{"id":243,"date":"2022-01-24T13:00:00","date_gmt":"2022-01-24T13:00:00","guid":{"rendered":"https:\/\/moneywithkatie.com\/i-finally-met-with-a-cpa-about-my-tax-strategy-heres-what-i-learned\/"},"modified":"2025-09-05T16:50:55","modified_gmt":"2025-09-05T16:50:55","slug":"i-finally-met-with-a-cpa-about-my-tax-strategy-heres-what-i-learned","status":"publish","type":"post","link":"https:\/\/moneywithkatie.com\/i-finally-met-with-a-cpa-about-my-tax-strategy-heres-what-i-learned\/","title":{"rendered":"I Finally Met with a CPA. Here\u2019s What I Learned."},"content":{"rendered":"
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On today\u2019s episode of, \u201cKatie posts about a situation that\u2019s so niche, it\u2019s unhelpful to almost everyone,\u201d I present to you: My first meeting with a CPA! This blog post is intended to help guide you through your first meeting, and potentially surface some questions you might want to ask yours, too.<\/p>\n

I have a lot of #respect for CPAs because I am a personal tax code enthusiast, and I admire anyone who attempts to tackle it professionally. You can\u2019t fake your way to a CPA \u2013 you have to know your shit.<\/p>\n

The CPA I worked with came highly recommended from a family friend of my parents who used to work with Warren Buffett at Berkshire Hathaway, so I had high hopes (that sentence makes us sound wealthy and mysterious \u2013 we aren\u2019t).<\/p>\n

Upon walking in his office, I knew I had a winner. He had that nutty professor vibe \u2013 tons of filing cabinets and boxes of hand-labeled files, old-school calculators, books upon books of tax code, and gentle \u201ccool grandpa\u201d vibes.<\/p>\n

If you\u2019re a W-2\/1099 gal like me, these questions are worth asking your CPA.<\/p>\n

Question #1: Am I going to pay a penalty for underpayment?<\/h3>\n

One of my major questions was about whether or not I was going to get ruthlessly penalized by my #boiz at the IRS for not paying any tax this year on my 1099 income, but Terry confirmed what I thought was the case:<\/p>\n

Because I will have paid 100% of my tax liability from last<\/em> tax season, I\u2019m safe. There’s a 110% threshold for incomes over (I think) $150,000, which we\u2019ll fall into this year, but even then, I think I\u2019ll have paid more than 110% of last year\u2019s tax bill this year.<\/p>\n

What does this mean?<\/strong><\/p>\n

I have two sources of income: W-2 (from which taxes are withheld) and 1099 (Money with Katie, from which no taxes are withheld).<\/p>\n

I know I\u2019ll owe a lot of tax money on my self-employment income, but I didn\u2019t want to pay the penalty<\/em> \u2013 I don\u2019t remember what it is off the top of my head, but I\u2019m pretty sure it\u2019s a percentage of either the income or tax owed. No bueno.<\/p>\n

The TL;DR: My income this year was much higher than last year and I was nervous that I may get dinged for underpaying.<\/p>\n

Fortunately, I\u2019ve already paid more in tax on my W-2 income this year than I did last year (e.g., if I owed $20,000 last year, I\u2019ve already paid more than $20,000 in taxes this year), so I\u2019m safe.<\/p>\n

Main takeaway:<\/strong> If you\u2019re making way more money this year and it\u2019s 1099, you may still be O.K. with regards to penalties as long as you\u2019ve paid between 100% and 110% of the tax liability you paid last<\/em> year.<\/h4>\n

Question #2: Are my pre-tax investments legitimate, or am I over-contributing?<\/h3>\n

Pre-tax investing is my favorite because it basically allows you to save taxes on money you\u2019re keeping<\/em>, vs. money you\u2019re spending<\/em> (how most common deductions work). <\/p>\n

To make matters hornier, your tax savings on pre-tax investment contributions come from your highest marginal tax bracket<\/em> \u2013 this means you\u2019re shaving off the most expensive part of your tax bill.<\/p>\n

I\u2019m in a fortunate situation I never thought I\u2019d be in, tax-wise: My \u201cproblem\u201d is that I\u2019m trying to defer as much income as possible, because my tax rate would be high otherwise.<\/p>\n

But hey, I got married at the exact<\/em> right time! Thanks, husband.<\/p>\n

(Married Filing Jointly works great for us as two full-time workers with one individual running a business on the side \u2013 if all of my income were in the single tax brackets, I\u2019d be paying 35%. Because we\u2019re married, it\u2019s 24%. Married Filing Jointly is usually<\/em> preferable, tax status-wise.)<\/p>\n

You can legitimately<\/a> defer up to $70,000 of income per income source<\/em> in 401(k)s for 2025<\/a>, but employer matches count toward the $70,000 limit. However, matches don\u2019t \u201cdefer\u201d any income, since they\u2019re just a tax-free contribution from an employer.<\/p>\n

What does this mean?<\/strong><\/p>\n

I had a 401(k) through my employer, and<\/em> I opened a Solo 401(k) for Money with Katie. I opened mine with Vanguard \u2013 all you need to open it is an EIN and other basic information.<\/p>\n

The super-extra good part? The contribution deadline is the filing deadline, so you have until April 2026 to make your 2025 contributions as long as the account was already open before the end of the year. Bless up.<\/p>\n

Here\u2019s the rub, though, if you\u2019re like me and have a \u201cjob 401(k)\u201d \u2013 you can\u2019t make employee<\/em> contributions to your Solo 401(k), because the employee<\/em> limit for 2025 is $23,500 across ALL 401(k)s. <\/p>\n

In other words, you can\u2019t contribute $23,500 as an employee to two different 401(k)s. You can only contribute $23,500 total<\/em> as the employee.<\/p>\n

The hack? You can make contributions to your Solo 401(k) as your own employer<\/em>. You\u2019re the boss, bitch.<\/p>\n

You\u2019re only allowed to contribute up to 20% of your net business income into a Solo 401(k) \u2013 so in order to put in a full $70,000 that number would have to represent 20% (or less) of your net business income (in other words, around $350,000).<\/p>\n

To calculate yours, take your net business income (revenue minus expenses and other deductions, like half the self-employment tax) and multiply by 20%.<\/p>\n

Main takeaway: If you have a W-2 job and 1099 income from your own business, a Solo 401(k) can help tremendously with helping to defer taxable income.<\/h4>\n

One other thing to note here: I was originally going to use a SEP IRA (similar to the Solo 401(k)), but since a SEP IRA technically codes as a Traditional IRA, it would\u2019ve prohibited me from enacting the spicy \u201cbackdoor\u201d Roth IRA strategy.<\/p>\n

Here\u2019s more about self-employment retirement account options<\/span><\/a>.<\/p>\n

Question #3: Are there any other pre-tax contributions I could be making that I haven\u2019t considered yet?<\/h3>\n

Like I said, I feel pretty lucky to be in a situation that I never thought I\u2019d be in: Trying to figure out the most efficient places to hide my income from the government is fun, if nothing else.<\/p>\n

I have an HSA (with a contribution limit of $4,300 for singles in 2025), so I knew I wanted to contribute the maximum to that, too. Apart from the:<\/p>\n