Remember, you pay taxes on your Adjusted Gross Income (AGI) - the net amount of taxable income, not all of your income may be taxable. For example, not all of the social security you received is taxable. Next, your AGI is reduced by your standard deduction or your itemized deductions, whichever is higher. For 2023, the Standard Deduction for a single person over age 65 is $15,700 and for a married couple, both over age 65, is $31,400.

You are taxed on any balance after the appropriate deduction above. If $23,000 is your 2023 total income and you are single, you would pay 10% tax on $7,300 or $730. If you file as a married couple, both over age 65, you would pay 10% tax on $1,000 or $100.

Hope this helps.

Gigi,

There you have it.

If I were you, I would get a CPA, at least for this go-round.

But keep in mind that all CPAs are not created equal. Choose carefully.

I have read the website of the fee-only financial planner you found back in Ohio, Havanich Financial. On her site she lists “Tax reduction strategies and tax-planning” as areas she can address for clients. You might want to talk with her again — or see if she will just recommend a CPA — if your need is not so much long range as it is just needing to feel like you have a clear understanding of what you need to do tax-wise, for now.

Btw, that was a pretty big tax refund you mentioned. Maybe that was unusual for you. But when you go for advice, find out the best way to keep that money for yourself during the year instead of letting the government have it.

Also, I don’t know if this applies, but in some Ohio school districts, a tax is put on earned income only. I guess that is done to keep retired voters’ support for school taxes.

You have a lot on your financial mind right now, and you are being smart to be careful and to ask questions. But, like I said at the beginning of the post, if I were you I would find the right CPA. Go in with your list of questions written down. And if you come across one who is dismissive and does not listen or is condescending about questions, find a different one.

We will always have a CPA. We could wrestle our way through Turbo Tax, I guess, but don’t want to. Besides, I want my CPA’s signature on the return. (But that’s just how I am.)

At this point, I do know how to prepare very carefully for the CPA. But it has been a learning curve — and that’s OK.

Boomer

A good CPA MIGHT be able to save you more taxes than his/her fee. I agree that you should get one that will listen to your questions no matter how out of left field they may be. It's much like a doctor - you can't be helped if don't you ask your questions. Your CPA should also be asking you questions to see what you may not be aware can save you money.

How many Schedule C filers would be better off as a S Corp? Are you taking all the deductions that may be available. Are you making contributions that can reduce your taxes that all not deductible because you use the standard deduction? Many CPA's will give to an introductory no charge meeting to see if there's a way to save you money.

I've seen too many filers that missed deductions.

I believe that the services we provide are beneficial to our clients. If the taxpayer can do it him/her self I'll tell them.

My business is a sub chapter S and taxes change from year to year.

My cpa keeps up with this much better than I can and when I ask if I can do something different his job is to keep me out of trouble so I can sleep at night.

He also makes some suggestions to save me money

That is worth some dollars to me.

True and useful, as long as the person brings along or has a workbook of all the income and assets, etc so that the CPA can get a sizing of the T-shirt. .

So to start, have at minimum all your income sources and expected amounts for the year, and the inherited IRA details, and then any other investment accounts such as IRAS,/401Ks for reference. For money market, take the latest dividend amount for the month and multiply it by the remaining months to forecast out the full year. from that number and sources, the CPA can ask some basic deduction questions and get the size of your t-shirt (english expression, breadbasket is the american equivalent)

good luck.

Well if a black helicopter circles around my neighborhood I will know what its about.

Money market proceeds = income. This is going to affect a lot of people who have conservatively invested their money, since these funds and other investments like CD's have skyrocketed in 2023. Saw a credit union CD recently paying 5.6% recently. 2-3 years ago they were below 1%

Yep……

And……

For those on Medicare, there could be an experience lurking that was not expected…….

“Allow me to introduce myself” — My name is IRMAA!

The first AGI threshold to worry about this is higher than a lot of us will reach, but be aware. I think even crossing that threshold by a buck will cost you the same as if you cross it by a lotta bucks. (Somebody please correct me if I am wrong about that. I have some letters behind my name, but none of them have anything to do with money.)

Anyway, pay attention to that income. IRMAA can be stealthy. Pay attention if you have had a cap gain, too.

If you are of RMD age and it is starting to look like IRMAA is out to get you this year, you can possibly head her off at the pass with a QCD. Might be worth doing some projecting right now and running numbers if you think IRMAA might even come close. Maybe for you IRMAA is already a done deal. I think for singles, this can happen relatively fast. I am just doing my usual warning because I don’t like to see somebody blindsided by IRMAA.

Boomer

Yeah. I know I call IRMAA “her” but my reason is a story. I will spare you that this morning. :)

IRMAA and NIIT (Medicare Tax) are confiscatory, sheer evil and impossible to avoid once one reaches that level of income.

I know it is harder for a single filer. Looks like the guess for 2025 IRMAA is $105,000 for one for 2023 income. (Not sure if I am right about that though. I don’t know if or how inflation factors in when the time comes.)

Married can allow more room to try to stay out of IRMAA’s clutches.

That darned look-back can catch taxpayers by surprise. A fat cap gain can do it. Gotta think two years ahead — and you have to know you have to think two years ahead — in case you might have a chance to duck IRMAA.

I know I sound a little obsessed with IRMAA sometimes. :swear: That’s the old teacher in me. Still trying to make a difference for somebody, maybe. Once a teacher always a teacher, I guess. At least, my state pension has the word ‘teacher’ somewhere in it.

Btw, manaboutown , I saw you picking on teachers earlier in a thread somewhere. (sigh) Oh well, I like to pick on you sometimes. ;)

Boomer

Since I took "once in a lifetime" LTCGs in both 2022 and 2023 I am stuck with both IRMAA and NIIT for two years running. I had no choice as the real estate properties were held by LLCs wherein the members were aging out. A few had already passed on or given their shares to younger members of their families and problems in dealing with 'the kids' were arising.

BTW waaayyy back in 1925 my mother at age 20 graduated from Goucher College and taught both math and French for fifteen years. I feel very fortunate to have had some wonderful teachers but I also had some awful ones.

Another reason we do pay a cpa to keep us out of trouble

I contacted a well respected CPA. Is $1500 for a consult about average or were they trying to get rid of me?

way too expensive, imo for your simple questions.

Unless he/she is going to review a few years of tax returns, meet with you to understand you & your situation................$1500 is aggressive.

$1500 is three to five hours of time.

Many CPAs don’t want to bother with prospects for very small fees and, thus, they might not be very interested. If you want cheaper, you might look to an Enrolled Agent working at H&R Block rather than a CPA. That might be good enough for what you want.

Gigi,

I just looked at what we paid to have our taxes done by a CPA last year -- $325. I know ours are easy though because I always know what she will need and I hand over everything organized. The office runs the numbers in whatever program it is, and if there is anything else we need to know, we find out then. That $325 was for state and federal returns. Where we lived before, there was an extra form for the school district that cost a few extra dollars to file, but not much. I am talking about Ohio.

I hesitate to say this because I don't actually know anything about what all is involved in your situation, but from what I am piecing together from your posts, I am wondering if you might be worrying too much about this.

An inheritance can sometimes make the heir feel outside the comfort zone when it comes to handling the money carefully and wisely. I can see that you are trying to be careful and wise and it sounds like you have a handle on things, in general.

But. . .unless there is absolutely a decision you have to make before the end of the tax year, maybe the best thing to do is simply to have your 2023 taxes done by a CPA when the time comes. They always look at the previous year. . .I think. . .or they should anyway.

Get some recommendations though.

Boomer

I'm sure you are right. I had a lot of decisions I had to make with this inheritance and feel like I'm in overdrive. I don't want to be frivolous with money my grandparents worked hard to save all their lives. They passed it to my aunt and she passed it to me, never spending a dime of it. Its not a lot of money but its the principle. I do know a CPA at H@R block that i will consult if my financial advisor can't help me.
Retirement is too much work!

Sounds to me like you are going to be OK. :)

Boomer