cancel
Showing results for 
Search instead for 
Did you mean: 
     
Highlighted
Joe3100
Explorer ○

Calculating Taxes mid year

As I am getting closer to retirement, I am curious how others calculate their taxes mid year or Oct timeframe. Currently I have a professional CPA doing my taxes, is it reasonable to ask him run my numbers for no fee? I would appreciate if you can share your ideas. Thanks 

Tags (1)
0 Kudos
21 Replies
Capital
Participant ○○○

Re: Calculating Taxes mid year


@Joe3100 wrote:

As I am getting closer to retirement, I am curious how others calculate their taxes mid year or Oct timeframe. Currently I have a professional CPA doing my taxes, is it reasonable to ask him run my numbers for no fee? I would appreciate if you can share your ideas. Thanks 


@Joe3100  you may need to have your CPA help you; but, don't expect him/her to work for free. Keep it simple and don't expect what is done prior to year end to be absolutely correct - all the numbers are not known early and you must make a guess as to what those numbers will be. It may be wise to sit down with him/her and discuss how he/she would best be able to help you. Let him/her know your concerns about the fees and see how you can help reduce the cost of the process. Personally I've been doing my own taxes for years using a tax software. The software for one year has the ability to estimate the next year's taxes based upon my input. I have a decent idea all year long what my tax position will be at year end.

Capital
0 Kudos
Moira
Follower ○○○

Re: Calculating Taxes mid year

I agree that competent tax professionals deserve to be paid for their time and expertise.  Don´t expect to get it for free.

Also, do not even *think* of bothering a tax pro about stuff like this right now.  They are under massive deadline pressure.  All those returns that were placed on extension last April are now facing a hard deadline of Oct 15.  Those are often some of the most complex returns out there.

I would try contacting your tax pro in late October.  (Many have plans for a long recovery weekend after Oct 15 deadline.)

 

 

0 Kudos
arriba
Participant ○

Re: Calculating Taxes mid year


@Joe3100 wrote:

As I am getting closer to retirement, I am curious how others calculate their taxes mid year or Oct timeframe. Currently I have a professional CPA doing my taxes, is it reasonable to ask him run my numbers for no fee? I would appreciate if you can share your ideas. Thanks 


 I worked in a related field so tax law is pretty basic to me.   I calculate my income taxes ongoing throughout each year using the IRS site, prior tax returns and an EXCEL spreadsheet, and have done so all of my life. 

Not saying he/she won't, but no, it is not reasonable for your CPA to do free tax work for you, regardless of how complicated your taxes are.

Before anyone can efficiently assist you, you should provide a bit more detail about your income sources and tax history.  Reason:  You may have very simple tax issues and filings while a poster responding to you might have the most complicated taxes on the planet, or vice versa.      

 

0 Kudos
PaulR888
Participant ○○○

Re: Calculating Taxes mid year

Joe ...  as you are still working, what is motivating you to all of a sudden do this?  

0 Kudos
Bentley
Participant ○○

Re: Calculating Taxes mid year


@Joe3100 wrote:

 Currently I have a professional CPA doing my taxes, is it reasonable to ask him run my numbers for no fee? I would appreciate if you can share your ideas. Thanks 


 After you retire and your employer no longer calculates your withholdings, your CPA will prepare your estimate tax forms for both state and Fed taxes. My CPA even provides pre-addressed envelopes.

 

0 Kudos
Joe3100
Explorer ○

Re: Calculating Taxes mid year


@PaulR888  Paul,

If all goes well, I may retire in March next year or closer. There are couple of reasons why I asked this question. I am 57 righ now so 

1. To get ObamaCare insurance and to keep it my income under certain tax bracket, by using 401K, dividends, etc.  I have to keep a close eye on the income.

2. I am planning on doing Roth rollover when I retire,  for this I would like to know where I stand on certain tax bracket and maximize the Roth conversion dollar amounts and still stay under the next Tax Bracket.

 

@PaulR888 wrote:

Joe ...  as you are still working, what is motivating you to all of a sudden do this?  


 

0 Kudos
Joe3100
Explorer ○

Re: Calculating Taxes mid year


@arriba 

Hello, please dont get me wrong, I am not asking for freebee from Tax advisor. Currently my taxes are basically W2 and may be 2-3 transactions on stocks sell. My adviser is charging me approx 400 dollars just for taxes, which I think are little high. When I retire it will be basically my withdrawels from 401K, Taxable accounts. Am I able to use IRS site for 2020 to plug some numbers in right now and see where I would fall in mid 2020 to do Roth Conversions and keep and eye on my income on ObamaCare income limits.

@arriba wrote:

@Joe3100 wrote:

As I am getting closer to retirement, I am curious how others calculate their taxes mid year or Oct timeframe. Currently I have a professional CPA doing my taxes, is it reasonable to ask him run my numbers for no fee? I would appreciate if you can share your ideas. Thanks 


 I worked in a related field so tax law is pretty basic to me.   I calculate my income taxes ongoing throughout each year using the IRS site, prior tax returns and an EXCEL spreadsheet, and have done so all of my life. 

Not saying he/she won't, but no, it is not reasonable for your CPA to do free tax work for you, regardless of how complicated your taxes are.

Before anyone can efficiently assist you, you should provide a bit more detail about your income sources and tax history.  Reason:  You may have very simple tax issues and filings while a poster responding to you might have the most complicated taxes on the planet, or vice versa.      

 


 

0 Kudos
arriba
Participant ○

Re: Calculating Taxes mid year


@Joe3100 wrote:

@arriba 

Hello, please dont get me wrong, I am not asking for freebee from Tax advisor. Currently my taxes are basically W2 and may be 2-3 transactions on stocks sell. My adviser is charging me approx 400 dollars just for taxes, which I think are little high. When I retire it will be basically my withdrawels from 401K, Taxable accounts. Am I able to use IRS site for 2020 to plug some numbers in right now and see where I would fall in mid 2020 to do Roth Conversions and keep and eye on my income on ObamaCare income limits.

@arriba wrote:

@Joe3100 wrote:

As I am getting closer to retirement, I am curious how others calculate their taxes mid year or Oct timeframe. Currently I have a professional CPA doing my taxes, is it reasonable to ask him run my numbers for no fee? I would appreciate if you can share your ideas. Thanks 


 I worked in a related field so tax law is pretty basic to me.   I calculate my income taxes ongoing throughout each year using the IRS site, prior tax returns and an EXCEL spreadsheet, and have done so all of my life. 

Not saying he/she won't, but no, it is not reasonable for your CPA to do free tax work for you, regardless of how complicated your taxes are.

Before anyone can efficiently assist you, you should provide a bit more detail about your income sources and tax history.  Reason:  You may have very simple tax issues and filings while a poster responding to you might have the most complicated taxes on the planet, or vice versa.      

 


 


Your income taxes appear to be pretty basic and paying a CPA $400 seems a bit heavy. 

That said, I have no idea what your capacity is for tax issues and filings so maybe $400 is actually fair/light. 

Regardless, given what you've disclosed here, seems you should be able to teach yourself - if you want to - how to do your own taxes manually or use Turbo Tax or the like, and save the $400 annually.

2020 Tax Tables and Standard Deductions are not officially out yet (they come out in the 4th Qtr annually) but are being estimated already.  Here's one:

https://tax.thomsonreuters.com/news/%E2%80%8B-2020-tax-brackets-estimated-by-checkpoint/

0 Kudos
ECEPROF
Explorer ○○○

Re: Calculating Taxes mid year

Based on what I read so far, your tax return seems to be simple. You don't need even TurboTax. There are many online tax filing websites for free. You can go through each step by answering the questions and you can complete the tax return. I used TaxAct for more than 20 years. They started charging too much money. So, I used Taxhawk last year. It will be even easier this year.  I collect the data every month and save them in a spreadsheet. I just need to copy and paste into Taxhawk.

I just used OLT website today and estimated my taxes for this year using the estimates for the future divs and distributions. I use 15% increase for per share div from last year of the quarter. Once the distributions are known every quarter, you have the actual numbers. So, everything looks good.

0 Kudos
Intruder
Participant ○○

Re: Calculating Taxes mid year

 

 


@Joe3100 wrote:

As I am getting closer to retirement, I am curious how others calculate their taxes mid year or Oct timeframe. Currently I have a professional CPA doing my taxes, is it reasonable to ask him run my numbers for no fee? I would appreciate if you can share your ideas. Thanks 



If your income is less than $150,000married/75000 single You can avoid tax penalties by withholding at least the same amount of taxes that were paid last year. Or if less you can withhold 90% of 2019 tax due.

0 Kudos
PaulR888
Participant ○○○

Re: Calculating Taxes mid year


@Joe3100 wrote:

@PaulR888  Paul,

If all goes well, I may retire in March next year or closer. There are couple of reasons why I asked this question. I am 57 righ now so 

1. To get ObamaCare insurance and to keep it my income under certain tax bracket, by using 401K, dividends, etc.  I have to keep a close eye on the income.

2. I am planning on doing Roth rollover when I retire,  for this I would like to know where I stand on certain tax bracket and maximize the Roth conversion dollar amounts and still stay under the next Tax Bracket.

 

@PaulR888 wrote:

Joe ...  as you are still working, what is motivating you to all of a sudden do this?  


PaulR:  Now I understand Joe.  I retired a little early (60.5 yrs) and had similar issues to sort out.  I will share my thoughts if you are interested.  You have a long way to go to get to Medicare (Age 65) when your medical costs will come down drastically.  Obamacare (ACA) has unknown future as does insurance plans and companies.  I would be a little scared retiring so early into the teeth of all these unknowns of Trump, Democrats and Election 2020.  Give careful thought and have Plan B and Plan C lined up.  Nothing reduces risk like working longer and continuing to get a paycheck.  Using 401K dividends is not going to suppress your income;  they are taxable income.  The way I suppressed my income was by living off my taxable account for first 4.5 years of retirement and then draw from IRA when the taxable account was essentially depleted.  It may be a little late to suppress your income for 2019.  I don't know what income years the ACA looks at to determine your eligibility.  You should get that cleared up if you haven't already.  I never got an ACA plan when I retired as my doctors here in Northern California did not accept them.  I bought an individual plan that cost me about $1K a month.  Pretty outrageous.  But it all added to my itemized deductions and as I was not pulling income from my IRA my income was down with huge deductions that allowed good chunks of Roth Conversions (taking money out of T-IRA and moving to Roth IRA and paying taxes on the money).  The more taxable account money you have, the easier will be for you to pay for your medical and pay taxes on Roth conversions.  Think it through closely and get professional advice if you feel you need.  And sometimes even they can give incomplete or inaccurate advice.  Good luck.  


 

0 Kudos
Moira
Follower ○○○

Re: Calculating Taxes mid year

The OP has indicated they have an ACA (Obamacare) policy and are concerned about qualifying for Premium Tax Credits.  Those rules can be extremely complicated.  $400 is not an unreasonable charge if the return has investment income, W-2, distributions from retirement plans, and ACA credit form.  The OP did not mention if s/he has a spouse or potential dependents.  Dependent issues can interact in complex ways with ACA credits.  Especially with older dependents (young adults on the margin of being independent or not) it can be very challenging to figure out whether or not they will be included on the return.

It can be very hard to figure out exact income for ACA purposes before the end of the year and there are notorious ¨cliff effects¨ for going over the permitted amount.  *Sometimes* a dependent´s income needs to be included on the taxpayer´s return for the purposes of computing the taxpayer´s ACA credit.

 

0 Kudos
Win1177
Participant ○○

Re: Calculating Taxes mid year

Joe3100,

I’m 61, and also looking at retiring w/in the next 2 years. I WISH my tax prep was only $400!!!! I pay nearly 10 times that since mine are VERY complicated (Two businesses (Medical practice, wife is realtor, Mine & my wife's, our children, Trust, family LP, etc). I also have a decent sized large portfolio, which generates significant dividends/ interest, as well as occasional capital gains/ losses. 

Over the years, I have developed an Excel Spreadsheet which I use to get a rough idea of where we stand tax wise each year. I just enter the income/ dividends/ interest, any capital gains/ losses, etc. just carry it over each year, and change anything related to new tax laws.

I would develop one and you can modify it each year based on any changes in tax law. My spreadsheet is pretty good at giving me a “rough idea” (w/in 10%) of what I will owe each year. And I’m NOT a CPA, but it gives me a good basic idea of how much to pay each quarter to avoid underpayment. 

Win
0 Kudos
ECEPROF
Explorer ○○○

Re: Calculating Taxes mid year

For those of you interested in the tax forms in the spreadsheet style, there is help here. You can download this and use it for estimate.

0 Kudos
myob
Explorer ○○

Re: Calculating Taxes mid year

These days nobody does nothin for free.  Expect to pay for every thing, including the smile and the hello. 

I use one of the free software tax sites, you can find them at file for free a t the IRS website, and run the numbers a few times a year with updated income information for the current year.  You can get a fairly precise estimate with out getting nickel and dimed to death.   Make any necessary adjustments for the current tax year, example the long term capital gain exclusion increases by 1550 for 2019, as well as any others to get a more accurate assessment.

0 Kudos
arriba
Participant ○

Re: Calculating Taxes mid year


@myob wrote:

These days nobody does nothin for free.  Expect to pay for every thing, including the smile and the hello. 

I use one of the free software tax sites, you can find them at file for free a t the IRS website...


"Nobody does nothin for free" yet "(you) use one of the free software tax sites."

Now that's funny.  

0 Kudos
RichK
Follower ○○○

Re: Calculating Taxes mid year

My recommendation is to take control of your financial projections and taxes including doing tax preparation yourself.  There is no better way to understand your financial position and the tax/cost implications of things like Obamacare, tax brackets, Roth Conversions, Medicare premiums, etc. and you will save on tax preparation fees.  

Here's a suggestion:

1.  First, buy Turbotax 2018 which you can get for about $10.  Then input your data from last year.  When you're done, your results should match exactly your 2018 filed taxes that were prepared professionally.

2.  Save your 2018 Turbotax file under a new name such as "2019 Pro Forma"

3.  Put your projected 2019 data in this new file to see where you stand.  This won't be 100% accurate; it will overestimate taxes a bit due to increases in tax brackets and standard deductions.  If you want, you can make manual adjustments to get it to work, but the difference is probably not so big.  If you also want to project 2020, you can, but you will start to get a wider variance; still, it might be close enough.

4. Then you can play games such as changing income and Roth conversions to determine the sensitivity of various levels of conversions on your income and total tax and to ensure you are staying below whatever cutoffs are in place for health insurance.  This process will also give you the confidence to do your taxes in 2019 using TT or some other tax prep software.

For tax liability, I strongly suggest you use one of the "Safe Harbor" tax provisions as mentioned in another post.  If you withhold or make estimated payments equal to either 100% of prior year taxes (110% if over $150K for a couple) or if you pay 90% of your present year taxes, then you won't experience any penalties (just make sure any estimated payments are in equal amounts each quarter).

 

 

ECEPROF
Explorer ○○○

Re: Calculating Taxes mid year


@RichK wrote:

My recommendation is to take control of your financial projections and taxes including doing tax preparation yourself.  There is no better way to understand your financial position and the tax/cost implications of things like Obamacare, tax brackets, Roth Conversions, Medicare premiums, etc. and you will save on tax preparation fees.  


+1. It is better to spend some of your time on these issues because then only, you will have a better understanding of the various moving parts in your cash flow - both in and out.

Sheryldell
Explorer ○○

Re: Calculating Taxes mid year

@RichK

 +1

Turbo tax for 2019 will be available in mid October.  I would definitely buy a version and practice/play with it.

The idea to make a past or even current return match your accountant's version is a good plan. You might even find he made an error!!

Hopefully soon you will be able to prepare your own return and save a lot of $$.  You can also ask an accountant to review the return you prepared for a lesser fee. I have done this in the past with complicated K-1s.

With the linkage  of Turbotax to your brokerage accounts, you will find the input of all your brokerage 1099-B data and 1099-DIV data onto the return to be so clean and simple. I remember having to do this transaction by transaction by hand, now it is a piece of cake. 

You may even find this to be fun!

 

 

Announcements

To learn more about the recent changes to Morningstar.com, please see the updated FAQ.

See recent posts and all our forums or access the old forums here.
 

You can read the community guidelines in