my wife and Ithat her husband was changing
jobs. And it was and it waslike, I didn't re he was with
the same company for probablytwenty years. I didn't realize
all of the considerations whenyou change jobs. And I'm like,
that is a podcast episode.
John Tripolsky (03:06):
Yeah. It's great when we come up with them that
way.
Chris Picciurro, CPA (03:09):
And we said, alright. This is great. I
and answered your questions, andI thought, you know what? Let's
talk through some of the tax andfinancial considerations when
you are changing jobs and and,you know, tip it or leaving a
job and because I guess it's notreally changing a job if you if
you don't get another job.Right?
So what what should you beconsidering when you leave one w
(03:31):
two position for another w twoposition? What should you be
considering when you leave a wtwo position and go into self
employment or start a businessor when you retire? So we're
gonna talk about this, but Iwant to encourage you. Bring
your questions and comments.Either leave those comments
right here on our YouTubechannel if you're watching or in
the on the defeating taxesprivate Facebook group.
(03:54):
You're gonna see that it's veryimportant to have that personal
board of directors. Talk to yourfinancial adviser and your tax
professional, when you're makingthese type of decisions. So,
yeah, let's jump in on theseconsiderations, and we're gonna
start with what happens when yougo to from a w two position to
another w two position.Obviously, the driver many times
(04:16):
for leaving an opportunity iscompensation. Maybe it's
opportunity, but it doesn'treally matter the reason why
you're moving.
Maybe it was involuntary. Right?May maybe maybe you had
downsized. Maybe the company gotsold. It doesn't really matter
why.
But I wanna just talk throughsome of the main considerations
that someone should think about.And
John Tripolsky (04:39):
And I'm sure there's probably been more of
this than ever in the past fouror five years. Right? I mean, we
talk about that little thingthat happened in all of our
lives. You know, the the wholeworld shut down, basically. It's
a lot of people went remote.
I mean, I could think of just ontwo really, over two hands, the
number of people that didn'teven wanna go back to the same
company after everythinghappened because, frankly, they
(05:01):
kinda realized, like, oh, man.The culture sucks there. I want
out. So a lot of people changed.Right?
You have Sure. A lot of shifts.
Chris Picciurro, CPA (05:09):
There's been shifts. There's been times
where people have, you know,been got used to working, from
home or remotely, and they don'twanna go back. So it it could be
a variety of reasons, but whatyou should be considering the
first thing I would beconsidering is what's what am I
gonna do about retirement? Do Ihave a four zero one k, a four
(05:31):
zero three b, four fifty sevenplan assets? I'm leaving that
employer, what should I do aboutthe the money that's there?
Am I vested in in a 100% vested?Should I roll it into my new
four zero one k if I haveanother company that offers it?
Should I roll it into an IRA?Obviously, if you just take the
(05:51):
money as a distribution, therecould be a big negative tax
consequence as far as it'staxable on a 10% penalty. What
if I've taken a loan againstthat four zero one k, and I need
to pay it back to prevent thattax?
So handling the four zero one k,four zero three b, four fifty
seven, whatever your retirementplan, simple IRA, handling that
retirement plan that you havewith your former employer is is
(06:14):
very important and something toto consider and and, not be
taken lightly. So definitely,like I said, talk to your tax
professional. Talk to yourfinancial adviser. If you're if
you're listening or watchingthis saying, oh, I don't have
one of those in my life. That'swhat we're here for.
Reach out to us, John. You knowthat we have an extensive
(06:36):
network of trusted people. Andyou might have you you might I
mean, we've run into situationswhere someone had a four zero
one k with an employer that theyhaven't worked at in a few years
for for whatever reason. So,again, the the four zero one k
is really designated for activeemployees, but those accounts
could become what we callorphaned, and but you wanna
(06:57):
address those. There aredefinitely some benefits for for
rolling it out of that formeremployer's plan.
So that's one thing. Anotherthing, quite frankly, something
that that I just dealt withtoday in in as the kids like to
say, IRL, right, in real life isdo do you have any unused
flexible spending account or daycare flexible spending accounts?
(07:20):
I you know, do you have a or ahealth savings account money
from that old employer? Can thatyou're just because you've leave
the employer, if you have ahealth savings account, that
money is still yours. Do youroll it into a new HSA?
Do you keep that account openand use the money until it's
expired? So do you have sometype of HSA or FSA, flexible
spending account as the FSA,that needs to be utilized, used,
(07:44):
or or or moved in some way,shape, or form? So that's
something to think about.
John Tripolsky (07:49):
And, Chris, you mentioned earlier on too. You
know, it's for those that don'tknow, when you talk about, are
you vested in something? So, Imean, I'll I'll kinda give a
little bit of example, so tellme if I'm off because I'm sure
you can do it way better. Butthose that are familiar with
that, right, you might be in aposition. You might look at your
account and say, wow.
You know, I got we'll just useit now. Wow. There's $10,000 in
there, but, you know, they do anemployee match. You know, I put
(08:11):
five. They put five.
Right. But you're not vested.Right? So, basically, what that
means invested, not invested,vested, is that account? It's in
the account, but usually,there's a a period of time where
you're remaining with thatemployer, other firms, until
that money is actually yours.
So, like, it's showing in theaccount. It's growing in the
account, but it's not reallyyours to withdraw or move shift.
(08:32):
Right? Is there anything
Chris Picciurro, CPA (08:33):
else that you've been an employee for a
certain period of time, forinstance. So Absolutely.
John Tripolsky (08:38):
I remember the first time I seen that in
account of mine, I was like,what do you mean it's not mine?
It's in my account, muchyounger. And then you think
you're like, oh, okay. That itmakes sense. You know, if if
they're they're investing inyou, you know, as an employee,
so it makes sense.
So, yeah, those that are gettinginto it, if you're not familiar
with it, there you go. There'syour definition.
Chris Picciurro, CPA (08:56):
Another another issue. This this happens
all the time when you when I seepeople start new employment.
Making sure your withholdingsfrom your w two ages are proper.
Right? Because you get thatfirst you're getting onboarded
as a new employee somewhere.
They send you your w four form,which is your withholding
certificate, and you fill itout. And what can happen is that
(09:20):
you're you maybe your formeremployer was withholding maybe
more or less than your currentemployer. In if without the
right tax planning and withoutdoing your tax projection, you
could find out that you'reeither way overpaid at the end
of the year or way underpaid inin in the actually owed
significant amount of tax.Right? Because what, you know,
what happens if you, you know,do you just fill out your w four
(09:43):
form differently?
And and so yeah. So make sureyour w two withholdings, after a
one or two paychecks, doublecheck those. Make sure they're
in line with what your marginaltax rate is. And then if you
need to pivot, then work withyour employer, to do that.
Remember, that w four form canbe changed.
(10:04):
W four form tells your employerhow much tax to withheld
withhold, rather, from yourwages.
John Tripolsky (10:11):
And with that too, I mean, it's god. It's been
ages since I filled one of thoseout. But, usually, I mean, you
could get the form yourself, andthen usually, it's just
submitting it to HR or whomever.
Chris Picciurro, CPA (10:22):
Yeah. Most larger employers have a portal
that you could submit yours. Soeven smaller employers that use
any type of online payrollservice, they're gonna have a
they're gonna have a portal thatyou can that you can put in
here.
John Tripolsky (10:34):
Here's a question for you based off your
experience. So, obviously,y'all's private practice, you're
dealing with some higher networth individuals, real estate
investors, etcetera. So thelikelihood of them having been
or with a company for a longerperiod of time is is more likely
than if you're working with abunch of millennials, say, for
example. I'm on the very tailend of that, so I can talk smack
(10:55):
about millennials, where theyswitch jobs every year. Have you
ever come across this withclients where they've been with
the same employer, say, fortwenty plus years, and you're
like, wow.
You're say it's a new client.You've guys have onboarded. You
say, wow. This is way off. Like,you need to go in and readjust
this because it has beendrastically off for a decade or
(11:17):
something.
Mhmm. Like, have you seen that alot?
Chris Picciurro, CPA (11:20):
No. No. Because, I mean, the
withholdings, they would knowthat if it was off if if they
had an an anomaly with their taxreturn. So let's say they they
had a you know, they're breakingeven or or or overpaid for years
and years, and then they owe. Sothey would the the indicator
would be the result of their taxreturn.
It gets very tricky when peopleare paid bonuses most of or if
(11:43):
they have employee stock optionsand that sort of stuff. Gotcha.
But by simply doing a taxprojection, that's how you know
where you stand.
John Tripolsky (11:51):
Perfect. Yeah. And I know we talk about that in
almost every single episode thatcomes up where it's something
everybody can do. Like, it's notyou don't have to be making 7
figures to do tax planning, aswe like to say.
Chris Picciurro, CPA (12:02):
No. Tax planning is for everybody.
Right. Next thing is somethingthat's going to be very tricky.
Okay?
Especially if you're with alarger employer. Many larger
employers have something calledgroup life insurance coverage.
The advantage of group lifeinsurance coverage is it's it's
the first $50,000 of employeepaid group life as far as from a
(12:23):
term insurance is is tax freeemployee benefit. Anything above
that is a is a taxable fringebenefit, or you might have
increased the amount of coveragethrough your through your pay.
With a group policy, typically,there's not a lot of
underwriting or or you're gonnahave to go through a health
exam, but the but the challengeis is when you leave that
(12:44):
employer, your life insurance isnow gone.
Mhmm. And that's something toconsider, especially, you know,
the older you are. No one'sgetting younger or healthier
typically, and that's really a,a blind spot for people when
they change employers to to bebe certain of that. Right?
(13:07):
Especially if you've got afamily.
If you don't have life insuranceoutside of your employment, that
could be a big zinger, we'llsay.
John Tripolsky (13:15):
If you leave a little bit more abruptly. Right?
You're not really thinking aboutthings like that. You're more
like, I gotta I gotta do this. Igotta do this quick.
So
Chris Picciurro, CPA: Absolutely. So definitely make (13:23):
undefined
sure, you know, even if you havegreat life insurance through
your employer, you I would Iwould definitely talk to someone
about coverage outside of youremployment. And, if you have
those questions, please jumpinto taxes. Just go to
defeatingtaxes.com. That's ourprivate Facebook group, or leave
a message for us atteachingtaxflow.
(13:46):
John, maybe you could put thelink to the hub in there. We
haveteachingtaxflow.combackslashhub,
hub. Anyone in our community cancan submit their information and
ask for a referral through ourcommunity.
John Tripolsky (13:58):
And I'll say too a little kudos to to ourselves
on that one. Right? I thinkeverybody resources that we've
brought into that hub, it'snever salesy. So it's never you
know, it's not like we do anintro to somebody or somebody on
our team does an intro, and thenthis other person just calling
them, how did I'm like, hey.Let's do this.
Let's do business. Let's dothis. A lot of the times, I'd
(14:19):
probably say, if I had to guess,probably 95% of the time,
they're just answering questionsand leave it at that. Right?
Like, I mean, it can be onanything.
And that's, I think, theglorious thing about what I
mean, it's taken us years tobuild that hub. But, I mean, you
decades, basically, of some ofthese contacts. And it and it it
(14:39):
really is great because,otherwise, you're you're getting
sold on something, I think, by alot of people. So, anyways
Absolutely. Little pat on ourown back there.
Chris Picciurro, CPA (14:47):
We've got a lot of resources for people.
We're and we're constantlyadding resources, you know, and
and take you and I are inmeetings all the time with
people that are interested in inmaybe working with people in our
community, and we're making surethat we feel like it could add
some value. So, I mean, a lot ofpeople I mean, a lot of people
in the community have beenguests on this podcast as well.
(15:09):
So there tons of greatresources. Let's say you're
leaving a job and relocating.
So, you know, the with the TaxCuts and Jobs Act, a lot of
those things changed, but youhave to be weird where where the
moving expenses used to be manytimes tax free or tax deduction.
Now most employer paid movingexpenses are taxable. The but
(15:32):
then so for instance, John, letme let's say that your employer
paid $30,000 for you to movefrom one place to the other.
They'll put that on your w two,but they're they're not gonna
have as much withholding as theywould if it was a bonus. So
another so the point isunderstand the ramifications if
your employ if if someone ispaying for your move that's
(15:53):
employment related
John Tripolsky (15:54):
Mhmm.
Chris Picciurro, CPA (15:54):
The tax ramifications of that. And then
the final thing, you're goingjob to job or even if you're
leaving a job in general, arethere stock options or RSUs,
which stands for restrictedstock options, that are
triggered? Or or or or do youlose them potentially? Right? So
(16:15):
sometimes you let's say youleave a job.
You might have to exercise thosestock options, which could have
a big taxable event. I IRL,right, in real life, I mean, I
just met with the one of theprivate CPA firm members that
has about a half a milliondollars of RSUs. The the the
person left their employer andand had to exercise those.
(16:38):
Again, I'd rather have a halfmillion dollars of taxable
income than not, but it was notsomething that person if I asked
that person a year ago, do youexpect to exercise these
options? That person would havesaid no.
Just circumstances changed. Itwas time for that person to for
a new chapter in their life, andthey had and they were had to
exercise those options. So justsomething to consider. Stock
(16:59):
options are ROCs when you leavean employer.
John Tripolsky (17:01):
It's funny. All these things that we're talking
about here, you know, to to makeit maybe relatable to some
people, it's you know, youalways hear the stories of, oh,
somebody won the lotteryunexpected. You know? What are
the chances they're gonna winthe lottery? They're all
excited.
Like, yeah. I won a$100,000,000, and then, like,
oh, crap. I really didn't winthat given that it's not divided
(17:22):
up anywhere else. Oh, I gottapay tax on this. I really didn't
win that.
It's kinda like with all this.Right? Like, if you're leaving
most likely, if you're leavingone position for another, it's
probably for the better. Like,you're probably you probably
have a lot of say in this. Youknow?
It's whatever it is. So you'rereally excited about it. And,
yeah, if you hear aboutsomething, you're like, oh,
crap. I need to exercise these,you know, the stock options.
(17:43):
It's almost like a it's anunwanted surprise, really,
unless you're aware of it.
Right? So a lot of these, Ithink, are are really like that.
Here's here's a question for youtoo going back just a hair. So
we talked about the relocationreimbursement, you know, being
taxable. What about, like,housing stipends?
(18:04):
Are those taxable?
Chris Picciurro, CPA (18:05):
Yeah. It depend that that comes down to
is it it a taxable or nontaxablefringe benefit? There are
special rules with her clergy,especially. It comes down to the
there's a lot of rules withthat. Is the assignment a
temporary assignment?
Is it a per you know, or is it apermanent move? Tip so.
John Tripolsky (18:24):
Interesting. Okay.
Chris Picciurro, CPA (18:25):
Yeah. No. That's check with your check
with your HR if you if you're inthat situation. It's a great
question. But let's say you'rein someone that says, hey.
We've got a you know, let's sayyou're based in in Michigan,
John, and, hey. We've got a jobin California for you for four
months. Ah, you know, sureyou'll get taxed there, but, you
know, we're dealing with you ahousing stipend. You can go rent
(18:45):
an apartment or, you know, putyou up or do they put you in a
hotel with an accountable plan?So it really comes down to
taxable versus nontaxableemployee fringe benefits.
John Tripolsky (18:55):
Right. That makes sense. So, yeah, it's
very, very, very situationallydependent.
Chris Picciurro, CPA (19:00):
Yes. As we like to say.
John Tripolsky (19:01):
I feel like we haven't used the term in while
either.
Chris Picciurro, CPA (19:03):
For self employment. Right? You're you're
you're you left your job, andyou're you're gonna either be
self employed, and you're eithergonna your income's gonna
change. You're either gonna payyou're either going to report it
on a schedule c for selfemployment, or maybe you're
you're entering maybe you'reyou're becoming part of a
partnership. Right?
(19:24):
Maybe you're an attorney, andyou left, corporate America, and
you and your buddy are creatinga partnership, your own law
firm. And then that means you'dget a k one. Or maybe you're an
s corp. I don't like peoplejumping in s corps. Check out
that episode.
We actually had someone in ourDefeating Taxes private Facebook
group. Every Friday, we we postand basically let people ask
whatever question they want. Andthis week, we had someone ask a
(19:47):
lot of questions about uscorporations, which are really
good questions. However, the thetone was, it's not time. Don't
jump into it right now.
John Tripolsky (19:55):
Yeah. That's that's one of those things that
I think I will remember. It usedto be, you know, I I knew how to
poke the bear with you with LLCsand everybody at one one of
those because they think it wasa tax benefit. But definitely,
the s corp topic is now the theone that I I know is a weak spot
for you.
Chris Picciurro, CPA (20:12):
Hey. I yeah. I mean
John Tripolsky (20:14):
If it doesn't make sense.
Chris Picciurro, CPA (20:15):
If it doesn't make sense. So so think
about your your income's gonnabe taxed differently if you go
into being in for business in inbusiness on your own. And
instead of, you know, obviously,the s corp is a hybrid model,
but in general, okay, instead ofyou getting paid under w two
where the all the taxes aregetting withheld from that, you
(20:36):
are now responsible to makequarterly estimated tax payments
both on the federal and statelevel. You're also going to be
subject to what's called selfemployment tax. So, John, as a
when you're when you receive a wtwo, your employer withholds
7.65%.
The employer actually matchesthat 7.65% that goes into the
Social Security system, and,that's a 15 and but when you're
(20:58):
self employed, you have to payboth sides of that, which is the
15.3% of self employment tax.You're also gonna be on your own
for retirement contributions.Right? You don't have that
employer anymore. So should you,you know, should are you in a
position that you can contributeto retirement?
What type of plan should it be?You've got everything from a a
traditional IRA, Roth IRA, allthe way up to a, you know,
(21:20):
defined benefit plan or a solofour zero one k or a SAP, simple
IRA. It's almost an analysis byparalysis. You wanna talk to I
know it seems like I keeprepeating myself. You wanna talk
to your financial adviser.
Talk to your accountant. Talkthrough, is this a point in my
life where I could contribute toretirement? How much can I
contribute? Do I have otheremployees? And design the the
(21:42):
the retirement plan around yourneeds.
Don't just pick one and and puta square peg in a round hole.
John Tripolsky (21:49):
You know? That is honestly, that's probably one
of the best quotes I've heardyou say in six months, And you
say a lot of good ones.
Chris Picciurro, CPA (21:56):
Should record it then.
John Tripolsky (21:57):
How good thing about recording? One right
there. Because, yeah, a lot ofpeople, it's just like, oh, I'll
take anything. I'm going fromsomething here and, yeah, just
make this work. But you're kindastuck with some of that.
Right? It's not as easy asflipping a light switch on and
off in in three minutes. So
Chris Picciurro, CPA (22:10):
So timing is important. And the now the
nice thing about being selfemployed, maybe some of the
things that you weren't able todeduct as an employee, we know
with Tax Cuts and Jobs Act, andit got extended over OB three.
Unreimbursed employee businessexpenses are not deductible from
99% of people, then now theyare. So home office now. Now you
(22:33):
can you know, some might thepoint is if you go from a w two
position to self employment,you're paying tax on your net
income, and you could deductsome of these things that you
weren't able to deduct when youare in the employee rule role.
So that's something to consider.And then the final thing which
we alluded to would be would bepotentially loss of group
benefits. Right? Do youespecially health insurance,
(22:57):
life insurance, disabilityinsurance. How do you pick those
up now being self employed?
And and what are the costconsiderations? You know? Can
you yeah. How do you how do youfind that? Maybe you have a
spouse that has some of thosethat coverage.
So, really, when you when you'reself employed or own a business,
(23:17):
you know, you you're probably incontact with what we call your
center of some influence a lotmore than when you are a w two,
you know, w two role. Mhmm.
John Tripolsky (23:28):
And this, obviously I mean, they're like
we said kind of at thebeginning. Right? I think we
gave a a good handful ofscenarios that everybody in the
workforce will go through at oneone point or another for umpteen
number of reasons, and we'llhave a little fun with this.
Right? I'd say you know,because, obviously, we have a
lot of loyal subscribers andlisteners to this podcast.
(23:51):
Won't give away the answer, butwe'll we'll kinda put it out
there and then let us know ifyou know the answer. Maybe we'll
send you something fun or or dosomething for you. You know, if
you go into the self employmentrealm with new things from the
one big beautiful bill actor,Obi three, Chris, as you
mentioned it there. Right? Ifyou're a foodie, you may wanna
consider becoming a commercialfisherman.
(24:13):
Not gonna say why. But, Chris,do you get where I'm going with
this one as far as for
Chris Picciurro, CPA (24:18):
deductions go? Actually, that carve out we
found out when at the recent isreally challenging because I
believe only people and onlycommercial fishermen in Alaska
get the 100% deduction for mealsprovided to them. So
John Tripolsky (24:34):
It's so weird, but it's very political.
Chris Picciurro, CPA (24:35):
To being I I don't see many foodies want
want to hang out on a fishingboat out off the shore of Alaska
No. To get a little additionaldeduction. Well, maybe you never
know. Right?
John Tripolsky (24:48):
Hey. Hey. Fun fun fact, Chris. I don't know if
you knew this about me, but whenI was in high school, so when I
was a senior, I had been datingthe same girl for about three
years, and I didn't wanna leaveher for a summer. So I actually
turned down a job to work inAlaska as a longlining salmon
fisherman because I didn't wannaleave her that summer.
(25:10):
Now I haven't talked to her inabout twenty five years. I
should've went on the damn trip.What do
Chris Picciurro, CPA (25:14):
I remember? Yeah. Those people
make some big bucks, but it's avery risky job.
John Tripolsky (25:18):
Yeah. I think even at that time, it was almost
a guaranteed, like, $38 in fourmonths. Mhmm. But there's a lot
there's a lot that goes into it.So
Chris Picciurro, CPA (25:26):
There yeah. It is it is a grueling job
from what I understand, and I'veI know a couple people that have
done it. Let's say your finalthing is you're gonna let's say
you're leaving for retirement.Right? So you're you're you're
retiring.
You're leaving your w twoemployment. Now you're you might
take some gap years. You mightsemiretire. You might start
(25:47):
doing other hobbies. What arethe considerations?
Right? Well, you might have totake retire required minimum
distributions from yourretirement accounts now that
you're not working. Are youshould you be drawing Social
Security? Are you alreadydrawing Social Security? How
does that affect the tax on yourSocial Security?
You know, do you have medicalcoverage? Are you eligible to
(26:11):
enroll in Medicare? You know,there's just so many things.
Should you should you take alump sum distribution
potentially from your employer,or if they offer you pension or
a lump sum distribution, shouldyou roll that lump sum over? Do
you you know, is your retirementincome gonna be taxed
differently than your w twowages?
Are you going to move, and maybenow you're in a different state?
(26:33):
So, obviously, there are a lotof considerations there. And,
typically, John, a lot moreplanning goes into that
transition to retirement thanfrom from, you know, usually,
well, leaving of of w twoposition to get another one
quitting your job and startingyour own business are I'm not
gonna say they're impulsedecisions, but they're decisions
(26:54):
that don't take years and yearsof planning like retirement
does.
John Tripolsky (26:58):
Right. I am sure my you know, I like to throw my
father under the bus becausehe's captain planner. I'm sure
I'm sure he had been planningfor since the day he got a job
for retirement. But and, youknow, some people, you know, we
we say a lot of this happens onimpulse too. I mean, Chris, you
know this.
Being from the Metro Detroitarea like myself, when the big
(27:19):
auto manufacturers went througha big old flipping turnaround, a
lot of people jumped intoretirement pretty damn fast and
didn't expect it. So I almostwonder too. And a lot of those
guys, I I know for
Chris Picciurro, CPA (27:30):
a fact a lot of
John Tripolsky (27:31):
those have been working for the same company for
twenty, thirty years. I wonderhow much of this kinda snuck up
on them where they didn't thinkabout it and, you know, jumped
off a cliff in a sense.
Chris Picciurro, CPA (27:40):
Oh, I absolutely. No. It could it can
happen. Well, I know a lot ofpeople count down their
retirement, but not everyoneplans for retirement like like
your dad did. So that kudos tohim.
John Tripolsky (27:52):
I love him for that.
Chris Picciurro, CPA (27:53):
And I and, you know, we hope he's listening
to this as we wrap this episodeup. I think, you know, the theme
is when you leave a job, there'sa lot more cons things to
consider than just pay.
John Tripolsky (28:05):
The man, you are, like, dropping knowledge
bombs today. That's gonna we'regonna get a a T shirt that says
that. But, yeah, it's I mean,really, what really, what you
said there, and I think has beenthe theme throughout this entire
conversation, right, is there'sstuff out there. Sure things can
be unexpected. But, really, I'mI'm glad we're having this
conversation too because even ifsomebody's listening to it or,
(28:26):
you know, they they listen topart of it, hopefully, they got
to the end here becauseotherwise, they wouldn't have
heard what I'm about to say.
But it's good to know this stuffbefore the opportunities even
come up to switch. Right?Because like you had mentioned a
couple examples. Right? The kindof being tossed in to make a
decision could have very, verylarge tax implications that may,
depending on the situation,offset the benefit of leaving
(28:50):
for a financial, you know, aboost in pay somewhere else
depending on how it works out.
So it's good to know. It's goodto know. And then, actually,
what we're gonna do with thisone, Chris, I just thought of
this while you were talking is,you know, I was kinda mentally
thinking of situations thatwe've heard even in the past
couple months, and, you know,we're just in Vegas for
taxposium and listening to othertax pros, and I'm kinda like a
(29:11):
sponge absorbing it all there.They're sharing examples of
their clients, you know, notsaying their names and all their
info especially. But thesituations oh, I'm gonna pop a
little survey, and I'm gonna putit on our Facebook page.
I know it'll be on our publicFacebook page for teaching tax
flow. We'll do it a littledifferent. Sometimes we put it
(29:31):
in the group, in the defeatingtax one. This one, put on the
page if we can, or we'll put itin group. We'll figure it out.
There'll be a link there. Justasking people how comfortable
they are or were with all thisstuff or how much they knew
about all this that could sneakup on them before, you know,
they listen to this. I'm justkinda curious too. So and then
from that, obviously, we we urgeeverybody just comment in there.
(29:52):
Let us know your situations.
Like, maybe it happened to you,somebody you know, makeup, say,
John Smith asking for a friendtype deal. It'd be good to know
because I think we could takethis in a lot of different
directions and dive deeper too.So we wanna make sure that we're
following a path and a track andan aisle that everybody's
interested in. So sound good?
Chris Picciurro, CPA (30:10):
That sounds great. I look forward to
hearing everyone's feedback, andI hope everyone has a great rest
of the day.
John Tripolsky (30:17):
Alrighty. Alright, everybody. Thank you
again for joining us here on theteaching taxable podcast. Again,
couple episodes away from 150.We think it's something fun to
do on that one.
And especially if you'relistening to this and you're not
watching it, I know that we'rewe are the most handsome
creatures on the planet. So, ofcourse, you wanna watch this.
Kidding, by the way, if you'relistening to this. Hop on
(30:39):
YouTube. Subscribe to ourchannel on YouTube.
We have so much more contentthan just these podcasts. We
just crossed over the 500 videocount on there. A lot of them
are shorts. Some of them arelonger form. We have recorded
webinars that we've put onthere, lessons, all kinds of
stuff on there.
If you go to our channel andactually search within the
channel on any keyword, it'lltake you down a ton of stuff,
(31:01):
but it'll count categorize itfor you. So check it out.
YouTube, teaching tax flow, andas we always close it out with,
I'm gonna start humming this ordoing something. We'll see
everybody back here again nextweek. Same day of the week,
completely different topic, butsame day of the week, different
date on the calendar.
Flip it around somehow. Anyways,I'm not your tax guy, Chris is.
(31:24):
Clearly, I can't even talktoday. So we're gonna close this
out. Everybody have a greatweek.
We'll see you soon.
Disclaimer (31:33):
The content provided is for educational purposes
only. We encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
Cabin Securities, a registeredbroker dealer.
The content of this podcast doesnot constitute an offer of
(31:54):
securities. Offerings can onlybe made through an offering
memorandum, and you shouldcarefully examine the risk
factors and other informationcontained in the memorandum.
Hey, everybody, and welcome back to the teaching
tax flow podcast episode 147.That's right. We're still
creeping up on that one fifty,that episode 150 here. And
today, we're gonna get into thattopic that everybody is bound to
do at some point in their life.Hopefully, you make it to the
last step of this.
We are gonna look at what to doas it relates to taxes when
(00:24):
you're leaving an employer formultiple reasons. But without
giving away too much, we aregonna dive into it on today's
episode. But before we do that,as always, let's take a moment
and thank our episode sponsor.
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John Tripolsky (01:23):
Alright, everybody. You heard in the
intro, we are gonna talk aboutsome of those glorious,
hopefully glorious, stages oflife when you switch employers.
So what does that mean exactly?You could leave for a million
reasons, but hopefully, some ofyou are listening to this.
You're actually retiring.
So congratulations. You made itto the other road. The light was
there, and it was not a traincoming at you. So we're gonna
(01:46):
tie this into taxes for you,which some of the stuff you may
not actually have known is evenreally a thing. So I don't know
the answers to it.
I'm not afraid to admit it. Butthis guy, if you're watching on
the other side of the screen forme, Chris Pacquero, welcome
back, sir. Your own show. Hereyou are again. You have the
answers, which is why we let youback.
Chris Picciurro, CPA (02:08):
It's great to be back. I've and, you know,
John, we talk about it all thetime that these topics come to
us through the teaching tax flowcommunity. This is a true story.
We my family and I were back inMichigan for the fourth of July
holiday and went to an outdoormall that you and I have gone to
(02:29):
before in the Detroit area,randomly ran into some friends
of ours that used to live in ourin the neighborhood a decade ago
that we're still friends with.And and they're part of the
teaching tax school communityalso, defeating taxes.
But it was random that I raninto them. And the the friend,
(02:49):
she was telling my wife and Ithat her husband was changing
jobs. And it was and it waslike, I didn't re he was with
the same company for probablytwenty years. I didn't realize
all of the considerations whenyou change jobs. And I'm like,
that is a podcast episode.
John Tripolsky (03:06):
Yeah. It's great when we come up with them that
way.
Chris Picciurro, CPA (03:09):
And we said, alright. This is great. I
and answered your questions, andI thought, you know what? Let's
talk through some of the tax andfinancial considerations when
you are changing jobs and and,you know, tip it or leaving a
job and because I guess it's notreally changing a job if you if
you don't get another job.Right?
So what what should you beconsidering when you leave one w
(03:31):
two position for another w twoposition? What should you be
considering when you leave a wtwo position and go into self
employment or start a businessor when you retire? So we're
gonna talk about this, but Iwant to encourage you. Bring
your questions and comments.Either leave those comments
right here on our YouTubechannel if you're watching or in
the on the defeating taxesprivate Facebook group.
(03:54):
You're gonna see that it's veryimportant to have that personal
board of directors. Talk to yourfinancial adviser and your tax
professional, when you're makingthese type of decisions. So,
yeah, let's jump in on theseconsiderations, and we're gonna
start with what happens when yougo to from a w two position to
another w two position.Obviously, the driver many times
(04:16):
for leaving an opportunity iscompensation. Maybe it's
opportunity, but it doesn'treally matter the reason why
you're moving.
Maybe it was involuntary. Right?May maybe maybe you had
downsized. Maybe the company gotsold. It doesn't really matter
why.
But I wanna just talk throughsome of the main considerations
that someone should think about.And
John Tripolsky (04:39):
And I'm sure there's probably been more of
this than ever in the past fouror five years. Right? I mean, we
talk about that little thingthat happened in all of our
lives. You know, the the wholeworld shut down, basically. It's
a lot of people went remote.
I mean, I could think of just ontwo really, over two hands, the
number of people that didn'teven wanna go back to the same
company after everythinghappened because, frankly, they
(05:01):
kinda realized, like, oh, man.The culture sucks there. I want
out. So a lot of people changed.Right?
You have Sure. A lot of shifts.
Chris Picciurro, CPA (05:09):
There's been shifts. There's been times
where people have, you know,been got used to working, from
home or remotely, and they don'twanna go back. So it it could be
a variety of reasons, but whatyou should be considering the
first thing I would beconsidering is what's what am I
gonna do about retirement? Do Ihave a four zero one k, a four
(05:31):
zero three b, four fifty sevenplan assets? I'm leaving that
employer, what should I do aboutthe the money that's there?
Am I vested in in a 100% vested?Should I roll it into my new
four zero one k if I haveanother company that offers it?
Should I roll it into an IRA?Obviously, if you just take the
(05:51):
money as a distribution, therecould be a big negative tax
consequence as far as it'staxable on a 10% penalty. What
if I've taken a loan againstthat four zero one k, and I need
to pay it back to prevent thattax?
So handling the four zero one k,four zero three b, four fifty
seven, whatever your retirementplan, simple IRA, handling that
retirement plan that you havewith your former employer is is
(06:14):
very important and something toto consider and and, not be
taken lightly. So definitely,like I said, talk to your tax
professional. Talk to yourfinancial adviser. If you're if
you're listening or watchingthis saying, oh, I don't have
one of those in my life. That'swhat we're here for.
Reach out to us, John. You knowthat we have an extensive
(06:36):
network of trusted people. Andyou might have you you might I
mean, we've run into situationswhere someone had a four zero
one k with an employer that theyhaven't worked at in a few years
for for whatever reason. So,again, the the four zero one k
is really designated for activeemployees, but those accounts
could become what we callorphaned, and but you wanna
(06:57):
address those. There aredefinitely some benefits for for
rolling it out of that formeremployer's plan.
So that's one thing. Anotherthing, quite frankly, something
that that I just dealt withtoday in in as the kids like to
say, IRL, right, in real life isdo do you have any unused
flexible spending account or daycare flexible spending accounts?
(07:20):
I you know, do you have a or ahealth savings account money
from that old employer? Can thatyou're just because you've leave
the employer, if you have ahealth savings account, that
money is still yours. Do youroll it into a new HSA?
Do you keep that account openand use the money until it's
expired? So do you have sometype of HSA or FSA, flexible
spending account as the FSA,that needs to be utilized, used,
(07:44):
or or or moved in some way,shape, or form? So that's
something to think about.
John Tripolsky (07:49):
And, Chris, you mentioned earlier on too. You
know, it's for those that don'tknow, when you talk about, are
you vested in something? So, Imean, I'll I'll kinda give a
little bit of example, so tellme if I'm off because I'm sure
you can do it way better. Butthose that are familiar with
that, right, you might be in aposition. You might look at your
account and say, wow.
You know, I got we'll just useit now. Wow. There's $10,000 in
there, but, you know, they do anemployee match. You know, I put
(08:11):
five. They put five.
Right. But you're not vested.Right? So, basically, what that
means invested, not invested,vested, is that account? It's in
the account, but usually,there's a a period of time where
you're remaining with thatemployer, other firms, until
that money is actually yours.
So, like, it's showing in theaccount. It's growing in the
account, but it's not reallyyours to withdraw or move shift.
(08:32):
Right? Is there anything
Chris Picciurro, CPA (08:33):
else that you've been an employee for a
certain period of time, forinstance. So Absolutely.
John Tripolsky (08:38):
I remember the first time I seen that in
account of mine, I was like,what do you mean it's not mine?
It's in my account, muchyounger. And then you think
you're like, oh, okay. That itmakes sense. You know, if if
they're they're investing inyou, you know, as an employee,
so it makes sense.
So, yeah, those that are gettinginto it, if you're not familiar
with it, there you go. There'syour definition.
Chris Picciurro, CPA (08:56):
Another another issue. This this happens
all the time when you when I seepeople start new employment.
Making sure your withholdingsfrom your w two ages are proper.
Right? Because you get thatfirst you're getting onboarded
as a new employee somewhere.
They send you your w four form,which is your withholding
certificate, and you fill itout. And what can happen is that
(09:20):
you're you maybe your formeremployer was withholding maybe
more or less than your currentemployer. In if without the
right tax planning and withoutdoing your tax projection, you
could find out that you'reeither way overpaid at the end
of the year or way underpaid inin in the actually owed
significant amount of tax.Right? Because what, you know,
what happens if you, you know,do you just fill out your w four
(09:43):
form differently?
And and so yeah. So make sureyour w two withholdings, after a
one or two paychecks, doublecheck those. Make sure they're
in line with what your marginaltax rate is. And then if you
need to pivot, then work withyour employer, to do that.
Remember, that w four form canbe changed.
(10:04):
W four form tells your employerhow much tax to withheld
withhold, rather, from yourwages.
John Tripolsky (10:11):
And with that too, I mean, it's god. It's been
ages since I filled one of thoseout. But, usually, I mean, you
could get the form yourself, andthen usually, it's just
submitting it to HR or whomever.
Chris Picciurro, CPA (10:22):
Yeah. Most larger employers have a portal
that you could submit yours. Soeven smaller employers that use
any type of online payrollservice, they're gonna have a
they're gonna have a portal thatyou can that you can put in
here.
John Tripolsky (10:34):
Here's a question for you based off your
experience. So, obviously,y'all's private practice, you're
dealing with some higher networth individuals, real estate
investors, etcetera. So thelikelihood of them having been
or with a company for a longerperiod of time is is more likely
than if you're working with abunch of millennials, say, for
example. I'm on the very tailend of that, so I can talk smack
(10:55):
about millennials, where theyswitch jobs every year. Have you
ever come across this withclients where they've been with
the same employer, say, fortwenty plus years, and you're
like, wow.
You're say it's a new client.You've guys have onboarded. You
say, wow. This is way off. Like,you need to go in and readjust
this because it has beendrastically off for a decade or
(11:17):
something.
Mhmm. Like, have you seen that alot?
Chris Picciurro, CPA (11:20):
No. No. Because, I mean, the
withholdings, they would knowthat if it was off if if they
had an an anomaly with their taxreturn. So let's say they they
had a you know, they're breakingeven or or or overpaid for years
and years, and then they owe. Sothey would the the indicator
would be the result of their taxreturn.
It gets very tricky when peopleare paid bonuses most of or if
(11:43):
they have employee stock optionsand that sort of stuff. Gotcha.
But by simply doing a taxprojection, that's how you know
where you stand.
John Tripolsky (11:51):
Perfect. Yeah. And I know we talk about that in
almost every single episode thatcomes up where it's something
everybody can do. Like, it's notyou don't have to be making 7
figures to do tax planning, aswe like to say.
Chris Picciurro, CPA (12:02):
No. Tax planning is for everybody.
Right. Next thing is somethingthat's going to be very tricky.
Okay?
Especially if you're with alarger employer. Many larger
employers have something calledgroup life insurance coverage.
The advantage of group lifeinsurance coverage is it's it's
the first $50,000 of employeepaid group life as far as from a
(12:23):
term insurance is is tax freeemployee benefit. Anything above
that is a is a taxable fringebenefit, or you might have
increased the amount of coveragethrough your through your pay.
With a group policy, typically,there's not a lot of
underwriting or or you're gonnahave to go through a health
exam, but the but the challengeis is when you leave that
(12:44):
employer, your life insurance isnow gone.
Mhmm. And that's something toconsider, especially, you know,
the older you are. No one'sgetting younger or healthier
typically, and that's really a,a blind spot for people when
they change employers to to bebe certain of that. Right?
(13:07):
Especially if you've got afamily.
If you don't have life insuranceoutside of your employment, that
could be a big zinger, we'llsay.
John Tripolsky (13:15):
If you leave a little bit more abruptly. Right?
You're not really thinking aboutthings like that. You're more
like, I gotta I gotta do this. Igotta do this quick.
So
Chris Picciurro, CPA: Absolutely. So definitely make (13:23):
undefined
sure, you know, even if you havegreat life insurance through
your employer, you I would Iwould definitely talk to someone
about coverage outside of youremployment. And, if you have
those questions, please jumpinto taxes. Just go to
defeatingtaxes.com. That's ourprivate Facebook group, or leave
a message for us atteachingtaxflow.
(13:46):
John, maybe you could put thelink to the hub in there. We
haveteachingtaxflow.combackslashhub,
hub. Anyone in our community cancan submit their information and
ask for a referral through ourcommunity.
John Tripolsky (13:58):
And I'll say too a little kudos to to ourselves
on that one. Right? I thinkeverybody resources that we've
brought into that hub, it'snever salesy. So it's never you
know, it's not like we do anintro to somebody or somebody on
our team does an intro, and thenthis other person just calling
them, how did I'm like, hey.Let's do this.
Let's do business. Let's dothis. A lot of the times, I'd
(14:19):
probably say, if I had to guess,probably 95% of the time,
they're just answering questionsand leave it at that. Right?
Like, I mean, it can be onanything.
And that's, I think, theglorious thing about what I
mean, it's taken us years tobuild that hub. But, I mean, you
decades, basically, of some ofthese contacts. And it and it it
(14:39):
really is great because,otherwise, you're you're getting
sold on something, I think, by alot of people. So, anyways
Absolutely. Little pat on ourown back there.
Chris Picciurro, CPA (14:47):
We've got a lot of resources for people.
We're and we're constantlyadding resources, you know, and
and take you and I are inmeetings all the time with
people that are interested in inmaybe working with people in our
community, and we're making surethat we feel like it could add
some value. So, I mean, a lot ofpeople I mean, a lot of people
in the community have beenguests on this podcast as well.
(15:09):
So there tons of greatresources. Let's say you're
leaving a job and relocating.
So, you know, the with the TaxCuts and Jobs Act, a lot of
those things changed, but youhave to be weird where where the
moving expenses used to be manytimes tax free or tax deduction.
Now most employer paid movingexpenses are taxable. The but
(15:32):
then so for instance, John, letme let's say that your employer
paid $30,000 for you to movefrom one place to the other.
They'll put that on your w two,but they're they're not gonna
have as much withholding as theywould if it was a bonus. So
another so the point isunderstand the ramifications if
your employ if if someone ispaying for your move that's
(15:53):
employment related
John Tripolsky (15:54):
Mhmm.
Chris Picciurro, CPA (15:54):
The tax ramifications of that. And then
the final thing, you're goingjob to job or even if you're
leaving a job in general, arethere stock options or RSUs,
which stands for restrictedstock options, that are
triggered? Or or or or do youlose them potentially? Right? So
(16:15):
sometimes you let's say youleave a job.
You might have to exercise thosestock options, which could have
a big taxable event. I IRL,right, in real life, I mean, I
just met with the one of theprivate CPA firm members that
has about a half a milliondollars of RSUs. The the the
person left their employer andand had to exercise those.
(16:38):
Again, I'd rather have a halfmillion dollars of taxable
income than not, but it was notsomething that person if I asked
that person a year ago, do youexpect to exercise these
options? That person would havesaid no.
Just circumstances changed. Itwas time for that person to for
a new chapter in their life, andthey had and they were had to
exercise those options. So justsomething to consider. Stock
(16:59):
options are ROCs when you leavean employer.
John Tripolsky (17:01):
It's funny. All these things that we're talking
about here, you know, to to makeit maybe relatable to some
people, it's you know, youalways hear the stories of, oh,
somebody won the lotteryunexpected. You know? What are
the chances they're gonna winthe lottery? They're all
excited.
Like, yeah. I won a$100,000,000, and then, like,
oh, crap. I really didn't winthat given that it's not divided
(17:22):
up anywhere else. Oh, I gottapay tax on this. I really didn't
win that.
It's kinda like with all this.Right? Like, if you're leaving
most likely, if you're leavingone position for another, it's
probably for the better. Like,you're probably you probably
have a lot of say in this. Youknow?
It's whatever it is. So you'rereally excited about it. And,
yeah, if you hear aboutsomething, you're like, oh,
crap. I need to exercise these,you know, the stock options.
(17:43):
It's almost like a it's anunwanted surprise, really,
unless you're aware of it.
Right? So a lot of these, Ithink, are are really like that.
Here's here's a question for youtoo going back just a hair. So
we talked about the relocationreimbursement, you know, being
taxable. What about, like,housing stipends?
(18:04):
Are those taxable?
Chris Picciurro, CPA (18:05):
Yeah. It depend that that comes down to
is it it a taxable or nontaxablefringe benefit? There are
special rules with her clergy,especially. It comes down to the
there's a lot of rules withthat. Is the assignment a
temporary assignment?
Is it a per you know, or is it apermanent move? Tip so.
John Tripolsky (18:24):
Interesting. Okay.
Chris Picciurro, CPA (18:25):
Yeah. No. That's check with your check
with your HR if you if you're inthat situation. It's a great
question. But let's say you'rein someone that says, hey.
We've got a you know, let's sayyou're based in in Michigan,
John, and, hey. We've got a jobin California for you for four
months. Ah, you know, sureyou'll get taxed there, but, you
know, we're dealing with you ahousing stipend. You can go rent
(18:45):
an apartment or, you know, putyou up or do they put you in a
hotel with an accountable plan?So it really comes down to
taxable versus nontaxableemployee fringe benefits.
John Tripolsky (18:55):
Right. That makes sense. So, yeah, it's
very, very, very situationallydependent.
Chris Picciurro, CPA (19:00):
Yes. As we like to say.
John Tripolsky (19:01):
I feel like we haven't used the term in while
either.
Chris Picciurro, CPA (19:03):
For self employment. Right? You're you're
you're you left your job, andyou're you're gonna either be
self employed, and you're eithergonna your income's gonna
change. You're either gonna payyou're either going to report it
on a schedule c for selfemployment, or maybe you're
you're entering maybe you'reyou're becoming part of a
partnership. Right?
(19:24):
Maybe you're an attorney, andyou left, corporate America, and
you and your buddy are creatinga partnership, your own law
firm. And then that means you'dget a k one. Or maybe you're an
s corp. I don't like peoplejumping in s corps. Check out
that episode.
We actually had someone in ourDefeating Taxes private Facebook
group. Every Friday, we we postand basically let people ask
whatever question they want. Andthis week, we had someone ask a
(19:47):
lot of questions about uscorporations, which are really
good questions. However, the thetone was, it's not time. Don't
jump into it right now.
John Tripolsky (19:55):
Yeah. That's that's one of those things that
I think I will remember. It usedto be, you know, I I knew how to
poke the bear with you with LLCsand everybody at one one of
those because they think it wasa tax benefit. But definitely,
the s corp topic is now the theone that I I know is a weak spot
for you.
Chris Picciurro, CPA (20:12):
Hey. I yeah. I mean
John Tripolsky (20:14):
If it doesn't make sense.
Chris Picciurro, CPA (20:15):
If it doesn't make sense. So so think
about your your income's gonnabe taxed differently if you go
into being in for business in inbusiness on your own. And
instead of, you know, obviously,the s corp is a hybrid model,
but in general, okay, instead ofyou getting paid under w two
where the all the taxes aregetting withheld from that, you
(20:36):
are now responsible to makequarterly estimated tax payments
both on the federal and statelevel. You're also going to be
subject to what's called selfemployment tax. So, John, as a
when you're when you receive a wtwo, your employer withholds
7.65%.
The employer actually matchesthat 7.65% that goes into the
Social Security system, and,that's a 15 and but when you're
(20:58):
self employed, you have to payboth sides of that, which is the
15.3% of self employment tax.You're also gonna be on your own
for retirement contributions.Right? You don't have that
employer anymore. So should you,you know, should are you in a
position that you can contributeto retirement?
What type of plan should it be?You've got everything from a a
traditional IRA, Roth IRA, allthe way up to a, you know,
(21:20):
defined benefit plan or a solofour zero one k or a SAP, simple
IRA. It's almost an analysis byparalysis. You wanna talk to I
know it seems like I keeprepeating myself. You wanna talk
to your financial adviser.
Talk to your accountant. Talkthrough, is this a point in my
life where I could contribute toretirement? How much can I
contribute? Do I have otheremployees? And design the the
(21:42):
the retirement plan around yourneeds.
Don't just pick one and and puta square peg in a round hole.
John Tripolsky (21:49):
You know? That is honestly, that's probably one
of the best quotes I've heardyou say in six months, And you
say a lot of good ones.
Chris Picciurro, CPA (21:56):
Should record it then.
John Tripolsky (21:57):
How good thing about recording? One right
there. Because, yeah, a lot ofpeople, it's just like, oh, I'll
take anything. I'm going fromsomething here and, yeah, just
make this work. But you're kindastuck with some of that.
Right? It's not as easy asflipping a light switch on and
off in in three minutes. So
Chris Picciurro, CPA (22:10):
So timing is important. And the now the
nice thing about being selfemployed, maybe some of the
things that you weren't able todeduct as an employee, we know
with Tax Cuts and Jobs Act, andit got extended over OB three.
Unreimbursed employee businessexpenses are not deductible from
99% of people, then now theyare. So home office now. Now you
(22:33):
can you know, some might thepoint is if you go from a w two
position to self employment,you're paying tax on your net
income, and you could deductsome of these things that you
weren't able to deduct when youare in the employee rule role.
So that's something to consider.And then the final thing which
we alluded to would be would bepotentially loss of group
benefits. Right? Do youespecially health insurance,
(22:57):
life insurance, disabilityinsurance. How do you pick those
up now being self employed?
And and what are the costconsiderations? You know? Can
you yeah. How do you how do youfind that? Maybe you have a
spouse that has some of thosethat coverage.
So, really, when you when you'reself employed or own a business,
(23:17):
you know, you you're probably incontact with what we call your
center of some influence a lotmore than when you are a w two,
you know, w two role. Mhmm.
John Tripolsky (23:28):
And this, obviously I mean, they're like
we said kind of at thebeginning. Right? I think we
gave a a good handful ofscenarios that everybody in the
workforce will go through at oneone point or another for umpteen
number of reasons, and we'llhave a little fun with this.
Right? I'd say you know,because, obviously, we have a
lot of loyal subscribers andlisteners to this podcast.
(23:51):
Won't give away the answer, butwe'll we'll kinda put it out
there and then let us know ifyou know the answer. Maybe we'll
send you something fun or or dosomething for you. You know, if
you go into the self employmentrealm with new things from the
one big beautiful bill actor,Obi three, Chris, as you
mentioned it there. Right? Ifyou're a foodie, you may wanna
consider becoming a commercialfisherman.
(24:13):
Not gonna say why. But, Chris,do you get where I'm going with
this one as far as for
Chris Picciurro, CPA (24:18):
deductions go? Actually, that carve out we
found out when at the recent isreally challenging because I
believe only people and onlycommercial fishermen in Alaska
get the 100% deduction for mealsprovided to them. So
John Tripolsky (24:34):
It's so weird, but it's very political.
Chris Picciurro, CPA (24:35):
To being I I don't see many foodies want
want to hang out on a fishingboat out off the shore of Alaska
No. To get a little additionaldeduction. Well, maybe you never
know. Right?
John Tripolsky (24:48):
Hey. Hey. Fun fun fact, Chris. I don't know if
you knew this about me, but whenI was in high school, so when I
was a senior, I had been datingthe same girl for about three
years, and I didn't wanna leaveher for a summer. So I actually
turned down a job to work inAlaska as a longlining salmon
fisherman because I didn't wannaleave her that summer.
(25:10):
Now I haven't talked to her inabout twenty five years. I
should've went on the damn trip.What do
Chris Picciurro, CPA (25:14):
I remember? Yeah. Those people
make some big bucks, but it's avery risky job.
John Tripolsky (25:18):
Yeah. I think even at that time, it was almost
a guaranteed, like, $38 in fourmonths. Mhmm. But there's a lot
there's a lot that goes into it.So
Chris Picciurro, CPA (25:26):
There yeah. It is it is a grueling job
from what I understand, and I'veI know a couple people that have
done it. Let's say your finalthing is you're gonna let's say
you're leaving for retirement.Right? So you're you're you're
retiring.
You're leaving your w twoemployment. Now you're you might
take some gap years. You mightsemiretire. You might start
(25:47):
doing other hobbies. What arethe considerations?
Right? Well, you might have totake retire required minimum
distributions from yourretirement accounts now that
you're not working. Are youshould you be drawing Social
Security? Are you alreadydrawing Social Security? How
does that affect the tax on yourSocial Security?
You know, do you have medicalcoverage? Are you eligible to
(26:11):
enroll in Medicare? You know,there's just so many things.
Should you should you take alump sum distribution
potentially from your employer,or if they offer you pension or
a lump sum distribution, shouldyou roll that lump sum over? Do
you you know, is your retirementincome gonna be taxed
differently than your w twowages?
Are you going to move, and maybenow you're in a different state?
(26:33):
So, obviously, there are a lotof considerations there. And,
typically, John, a lot moreplanning goes into that
transition to retirement thanfrom from, you know, usually,
well, leaving of of w twoposition to get another one
quitting your job and startingyour own business are I'm not
gonna say they're impulsedecisions, but they're decisions
(26:54):
that don't take years and yearsof planning like retirement
does.
John Tripolsky (26:58):
Right. I am sure my you know, I like to throw my
father under the bus becausehe's captain planner. I'm sure
I'm sure he had been planningfor since the day he got a job
for retirement. But and, youknow, some people, you know, we
we say a lot of this happens onimpulse too. I mean, Chris, you
know this.
Being from the Metro Detroitarea like myself, when the big
(27:19):
auto manufacturers went througha big old flipping turnaround, a
lot of people jumped intoretirement pretty damn fast and
didn't expect it. So I almostwonder too. And a lot of those
guys, I I know for
Chris Picciurro, CPA (27:30):
a fact a lot of
John Tripolsky (27:31):
those have been working for the same company for
twenty, thirty years. I wonderhow much of this kinda snuck up
on them where they didn't thinkabout it and, you know, jumped
off a cliff in a sense.
Chris Picciurro, CPA (27:40):
Oh, I absolutely. No. It could it can
happen. Well, I know a lot ofpeople count down their
retirement, but not everyoneplans for retirement like like
your dad did. So that kudos tohim.
John Tripolsky (27:52):
I love him for that.
Chris Picciurro, CPA (27:53):
And I and, you know, we hope he's listening
to this as we wrap this episodeup. I think, you know, the theme
is when you leave a job, there'sa lot more cons things to
consider than just pay.
John Tripolsky (28:05):
The man, you are, like, dropping knowledge
bombs today. That's gonna we'regonna get a a T shirt that says
that. But, yeah, it's I mean,really, what really, what you
said there, and I think has beenthe theme throughout this entire
conversation, right, is there'sstuff out there. Sure things can
be unexpected. But, really, I'mI'm glad we're having this
conversation too because even ifsomebody's listening to it or,
(28:26):
you know, they they listen topart of it, hopefully, they got
to the end here becauseotherwise, they wouldn't have
heard what I'm about to say.
But it's good to know this stuffbefore the opportunities even
come up to switch. Right?Because like you had mentioned a
couple examples. Right? The kindof being tossed in to make a
decision could have very, verylarge tax implications that may,
depending on the situation,offset the benefit of leaving
(28:50):
for a financial, you know, aboost in pay somewhere else
depending on how it works out.
So it's good to know. It's goodto know. And then, actually,
what we're gonna do with thisone, Chris, I just thought of
this while you were talking is,you know, I was kinda mentally
thinking of situations thatwe've heard even in the past
couple months, and, you know,we're just in Vegas for
taxposium and listening to othertax pros, and I'm kinda like a
(29:11):
sponge absorbing it all there.They're sharing examples of
their clients, you know, notsaying their names and all their
info especially. But thesituations oh, I'm gonna pop a
little survey, and I'm gonna putit on our Facebook page.
I know it'll be on our publicFacebook page for teaching tax
flow. We'll do it a littledifferent. Sometimes we put it
(29:31):
in the group, in the defeatingtax one. This one, put on the
page if we can, or we'll put itin group. We'll figure it out.
There'll be a link there. Justasking people how comfortable
they are or were with all thisstuff or how much they knew
about all this that could sneakup on them before, you know,
they listen to this. I'm justkinda curious too. So and then
from that, obviously, we we urgeeverybody just comment in there.
(29:52):
Let us know your situations.
Like, maybe it happened to you,somebody you know, makeup, say,
John Smith asking for a friendtype deal. It'd be good to know
because I think we could takethis in a lot of different
directions and dive deeper too.So we wanna make sure that we're
following a path and a track andan aisle that everybody's
interested in. So sound good?
Chris Picciurro, CPA (30:10):
That sounds great. I look forward to
hearing everyone's feedback, andI hope everyone has a great rest
of the day.
John Tripolsky (30:17):
Alrighty. Alright, everybody. Thank you
again for joining us here on theteaching taxable podcast. Again,
couple episodes away from 150.We think it's something fun to
do on that one.
And especially if you'relistening to this and you're not
watching it, I know that we'rewe are the most handsome
creatures on the planet. So, ofcourse, you wanna watch this.
Kidding, by the way, if you'relistening to this. Hop on
(30:39):
YouTube. Subscribe to ourchannel on YouTube.
We have so much more contentthan just these podcasts. We
just crossed over the 500 videocount on there. A lot of them
are shorts. Some of them arelonger form. We have recorded
webinars that we've put onthere, lessons, all kinds of
stuff on there.
If you go to our channel andactually search within the
channel on any keyword, it'lltake you down a ton of stuff,
(31:01):
but it'll count categorize itfor you. So check it out.
YouTube, teaching tax flow, andas we always close it out with,
I'm gonna start humming this ordoing something. We'll see
everybody back here again nextweek. Same day of the week,
completely different topic, butsame day of the week, different
date on the calendar.
Flip it around somehow. Anyways,I'm not your tax guy, Chris is.
(31:24):
Clearly, I can't even talktoday. So we're gonna close this
out. Everybody have a greatweek.
We'll see you soon.
Disclaimer (31:33):
The content provided is for educational purposes
only. We encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
Cabin Securities, a registeredbroker dealer.
The content of this podcast doesnot constitute an offer of
(31:54):
securities. Offerings can onlybe made through an offering
memorandum, and you shouldcarefully examine the risk
factors and other informationcontained in the memorandum.
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