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Tail Wagging

Kenyon Sayler  |  Jul 19, 2022

A POPULAR REFRAIN is that we shouldn’t let the tax tail wag the investment dog. I struggle with this one.
Currently, 87% of our stock portfolio is in broad-based, low-cost index mutual funds, with the other 13% in individual stocks. I prefer the index funds—and yet I continue to hold the individual stocks because I don’t want to pay the taxes on our gains.
About 6.7% of our total stock portfolio, equal to half our money in individual stocks,

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Even More Taxing

Richard Connor  |  Jul 14, 2022

INFLATION HAS BEEN the big economic story of 2022. Steep increases in consumer prices have hurt families in many ways—some of which aren’t so obvious.
You’re likely aware of the hefty increases in borrowing costs, home prices, rents, gas prices and groceries. But here’s something else to consider: how inflation can lead to higher taxes.
Important parts of the federal tax code aren’t indexed for inflation. Result: If inflation leads to nominal increases in a family’s income,

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Self-Inflicted

Jonathan Clements  |  Jun 29, 2022

I’M NOT IN THE HABIT of celebrating half-birthdays, but my next one has me thinking. In a few days, I’ll turn age 59½.
That, of course, is the age at which you can tap your retirement accounts without paying the 10% early withdrawal penalty. Though I don’t currently need to pull spending money from my retirement accounts, I like the feeling that I can now do so penalty-free.
Even without that 10% penalty, however,

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Tax Shelter

Richard Connor  |  Jun 13, 2022

MY WIFE AND I RECENTLY took advantage of one of the most valuable tax breaks for the typical American family. The tax code provides a generous exemption on the profit from the sale of a primary home. Although this is widely known, it also—based on my conversations with a variety of people—seems to be widely misunderstood.
The Taxpayer Relief Act of 1997 made a major change to the taxation of home sales. Prior to this,

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True to Form

Larry Sayler  |  May 29, 2022

IS THE IRS NO LONGER able to provide basic services to the public?
When my father passed away, he left his financial assets in a trust for my siblings and me. A trust is a good estate planning tool, but there are some disadvantages. Among them: A trust has to file its own income tax forms.
My mother is the trustee. She uses a local CPA to prepare the tax returns for the trust.

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Ten Points of Pain

Richard Connor  |  May 18, 2022

I JUST COMPLETED my fourth year preparing tax returns as part of the federal government’s Volunteer Income Tax Assistance (VITA) program. I’ve seen first-hand how confusing our tax code can be for many taxpayers. Here are the 10 areas of confusion I’ve encountered most often:
1. Income. Anyone looking through a tax return will see multiple definitions of income. There’s total income, adjusted gross income (AGI), modified adjusted gross income, provisional income and taxable income.

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Tax Bites

Sanjib Saha  |  May 10, 2022

MY TAXES ROSE 50% in 2021. I’ve never paid so much before, not even during my peak earning years. I’m not upset about having to pay my fair share, but the extent of the increase puzzled me. After examining my tax return, I came away with a handful of insights.
To be sure, I wasn’t expecting a large refund. The reason: I suspected that a onetime employment windfall would cause me to owe money,

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Life on the Margins

Richard Connor  |  Apr 18, 2022

THIS IS MY FOURTH year serving in AARP Foundation’s TaxAide program. I prepare federal and state tax returns three days a week for a mixture of retirees and lower-income citizens.
Each week, I see clients who are baffled by the complexity of our tax code. Many have been paying hundreds of dollars to commercial preparers because they’re afraid of making a mistake.
And no wonder. The federal tax code has myriad twists and turns that can confound the average taxpayer.

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Coming Out Different

Richard Connor  |  Apr 15, 2022

I LEARNED SOMETHING new while preparing a tax return recently for a widowed senior citizen. I volunteer for AARP Foundation’s TaxAide program. A widow in her mid-70s had received her 2021 required minimum distribution (RMD) from her IRA—and it consisted entirely of Exxon Mobil stock.
Her account’s custodian, instead of selling the stock and distributing cash, gave her the actual shares. This had never happened to her before, and she hadn’t requested it. Why did the custodian do it?

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Aversion to Income

Joe Kiefer  |  Apr 14, 2022

MY WIFE AND I PAID just $234 in federal income taxes on 2021 adjusted gross income of $98,370, giving us an effective tax rate of less than 1%.
How did we end up paying so little? It all started with my October 2020 layoff. I was age 57 and had, until then, enjoyed a 34-year newspaper career. One of my immediate concerns: getting health insurance coverage.
That turned out to be easy in 2021.

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Time to Settle Up

Matt C. White  |  Apr 12, 2022

TAX DAY IS ALMOST here, and I have a feeling that some of you may be less than excited. The cash that changes hands every year around this time gets a lot of attention, but it tells an incomplete story. The size of the check you write—or the refund you’re receiving—doesn’t, by itself, say much of anything about your tax situation.

Back in the days before technology made transferring money so convenient, did you ever let a tab run both ways with a friend?

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Fair Enough

Richard Connor  |  Apr 10, 2022

IT’S OFTEN SAID THAT beauty is in the eye of the beholder. The same could be said of fairness in taxation.
A recent article by Kelly Phillips Erb addresses this contentious topic. Erb, who tweets as @TaxGirl, is the team lead for insights and commentary at Bloomberg Tax and Accounting. Her article was titled, “Did you pay your ‘fair share’ of federal income tax this year?”
The piece discusses the history and current state of U.S.

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Fleeing the Taxman

John Yeigh  |  Apr 4, 2022

NEW HAMPSHIRE’S STATE motto is “live free or die.” But for my wife and me, the first part might be better expressed as “live tax-free.”
We just moved to New Hampshire from Maryland. The move’s main purpose is to be near our kids, enjoy lake and mountain activities, and experience cooler summers. But New Hampshire’s zero tax rate on earned income, pensions and capital gains is a major bonus.
Eight states have no tax on personal income,

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A Taxing Move

Richard Connor  |  Mar 24, 2022

I HATE LOOKING AT life through the lens of taxation. But at this time of year, it’s hard to avoid.
I’ve been doing my own taxes for more than four decades. But this year represents a new milestone in my tax return preparation career. We moved from Pennsylvania to New Jersey at the end of March 2021, so I’ve had to prepare 2021 tax returns for both states. Although I’d researched New Jersey’s tax code and made an estimate of what the differences would cost,

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22 Tax Season Tips

Matt C. White  |  Feb 23, 2022

WILL YOU BE WORKING with a CPA to file your tax return? For eight years, I was one of the folks on the other side of this annual ordeal. Want to make life easier both for yourself and for us green-shade types? Here are 22 insights:

1. Time is money. CPAs sell expertise by the hour. They track everything they do, all day long, in six-minute increments—or perhaps 15. For the business to survive,

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