I love a New Year. It’s a great time to evaluate your current situation and make changes as necessary. Here’s what I’ve been up to recently:
1. We adjusted the tax withholding for our Social Security payments. Current withholding options are 0%, 7%, 10%, 12% and 22%. We reduced our withholding from 15% to 7% since our income is lower than when we were working and refunds were getting too large.
2. We opened a new checking account with a $500 sign-up bonus and couldn’t be happier with the improved service. It was a big job to make this change as our direct debits and deposits had to be moved to the new account and, since we pay all of our bills electronically, I needed to set that up as well.
For a couple months, we had both accounts open as we couldn’t close our old checking account until everything had properly changed over. Social Security took around two months to make the switch. Luckily, everything went seamlessly.
3. I decided on new tax software for this year. Thanks to Marjorie, Dan and Andrew for their endorsement of FreeTaxUSA. I did a little research of my own and couldn’t find a bad word about it.
4. I did my usual review of our 2025 year-end account balances and everything did well. I might change the asset allocation a bit in our IRA’s. For those who take RMD’s, it’s great to use those to rebalance your retirement accounts.
5. Jonathan wrote a great article last January called “Spending It”. I chose the Fixed Withdrawal Rate option with the goal of withdrawing up to 5% annually for living expenses. Last year, we used 4.8% which is almost exactly the same as the year before.
6. I read a non-financial resolution in a recent Kiplinger article that I’d like to share. It says to “Let go of old habits, relationships and commitments that no longer serve you.” That resonated with me.
Francine Duke
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Francine, thanks for your article and hope you post more.
I did use FreeTaxUSA for the first time last spring and it was great. I’ll use it again this year for 2025 taxes.
I took my first RMD in 2025 and made several QCDs. There’s a new Code Y for Box 7 of the 1099 to indicate QCDs, but it’s optional for 2025. Schwab, who has my retirement account, won’t implement it till 2026. So fingers crossed FreeTaxUSA can deal easily with that.
Andrew, On FreeTaxUSA after you input the 1099-R information that you received from Schwab there is a following screen which reads as follows –
Did you donate this IRA directly to charity?
A Qualified Charitable Distribution (QCD) is when you have part or all of an IRA distribution transferred directly to a charitable organization or a split-interest entity.
Yes
No
Is part or all of this distribution a QCD?
While I did not making a QCD for 2025 I expect responding appropriately to these questions will get your QCD properly reported on your 2025 1040.
Best, Bill
Bill P.,
I have been given check writing privileges on my Fidelity tIRA which I will be using to make my QCDs when eligible >4/27/27. They also can be used for RMDs when I turn 73, but I will not likely use them for that purpose.
My concern is that Fidelity will have no idea when they clear the check whether it is for a QCD, or whether it is a normal taxable distribution. So the question arises for me…. If Fidelity sends me a 1099-R with no code Y, but I tell FreeTaxUSA that it does have a Y code, will I run into trouble with the IRS?
Bill M.
Bill, thanks very much for this info. It greatly eases my mind.
Andrew
Hi Andrew, I’m very much looking forward to trying this new software. It’s great that I found out about it on this site. Hope it can handle your QCD’s!
3. I decided on new tax software for this year…FreeTaxUSA.
I would try FreeTaxUSA if it could do the local (school district) tax return along with the state tax return. Sadly, online info says it generally does not. Nor does H&R Block.
TurboTax, the online version of which I’ve been using since 2015, does handle the local return nearly seamlessly with the state return. Thanks to other HD comments about TurboTax Desktop version and its “what-if” feature, I decided to try it this year. When I looked yesterday, Amazon happened to have the downloadable Federal+State Premier version on sale, which I figured bodes well. While I can’t say I’m ever exactly eager to do my tax returns, I am looking forward to seeing what this can do. 🤞
Unfortunately the What-If worksheet hasn’t yet been updated for the 2026 standard deduction, and it seems the 2026 tax brackets are stale as well.
FreeTaxUSA calculates school district taxes in Ohio. You have to be sure to plug in the SD number, which IDs if the district has a tax, and whether it is based on earned income or total income.
It will not calculate city income taxes, of which Ohio has many.
Thanks, Dan. That’s different from what I saw in an online search, but I hadn’t found a way to ask FreeTaxUSA directly. If it also e-files the returns, maybe I’ll try it next year…
Hey, whatever you are comfortable with. I used to use Turbo Tax, it’s great software.
If you care to respond, my question is where do you live that you have to file a school district tax return? I’ve never have heard about such a return. 🤔
Local (school district) income taxes are one of the joys of living in some parts of Ohio.
Fancine, Your professional background brings a lot to the table. I agree with David, and would love to hear more from you.
I also use the New Year to analyze all things money. For example, I have checked my IRA balances at the end of the year, and calculated my RMD to be sure my monthly distributions are great enough to satisfy it. I use the tax withholding from that distribution to meet our total tax liability; my goal is a zero balance due/refund.
On a personal note, you mention Marjorie Kondrack. She has not been posting for a while. I know she is dealing with health issues. I miss her articles and comments.
Dan, I’m sorry to hear about Marjorie. I do plan to post more this year. Thanks.
Just curious Dan. Doesn’t your IRA record keeper automatically calculate RMD after the first of the year? Fidelity does it automatically and tracks what you take throughout the year plus QCDs as well.
Yes, but I have IRAs in two places. I just get the numbers off Fidelity’s Full View and plug them into the RMD calculator. Easybreezy.
Great post Francine
I’d like to see more from you.
As to number 5:
I received or last tax form yesterday so of course I had to immediately go to TurboTax to do a preliminary look at our income. Some may remember a while back I wrote a post regarding the maximum income while maximizing the 12% tax bracket. I was trying to determine the maximum amount I could convert.. Well somehow I messed up with those calculations and ended up 7K below the maximum, and boy am I kicking myself as that additional income could have been converted.
One other thing I noticed is how little we spent last year despite 3 vacations (4 weeks worth, but only one involved flights). Prior to doing these calculations I was investigating getting out of NH in February (we just received 18 inches of snow), but had decided it was too expensive. I also noticed yesterday that our portfolio had hit an all time high. The result? We booked a week in Barbados the first of February and staying in a really nice hotel (we have never taken a trip to a warm local in the winter). It’s time to spend more of our hard earned savings on memories. 🏝️ 🌞
BTW I have gotten in the habit of when watching TV and they mention a local asking my wife, “have you ever been there?” We have been blessed to do a lot of traveling.
Thanks, David. I have some ideas in mind for future articles. Your trip sounds wonderful! You deserve to spend the money. Enjoy!