Lazy Man and Money

Do I Need a Certified Financial Planner?

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For decades now, I’ve been studying personal finance. It’s gotten to the point that sometimes, I don’t know if I have anything new to add. In fact, one my goals this year is to organize the 2 million words I’ve written… maybe cut it down to a million words that cover all the major points.

(Don’t worry I intend to keep a back-up of my articles around if you are curious about my money thoughts on March 8th, 2007… and I know you are!)

After all of that, that title was surprise, even to me. I think the answer is, “Yes, I do need a Certified Financial Planner.” However, it’s probably not for what most certified financial planners typical do. I have a few advanced questions.

I’ll cover the advanced question that sent me down this rabbit hole in a minute. For now, let’s consider a simple possible conclusion. If I can benefit from a CFP, there’s a strong chance you can too… or maybe not.

Why See a Certified Financial Planner Now?

The simple answer is that my finances were easy. There were a set of relatively basic rules and we had the income to cover them. For example, we maxed out retirement accounts and invested them well. We bought rental properties and built and empire. I’m extremely good at saving money on all sorts of expenses from food to clothes to electricity (solar panels).

It’s all worked out very well, much better than we could have expected…

…and that’s the “problem”

Our finances have gotten fairly complex with the diverse number of income streams we have. It’s made me start to look at things that many people perhaps should not focus on. One of those things is income tax. As our money continues to compound and snowball, we may reach higher tax brackets. I don’t mind paying my fair share, but I don’t want to give them any more than I have to. I’ll play the game that they created to pay less taxes if I can. Also, if the government is going to act like it currently does, well I don’t want any part in funding this absurdity – or any more than I legally have to.

I’d rather:

  • Donate to charities that I believe in – in the best possible way.
  • Leaving behind a financial family legacy
  • Maximizing the amount of sunsets, museums, and any other wonderful things I can fit into this short life

Details of the Financial “Problem”

I keep putting “problem” in quotes because it’s a situation at least 99% would love to deal with. The issue is about optimization. If we make some mistakes with our money, we’ll likely still be in tremendous shape. However, we’ll limit those three things of above and have less money for them than we could have.

I’ve already mentioned my biggest concern. It’s taxes.

Many of the personal finance writers who retire early have saved up a lot of money when they were young and are living frugally off of the investments generated by those savings. They earn a low income, but it’s enough through their frugal activities like travel hacking, geographic arbitrage, and owning a home in a low property tax area. This low income can often be so low that they pay very little in taxes.

(Note: Some criticize them for not paying their fair share, but I’m not going to pass judgment. Don’t hate the players, hate the game, right?)

This is a tremendous plan for them, but it’s not likely to work for us.

My wife’s pension alone is substantial already. There’s no tax trick to make it look lower. We have investment properties and the income from those could be substantial as well. We may be able to reinvest that money in upgrades or further real estate, so that income doesn’t get too substantial. However, we’d like to be able to use that money for things like college expenses.

The biggest thing coming down the road is our investments. We’re 43 now and after years of saving for retirement in those accounts, they are doing quite well. We might not touch them for another 30 years, meaning that they’ll be very big when it comes time to take them. Many are in TSPs, SEP-IRAs, and Rollover IRAs (from 401Ks), so we’ll have to pay taxes on them then. We could be in a high tax bracket.

Most people who retire earn less in retirement, so their tax bill on deferred taxes is less. I have a feeling ours could be more. A certified financial planner could give us a second educated view into all this.

One thing that intrigues me is that the taxation of qualified dividends is very low – potentially even zero. It’s quite possible that it’s better to hold stocks (including ETFs) outside of our tax-deferred accounts. It looks like we’d only pay 15% maximum on the income from these dividends vs. the 28% (or more) that we’d have to pay when it comes out of tax-deferred accounts.

All of this goes into main financial question of the year (so far): Is it okay not to save for retirement?

Of course, we’d still be saving, but doing it in a way that potentially allows us to pay fewer taxes in the future.

This all me a case of me overthinking things. (I have a tendency to do that.) In this case, getting a second opinion can only be seen as a positive thing, right?

And that brings me to my original thought, “If I can benefit from a certified financial planner, there’s probably a good chance you can too.”

Why Nearly Everyone is Getting Scammed by Taxes (Not the Way You Think)

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Happy Tax Day… said no one ever.

In fact, taxes are so bad that people forgo billions of dollars collectively to just get it over with.

I just got an email my tax preparer that our extension is safely filed. Phew! Wait, what! Extension?!?!

It’s true. For around the 10th year in a row, we are filing an extension. Actually, “we” is wrong. My wife did ALL of the difficult personal tax stuff. I’ve been slow to put together the paperwork for the S-Corp. Unfortunately, the personal tax filing requires the S-Corp to be filed first as those numbers will feed into the personal filing.

This means that I’m writing this article about filing taxes (we’ll get to that in a minute) instead of filing taxes. That’s exactly how much I dislike filing taxes. And remember, I have a tax preparer.

I have written about some of the tax scams out there. Most of these are run by individuals trying to steal your tax refund.

The scam today that I want to talk about it that most of us shouldn’t be filing taxes at all. By the way, since many lawyers seem to sue me for using the word scam, please see the disclaimer below indicated by the “*”.

While that’s my opinion, it’s based on my understand of reading ProPublica’s Filing Taxes Could Be Free and Simple. But H&R Block and Intuit Are Still Lobbying Against It.

I’ll let ProPublica explain:

“Here’s how preparing your taxes could work: You sit down, review a prefilled filing from the government. If it’s accurate, you sign it. If it’s not, you fix it or ignore it altogether and prepare your return yourself. It’s your choice. You might not have to pay for an accountant, or fiddle for hours with complex software. It could all be over in minutes.

It’s already like that in parts of Europe. And it would not be particularly difficult to give U.S. taxpayers the same option. After all, the government already gets earnings information from employers.”

One of my favorite shows, Adam Ruins Everything, has an extremely funny 3-minute video that expands upon it in more detail:



You should really watch the video if it is at all possible.

The ProPublica idea of how taxes could work makes a lot of sense, doesn’t it? For me personally, there would likely be a lot of corrections to make. Or I might have to prepare my taxes myself. That’s on me for having an S-Corp, rental properties, and some other stuff that is less than standard.

The promise with the latest tax reform was that Americans could do their taxes on a postcard. So it stands to reason that a fast majority of Americans could instead review the postcard that the government sends them, signs off on it, and drops it off in the mail. It could take a majority of Americans 30 seconds assuming that they have to go to the post office anyway.

We could even get really crazy and make it possible to confirm and fix online. I understand there some security concerns with that, but the Social Security Administration already has a ton of financial available online.

It seems that the major problem for reaching this tax utopia is that the tax preparation companies themselves seem to lobby congress to shoot down bills that would allow it. It doesn’t sound logistically complicated and other countries are doing it successfully.

We could probably save a billion hours of productivity and billions of dollars of consumer dollars if we just did the sane, bipartisan process that we use for just about every other billing procedure (as explained with the pizza delivery example in the video above).

The other day my wife was reading something that involved the term “racketeering.” I started to explain it the best I could, but then I realized I should rely on a more formal definition. Investopedia defines racketeering as:

“Racketeering, often associated with organized crime, is the act of offering of a dishonest service (a “racket”) to solve a problem that wouldn’t otherwise exist without the enterprise offering the service.”

A lot of that definition stuck in my head when thinking about the situation about tax preparation. I want to be very clear that tax preparation is NOT a dishonest service or alleging they are racketeering. In fact, the more I read the definition the less it seems to fit. Originally, I thought, “Hmmm, in the context of the ProPublica article, for many people tax preparation seems to be aimed at solving a problem that might not exist if not for the tax preparers’ lobbying to keep the problem in existence.” Parts of that opinion still feels right to me.

I’m not saying that this new system designed by ProPublica would be easy and perfect. However, can anyone argue against this as a great way to help tax payers save billions of hours and dollars?

How do you feel after reading all this? Let me know in the comments.

Update April, 2019: Now it looks like Congress is trying to ban the government from making free tax filing due to lobbying by the tax prep industry.

* I use “scam” as my opinion for anything that just doesn’t feel “right.” I wrote a little more about it here. It doesn’t mean that anything illegal is being done here. In fact, I often use it as in this exchange one of my favorite movies, Say Anything. It feels weird to add this paragraph on at the end of my articles to make it clear for lawyers, but that’s the world we live in. It should also be noted that I draft and publish my articles very quickly, as intended by the blogging platform, and thus this is most informal of writing styles with zero proofreading.

Look Out for (and Avoid) Tax Scams

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I was planning on writing this article a couple of months ago, but I got busy (yes that Le-vel thing again.) Fortunately, my wife got a phone call that reminded me to write this. I didn’t hear the call, but she quickly hung up and said, “Some kind of tax scam” when I asked who it was.

There’s a lot of tax fraud out there. The IRS lists a “Dirty Dozen tax scams”.

I’ll give you a minute to click and review the list.

For those who didn’t take the time here are a couple of common ones. There’s identity theft where someone else uses your identity to claim a refund. This is probably the biggest tax scam out there.

Second on the list was the phone call that my wife was referring to.

New scams are always creeping up on the IRS radar. For example the IRS warns people of this one. In short:

“Typically, con artists falsely claim that refunds are available even if the victim went to school decades ago. In many cases, scammers are targeting seniors, people with very low incomes and members of church congregations with bogus promises of free money.”

I think there are two main defenses you can use to protect yourself against this fraud. First, it is helpful to grow that critical thinking muscle in your head. Yes the brain. If it sounds too good to be true, it probably is. If someone is calling you up on the phone to offer you something, and you don’t know them, it’s probably not a good idea. (Incidentally, these are also the kinds of things that can help you avoid many MLM/pyramid scheme scams.)

The second thing you can do is file your taxes sooner. If you get your taxes done quickly, it gives someone less time to steal your identity and beat you to the punch. Unfortunately, this advice comes too late this for this year’s taxes. The best way to get them done quickly? In my opinion, TurboTax is the way to go for most people.

What I Learned by Doing My Own Taxes

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This post is part of the TaxACT #DIYtaxes blog tour which shares stories and tips about doing your own taxes and how it makes you smarter about the overall health of your finances. Do your own taxes today at TaxACT. You got this.

My taxes weren’t always this complicated. It used to be a pretty W-2. The most complicated parts were the few write-offs like the excise tax in MA. Over the years, I’ve added a wife and the requisite 2.5 children (a dog counts as half, right?)

The wife is in the military, which lead to us moving away and turning each of our existing condos we owned into income properties (they were too far underwater to sell). And this blogging “thing” took off to being its own full-time business. Suddenly we’ve got military exceptions, rental property, business and child care write-offs.

As complicated as it is, it could be a lot worse.

Back in the dot-com boom, I used to actively trade internet stocks. Sounds glorious, doesn’t it? Well my account had about $8000 in it, which means if I worked out a 1% gain on the day (which is huge on an annual basis), I would make a grand total of $80. I’d pay a good part of that gain in commissions to Datek who had my brokerage account. It wasn’t a super-smart plan and I did it mostly for fun. I wasn’t expecting to get rich.

Then tax-time came around. That’s when the tax software I used told me about the “wash rule.” Essentially, when you are buying and selling the same stock, you can’t claim a loss unless 30 days go by. (This is a purposeful gross simplification. There are many great resources that are far better suited at explaining it than I am.) Fortunately, tax time rolled around before I had done too much trading that would have been effected by the rule.

There’s something powerful in getting down and dirty with your taxes. It forces you understand the reality of how you did financially the previous year. Here’s just one example. I often keep a running tab of how much money I make on my internet businesses each month. It isn’t until tax time that I dig into the expenses. I find domain names that I never used. They seemed like a great idea at the time. I also found a hosting service that I no longer use. Why am I paying a monthly fee for it? (Note: As I’m writing that sentence, I’m canceling the service.)

I suppose I could hand a bunch of paperwork and statements to someone else and have it done for me. If I did, I would avoid looking at these expenses for years.

Friends and family sometimes consider me the “money expert.” With that, comes questions like, “Do you do your own taxes?” I think what they mean to ask is, “Should I do my own taxes?” Most people don’t have rental properties and small businesses with military exceptions. I probably fall in the 3-5% range of people who have “weird taxes.” I always recommend my friends and family do their own taxes.

The last few years, I have had a tax advisor. She’s a friend of the family and very good at what she does. I also get a good price (not sure if I get a family discount or not). Combine that with my tax situation and there are enough factors to push me to use her services. Before she even looks at a single piece of paper, I’ve done hours of work analyzing expenses, pouring over receipts, and getting dirty with the numbers.

Beating the tax deadline doesn’t have to be stressful. With TaxACT, everything you need to confidently prepare and e-file your taxes is right at your fingertips. You got this. File your simple or complex federal return FREE today with TaxACT Free Edition.

Have You Decided To Be Rich?

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Last week while on an airplane, I finally caught up on some reading. I brought three books with me… Millionaire By Thirty, You’re Broke Because You Want To Be, and 422 Tax Deductions for Businesses and Self Employed Individuals.

While reading You’re Broke Because You Want To Be, Larry Winget wrote something that stuck with me.  Loosely paraphrased it was “if you want to be rich, you need to make the decision to be rich.” I thought that it sounded pretty obvious, perhaps a little too obvious for the average person to think about. I tried to think back to when I was 24, and I clearly hadn’t decided to be rich. I was preoccupied with trying to woo the hot girl from my Spanish class, making my boss happy, drinking a little more than I should, and just about anything other than getting rich.

Flash forward to this plane ride… I could have brought the copy of the Buffy Season 8 Comic Book which my wife got me for Christmas. I have been looking forward to reading it for some time. However, here I was with three financial books… one being possibly the most dry topic off all-time… 422 Tax Deductions… and tax time is a good 10 months away!

I don’t know when I made the decision to be rich, but it seems that I clearly did.  I have no other explanation as to why I would bring those financial book vs. a book that I’ve been looking forward to.  I obviously still have a long way to go, but I think I might be moving in the right direction.

Have you made the decision to be rich?  If so, how has the decision impacted your finances?