Tax advisor?

[tmm99]

Do you have a tax advisor? Would you have one if you weren't financially savvy (=me)?

I have a CPA I go to for my taxes (I messed up something when I started tIRA/Roth IRA conversion, and I also messed up with selling some stocks, so I have been going to a CPA the last few years. I actually don't even show up - I just collect all the info he will need and I send the info to him) but all he does is yearly taxes for me - you know, just filling out the form and send it. I asked him this year if there was anything I should be doing differently, he answered that there is not a lot I can do short of earning less money. I am barely itemizing since I do not own a home = no mortgage interest/property taxes I can deduct, and I am already maxing out my 401K. He suggested I increase charitable contribution.

Anyway, do you get tax advice when you do taxes each year (This is a question for not so financially savvy like myself - if you do taxes yourself, obviously this question won't apply to you.) or you have a tax advisor you go to at a non-tax time?

It really didn't matter much when I had no money at all, but now that I have a little, I am thinking maybe there are other things I should be doing. Also you guys helped me understand that there are more advantageous ways (tax wise) to sell my stocks/funds vs maybe using the default FI/FO, I thought I'd ask if I should get a tax advisor separately from my yearly tax guy. BTW, I paid $340 this year for tax prep (I realize the guy has to type a lot because I have a lot of after tax gains etc that I need to report, but I think I can save money by going to H&R block or something.. This is bay area though - everything costs a lot.)

 

[LongPrime]

I took H&R tax prep course (~20 years ago) mostly for tax education and secondly for possible moonlighting income. Then using precursor program on 8086 computer to Intuit (?).

IMO, use a tax program to audit preparer's work and to LEARN the tax "loopholes". Run scenarios What-Ifs. Keep some type financial adviser to bounce ideas. Do not invest or avoid investment ideas just because of taxes (pro or con)-Invest because they are good ideas.

 

[pb4uski]

If you are a W-2 employee your tax savings options are pretty limited in my experience. Pre-tax/deductible savings opportunities (401k, deductible IRA, HSA, etc) are useful.

I wouldn't increase charitable contributions only for the tax benefits - even after the tax benefit it is a net negative - give because you want to.

 

[Gill]

$340 is quite reasonable to have a CPA prepare your return.
Bruce

 

[splitwdw]

The CPA that does our taxes gives advice on ways to save and often says "why the heck did you do that". Cost $150 and a loaf of home made bread. Only thing we use him for is taxes because both of us don't want to take a chance on messing up our taxes. He's never charged for any extra work, like an amended filing we had to do cause of a mix up at my husband's company and sending letters/info to the IRS for problems with a IRA rollover problem.

 

[haha]

Do you have a tax advisor? Would you have one if you weren't financially savvy (=me)?

I have a CPA I go to for my taxes (I messed up something when I started tIRA/Roth IRA conversion, and I also messed up with selling some stocks, so I have been going to a CPA the last few years. I actually don't even show up - I just collect all the info he will need and I send the info to him) but all he does is yearly taxes for me - you know, just filling out the form and send it. I asked him this year if there was anything I should be doing differently, he answered that there is not a lot I can do short of earning less money. I am barely itemizing since I do not own a home = no mortgage interest/property taxes I can deduct, and I am already maxing out my 401K. He suggested I increase charitable contribution.

Anyway, do you get tax advice when you do taxes each year (This is a question for not so financially savvy like myself - if you do taxes yourself, obviously this question won't apply to you.) or you have a tax advisor you go to at a non-tax time?

It really didn't matter much when I had no money at all, but now that I have a little, I am thinking maybe there are other things I should be doing. Also you guys helped me understand that there are more advantageous ways (tax wise) to sell my stocks/funds vs maybe using the default FI/FO, I thought I'd ask if I should get a tax advisor separately from my yearly tax guy. BTW, I paid $340 this year for tax prep (I realize the guy has to type a lot because I have a lot of after tax gains etc that I need to report, but I think I can save money by going to H&R block or something.. This is bay area though - everything costs a lot.)

You have many things to occupy your mind, not least of which is earning a high income. If you want some advice, your tax preparer is likely best, as he knows your situation, to some extent knows your personality, and has some commitment to serving you.

I can't help you with this, but if you ask on this forum, "ok I earn about x, and I rent and max out my 401 K, (and whatever else you already do) what more can I do and how much help is it likely to be?" Likely you
will find that your CPA is correct, there is really not much room for improvement.

Overall, I think like others have said above, if you use the ordinary biggies that wage earners use, there will be little else. If you get any suggestions here, ask your CPA to vet them for your specific situation. By the way, I think I paid my LA CPA about that much in the 70s. So don't let that guy get away!

Ha

 

[tmm99]

I would like to thank everyone for your comments!

Like some of you said, $340 isn't so bad, but the last few years, I didn't fill out any of his questionnaires - I just put the necessary doc's together and send them off to him. This year, I took time (about 2 years) filling out the questionnaires (basically listing all the gains I had with stocks/funds, etc, as well as putting down all the interest earnings from different institutions) and organized the doc's with numbering system and the fee decreased by $5, so I was a little unhappy, but maybe this is not so bad...

As ha is suggesting, I am putting my general finance info below to see if anybody sees something I could do differently...

I live in CA and am in my mid 50's. I make about $165 a year. Single. No dependents. I max out my 401K. I do tIRA to Roth IRA conversion (max). I rent. I max out my HSA. Some of my funds are in after tax (which generates some capital gains/ordinary dividends) - Most of my money (70+%) is in tax deferred accounts.

I am in 28% federal and 9.3% state tax bracket (I think)

Anything I can do to lower my tax burden (besides reducing my salary, giving more to charity, having a child...)?

 

[LongPrime]

Do you have a 401k Roth at work?

 

[LongPrime]

Oregon is probably going to get another wave of Californians who sold their greatly appreciated housing for relatively cheap housing and living off the difference.

 

[LongPrime]

If you already have the data and definitely have a copy of the last year's 1040- spend 3 hours to run a tax program (free-they charge for the filing and for state). Learn from the questions it asks. Look at the projections and averages and tax hints offered by the programs.

 

[LongPrime]

What is the FIRE number?
What is your expected tax bracket in FIRE

 

[LongPrime]

A tax prep of $340 is a lot. Because you may have a fairly simple preparation-non-itemized but with capital gains/losses. interest/dividends. All of which are filled into the proper forms when asked. This $340 is recurring.

Mine is ~$29 and I can run innumerable trials and projections.

 

[RE2Boys]

If your "barely itemizing" you could try to bunch your itemized deductions every other year and take the standard deduction in the odd year. Move charitable giving to be generous every other year and tight in odd years----give in advance in December one year and push off into January for the year not itemizing. You can do the same thing with state taxes if your doing estimated payments.

 

[Brat]

The OP is renting so no house sale differential for him.

And yes, I have noticed the number of former Bay Area residents, particularly those who work out of their home, moving to Portland Metro because of the difference in the cost of housing. The Alaska Air flights between PDX and SJC are almost commuter runs.

 

[tmm99]

Do you have a 401k Roth at work?

I do, but

What is the FIRE number?
What is your expected tax bracket in FIRE

I will most likely be in a 15% tax bracket from 28% once I FIRE.

If you already have the data and definitely have a copy of the last year's 1040- spend 3 hours to run a tax program (free-they charge for the filing and for state). Learn from the questions it asks. Look at the projections and averages and tax hints offered by the programs.

What tax program are you talking about?

 

[inquisitive]

I filed my own taxes the last several years, $340 per year adds up to quite a bit. Since you know your situation, it would be quite easy to get a tax program for $20-$50 dollars and enter the numbers yourself. It will also suggest deductions that you might be eligible for or missing. I feel that I have learned more about the tax system each year by self-filing. This year I used Taxact which is free! It doesn't allow you to electronically save a copy of the final return but you can print one out. In previous years I have used software from H&R block or Intuit.

It doesn't sound like there is much you can do to save taxes based on your current situation except change jobs. Eg, if you were to shift into real estate over the next few years, you could save on the 15.3% SE tax that you pay as a W2 employee and could take depreciation and other expenses to offset other income.

 

[pb4uski]

....I live in CA and am in my mid 50's. I make about $165 a year. Single. No dependents. I max out my 401K. I do tIRA to Roth IRA conversion (max). I rent. I max out my HSA. Some of my funds are in after tax (which generates some capital gains/ordinary dividends) - Most of my money (70+%) is in tax deferred accounts......Anything I can do to lower my tax burden (besides reducing my salary, giving more to charity, having a child...)?

Probably not.

On preparing your return, most brokerages and mutual fund companies provide uploads that do a lot of the typing for you.

 

[frayne]

Have been doing my own taxes since 1974. When I retired I also took the Block tax course just to educate myself on the finer points of the tax code to make sure I wasn't missing anything. Did work five seasons as a Block preparer and still keep my hand in the game by working for the VITA program. Having a good understanding of the tax code has no doubt saved me thousands of dollars that I otherwise may have had to pay in taxes. As with financial advisors, tax advisers come in many different flavors and by virtue of having the title tax advisor doesn't necessarily mean the person has your best interests at heart be they a CPA, EA or even a tax attorney. Due to the seasonal nature of our income tax, the best time to see a tax advisor is during the off season, say May thru December.

 

[target2019]

Anyway, do you get tax advice when you do taxes each year (This is a question for not so financially savvy like myself - if you do taxes yourself, obviously this question won't apply to you.) or you have a tax advisor you go to at a non-tax time?

Even those who self-prepare taxes need advice. Sometimes it comes from an advisor, online community, IRS, or help files. You really will benefit from doing your own, but understandable how intimidating it can be at first.

Be prepared to spend extra hours, though. This is what your preparer is charging for--entering numerous transactions, the format for which can change. You just won't be as quick, or reliable at typing, so be careful.

For the past 10 years I have prepared two not-so-simple tax packages. I set aside one weekend for each. When you are still working, preparing your own can use up free time.

Like others mention, get tax software and try to duplicate the preparers' results.

 

[pb4uski]

IMO there is no need in most cases to hire a tax adviser if you have a CPA preparing your taxes - use the CPA.

I thin most people should be more involved in doing and understanding their taxes so at least if they have a professional doing them they can be knowledgeable and ask their preparer the right questions.

One possibility might be to migrate towards preparing your taxes yourself and have your CPA review them before you file. At the least, review your return in detail so you understand how your personal finances affect your tax return.

 

[Animorph]

If your "barely itemizing" you could try to bunch your itemized deductions every other year and take the standard deduction in the odd year. Move charitable giving to be generous every other year and tight in odd years----give in advance in December one year and push off into January for the year not itemizing. You can do the same thing with state taxes if your doing estimated payments.

+1.This is a standard tactic that might help a little if you have some flexibility.

 

[David1961]

I used a tax preparer/advisor about 20 years ago. He set up his own business and was a friend of my family. He'd do our taxes (for a fee) and also would talk with me about tax strategies for lowering my taxes for free during the year. But most of his "strategies" were things like buy a house, buy property and rent it out, invest in municipal bonds - things I already knew.

A related question. What is the difference between a "tax preparer" and a "CPA"? I know a CPA is certified and probably has more training, etc. My experience with CPAs is they seem to be willing to do your taxes but seem to shy away from giving "advice" but maybe that is just my impression. And don't CPAs have to deal with things other than taxes, like doing bookwork for businesses? Do some CPAs "specialize" in tax planning? I've always looked at CPAs similar to doctors. You can ask a urologist about your chest pain and would get advice but if you really want better advice you'd go to a cardiologist.

 

[pb4uski]

As I recall there are "unlicensed" preparers, enrolled agents (EAs) and CPAs (certified public accountants). Anyone can hang out a shingle and hold themselves to be a tax preparer. IIRC EAs have passed an IRS test and other criteria and may even have CPE requirements (I'm not sure on the CPE requirements).

CPAs typically have a bachelors or masters degree, pass a national exam, and have 2 or more years of experience working under another CPA. However, only a small subset of CPAs specialize in taxes (most are auditing or corporate accounting and financial reporting) but most CPAs who hold themselves out as tax preparers specialize in taxes.

 

[brett]

We use a CA(CPA) and are very pleased with the service and the outcome. She does our returns and she gives us guidance on tax planning. In one instance she brought in a tax specialist for one hour review.

We engaged her in 2006. Apart from dealing with her going forward, I wanted her to review our past tax returns. I had prepared them myself and had some concerns. We were doing some retirement planning and the last thing that we wanted was a knock on the door from our IRS. We had good records. Bottom line was the she refiled back to 1999 for me and several years for my wife.

We had a net gain of $8500 on those refiles, confidence that our returns were complete and accurate, and a tax plan going forward. Our incremental tax rate is 39 percent. We can write off the accounting fees.

We have absolutely no issue with paying for good professional advice/service.

 

[haha]

If I made $165K/yr, and had a life, no way would I self-prepare in preference to paying a known and satisfactory CPA $340 per year. It actually adds up to peanuts.

Ha