How many folks use a tax attorney or specialist?

[68bucks]

I have a somewhat complicated situation with my retirement savings. I have a pretty good chunk of money but its nearly all in pre-tax situations. I'm 55 and would like to retire. On paper I have plenty it seems but to access the money means complected options and probably penalties. If I keep on working the amount is likely to continue to grow to a point I think I'll have RMD problems down the road if I'm not there already. I'm no tax expert for sure, though I do my own taxes since they're pretty simple. However I am now beginning to think I need to hire someone that can better evaluate the situation and advise. I have a FA but he's not a tax expert buy his own admission. I just wonder how many people here spend the money to hire a professional tax adviser of some sort?

 

[Meadbh]

I had a professional corporation (which is now a holding company) whose retained earnings are tax sheltered until withdrawn. My personal tax sheltered accounts are large enough that I will face heavy tax liabilities due to RMDs approximately 14 years in the future. Hence I am gradually drawing down on them now, in a lower tax bracket, to smooth taxation. I need to hire an accountant for my corporation and my accountant is an expert in this field. Her advice is invaluable in helping me choose an integrated tax efficient withdrawal strategy from both corporate and personal accounts.

I use attorneys for legal matters. When it comes to taxes, I hope to avoid needing legal expertise.

 

[dallas27]

Tax attorney? Nothing i hate more than stuffed animals staring at me in my own house. Wait...


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[2017ish]

Tax attorney is likely an elephant gun--unless your pretax dollars are in something other than standard 401k/403b/IRA locations. Have you tried to self-teach via this site, bogleheads, etc? I suspect that if you are doing your own taxes, you could get a handle on this--or at least put yourself in a position to know what you don't know in a more specific manner.

Given your timeframe, conversion ladder probably wouldn't work, but 72t might. Then again, depending upon your personal situation and effective tax rate, the penalty may not be that onerous once you break things down. (10% is a lot--but if your tax brackets are going down a lot in retirement....)

 

[gerntz]

Seems to me you need a CPA vs. an attorney. The latter to me would be for legal financial issues. The former can look at your assets and income and tell you how to minimize taxes/maximize income over the years and how much income you will have. In the process of his/her figuring it all out, you can learn your ropes and take over after a year or two & save the CPA fees if you like. I think trying to self-teach from scratch may take more elapsed time that will cost you more money than the cost of the CPA getting this laid out. And you may miss the best plan. The CPA can probably come up with a good plan after a few hours discussion with you & several hours work. You can do what ifs also. OK, it may cost you $2000, or more, but his knowledge will likely save way more costly mistakes. JMO.

 

[Big_Hitter]

a CPA should know this stuff


you could also try an Enrolled Agent

 

[swakyaby]

I have a solo practice CPA doing my tax returns since I started working as a self employed physician 18 years ago. He is a CPA that does primarily tax returns for individuals and small businesses, but has expanded his expertise to trusts and estate planning. Admittedly, I underutilize his services as I rarely contact him outside of tax season, although he has invited me to contact him about financial matters that affect my taxes whenever I have questions. Even when I moved 80 miles away for new employment in a group practice, and my tax returns became much simpler, I continued returning to him for tax returns and advice. It sounds like you would feel more comfortable contacting such a person, and retain him for the first few years of retirement until you feel comfortable managing on your own. I don't think you need a tax attorney.

 

[Rickt]

Just visited my tax accountant to plan for estimated taxes coming due on June 15. She ran the P&L of my two businesses and we projected those thru year end. She also calculated the taxable dividends thru year end, capital gain(loss) thru date and ran all the numbers on a 2015 Tax return to come up with estimated taxes. It's not rocket science, I could have done it as well but a second set of eyes looking at tax situation is well worth the small fee paid to the CPA in my opinion .

 

[Whisper66]

I also have a significant portion of my savings in tax deferred accounts. Have not hired a tax attorney but have consulted with some others. Basically I used this forum and Bogleheads wiki (Bogleheads - Index page) as self learning tools. Then used the I-ORP tool (Optimal Retirement Planner - Parameter Form) to test the optimum way to manage taxes. Lastly I bounced my plan off our tax advisor and Vangaurd account representative to see if I was missing anything critical. If one doesn't mind spending some time learning a bit, it's not as hard as it seems at first (at least in my case).

 

[Car-Guy]

No tax attorney, no financial advisors, no CPA's etc. Especially now that I'm retired and have the time, I'd much rather learn about these things myself so I can do my own tax and financial planning/investing. I've found most items/issues are actually pretty simple if you take them one at a time. Some items/issues may affect others but that too is pretty easy to figure out. It just takes some time and reading. Of course you may rather have someone else handle this "stuff' for you and that's okay too, but for me, I like to know "how and why".

 

[ziggy29]

We may have to this year. If all goes as we hope my wife will become an ordained pastor next month, which makes her self-employed by IRS standards. This is uncharted territory for us and although I'm good with numbers and pretty well versed in tax law, for the first year I'm not yet convinced I can do this alone. Fortunately we have a few months to make that call.

 

[sengsational]

I was on the fence with hiring expertise a few times. But I came away from the brink because I always tried to build-up a little working knowledge of the problem before I was across the desk from the hired gun. Then, after digging a little and asking a few "dumb questions", I felt I could go it alone. This is especially true since my situation is simple, and far from unique...there's got to be a blog or forum post that fits the question I have, and if not, I'd just ask.

 

[Bamaman]

I worked long term for Megacorporation which had a great 401K program, defined pension and good healthcare programs. I also fully funded IRA's--and played the stock market aggressively for 35 years. We have no debt and enough tax paid Cash to last to age 70 1/2.

My business is simple and I do my own income taxes. I have no needs for a CPA or a Tax Attorney. Very, very few people require a Tax Attorney unless they're of very substantial means, and are in very complicated financial situations.

 

[Meadbh]

Very, very few people require a Tax Attorney unless they're of very substantial means, and are in very complicated financial situations.

Well then, I am one of those very, very few people. I suspect we are not that few in number.

 

[Jerry1]

You either need to hire someone or spend a fair amount of time learning. I am a CPA but I haven't practiced in years. I've been in an executive position that requires financial knowledge but no tax knowledge for over 20 years. I'm in a very similar position - I'm 54, want to retire early and almost all my wealth is in my 401k or similar type of account.

As I have focused on retiring this past year, I've learned a lot. It was obviously very helpful to have once practiced as a CPA so I certainly understand taxes, however, there are a lot of things to consider and it takes a lot of time for it all to sink in and a plan to come together. Someone who does this on a regular basis could certainly do it quicker than I but I think after about 6 months, I have a pretty good understanding on how the taxes will work as I draw out the tax differed money.

One thing that I learned is that I should have saved more money in an after tax account or if/when my income would have allowed, taken advantage of a ROTH. When trying to minimize the taxes, having a few more options for drawing cash would definitely help.

One thing I'm grateful for is that when I was 20, I married a 25 year old. When I turn 55, my wife will be exactly 59 1/2. I wish I could say I planned that. Personally, I would probably not retire if I couldn't draw down my 401k without penalty. Note that there are ways to draw from the 401k without incurring a penalty. I forget the code at the moment, but basically, you have to take equal withdraws based on your life expectancy. One more thing you'll have to learn or get advice on. Personally, I'd work part time until 59 1/2 had I not married so wisely.

The other thing you need to get informed on is Social Security. I always thought the best thing to do was for me and my wife to wait until 70 or at least our full retirement age. However, having run some calculations, it appears the best formula is for me to start at 62. Wife will be 67 (full retirement age due to me marring well) and she will file and suspend. She'll take half of my SS until 70 at which time she'll switch over to her full SS and we'll ride that out. I never knew any of that a couple months ago and it's not something I ever came across when I was doing taxes as a practicing CPA. So again, you'll either need to learn or get advice.

Best of luck on your journey.

 

[harley]

We had a complicated couple of years tax-wise a while back. I had a CPA do my taxes a couple of times. But when I ran the numbers through TT and came up with pretty much the same results I decided to just do it on my own. My taxes are still relatively complicated (small business, rentals, Roth conversions, etc.) but I really haven't found anything I can't do on my own. Even though the tax code is overly complex and written in BS'ese, when in doubt I make my best guess and figure even if they come back at me I'll be OK from a best intentions POV, and I'll argue the issue then.

I don't think early withdrawals (72-t) will challenge the program. If you need to for peace of mind, get a CPA until you feel comfortable with the situation. But an attorney? Definitely not.

 

[hesperus]

Just before receiving a windfall, and some complicated tax years that followed, I was fortunate enough to find a guy who is both a CPA and tax attorney, who has been very helpful for us. We pay him a retainer each year to have unfettered access to him at any time. I now look at him as our go-to professional for all things taxes, financial planning, and estate planning.

 

[gerntz]

No tax attorney, no financial advisors, no CPA's etc. Especially now that I'm retired and have the time, I'd much rather learn about these things myself so I can do my own tax and financial planning/investing.

That's great, but he's not retired, busy, & doesn't think he has the knowledge now.

 

[gerntz]

Well then, I am one of those very, very few people. I suspect we are not that few in number.

I'm curious: what does a tax attorney do for you that a CPA can't?

 

[Meadbh]

I'm curious: what does a tax attorney do for you that a CPA can't?

I beg your pardon. I misread the post by Bamaman. I assumed it was a tax attorney or other professional, as outlined by the OP. I use a CPA, not a tax attorney.

 

[Pbkmaine]

Are the pretax assets in an IRA or a 401(k)? If in a 401(k), is it with a current or former employer? Because there is nuance in the withdrawal rules. First off, you can take substantially equal distributions over your lifetime anytime. An example is having a paper route as a kid and putting all the money into Apple stock in an IRA. Time passes, you are now 40 and a billionaire. You can withdraw this money without penalty if you take it over your lifetime using IRS tables. The other, more likely exception is if you have money in a company 401(k) and separate from service in or after the year you turn 55. You can take the money out without penalty. If you roll it over into an IRA, however, the age of withdrawal magically changes to age 59 1/2. Before doing these things, though, it always makes sense to talk to a CPA or enrolled agent who regularly works with retirement distributions.

 

[frayne]

I have a somewhat complicated situation with my retirement savings. I have a pretty good chunk of money but its nearly all in pre-tax situations. I'm 55 and would like to retire. On paper I have plenty it seems but to access the money means complected options and probably penalties. If I keep on working the amount is likely to continue to grow to a point I think I'll have RMD problems down the road if I'm not there already. I'm no tax expert for sure, though I do my own taxes since they're pretty simple. However I am now beginning to think I need to hire someone that can better evaluate the situation and advise. I have a FA but he's not a tax expert buy his own admission. I just wonder how many people here spend the money to hire a professional tax adviser of some sort?

Look at a 72T option. I did it and would do it again in a heart beat. I ran the numbers, had FIDO run the numbers and a CPA run the numbers and not much difference between the three. That was seven years ago and glad I did it. You can spend money getting advice but the bottom line is, you have to make the decision. Instead of spending money for advisers, I did the homework and math myself, it wasn't that hard, plus it gave me the warm fuzzy feeling of actually understanding all aspects of my financial situation. Just my two cents.

 

[pb4uski]

If you go to a CPA try to find one who also has is a PFS.. Personal Financial Specialist which is a CPA iwth advanced training in taxation and financial planning. Look for one in your area at CPA/PFS Credential Holder Directory

Also, many but not all, 401k plans allow penalty free withdrawals if you leave service after age 55.

If you can't access you money without penalty before 59 1/2 you might consider a 72t or if you own a home free and clear, take out a mortgage and use the proceeds to get you from 55 to 59 1/2.

 

[LOL!]

One thing I'm grateful for is that when I was 20, I married a 25 year old. When I turn 55, my wife will be exactly 59 1/2. I wish I could say I planned that. Personally, I would probably not retire if I couldn't draw down my 401k without penalty. Note that there are ways to draw from the 401k without incurring a penalty. I forget the code at the moment, but basically, you have to take equal withdraws based on your life expectancy. One more thing you'll have to learn or get advice on. Personally, I'd work part time until 59 1/2 had I not married so wisely.

The IRS allows penalty-free 401(k) withdrawals for those separated from service in the year they reach 55 or later, so no need to wait until age 59.5 unless one's plan does not use the IRS rules.

The 72(t) / substantially equal periodic payments applies to IRAs, but not 401(k)s. Howevever, since one can rollover a 401(k) to an IRA that is not really a problem.

So maybe you married wisely, but it wasn't because of the age difference.

 

[6miths]

I had a professional corporation (which is now a holding company) whose retained earnings are tax sheltered until withdrawn. My personal tax sheltered accounts are large enough that I will face heavy tax liabilities due to RMDs approximately 14 years in the future. Hence I am gradually drawing down on them now, in a lower tax bracket, to smooth taxation. I need to hire an accountant for my corporation and my accountant is an expert in this field. Her advice is invaluable in helping me choose an integrated tax efficient withdrawal strategy from both corporate and personal accounts.

I use attorneys for legal matters. When it comes to taxes, I hope to avoid needing legal expertise.

Same situation. I was lucky enough to have a close family friend who is an accountant who spent many years with the tax department before going out on his own. Much experience with professional corps as well so I was very lucky. Also hoping not to need a tax attorney or attorneys of most other specialties for that matter although I do have one to use when updating the wills and such.