Taxes
 

I'm fairly new to investing and have never talked to a CPA. According to Vanguard, I've made $15,000 taxable income so far in 2023 so i should make around $21-23,000 by year end. Most of this taxable income is from my VMFXX Money Market at Vanguard where i have 60% of my funds. I know that a large part of the income from that fund is government securities. On my taxes last year, which i did myself on turbo tax, it asked if my income was from government securities and i said yes so i assume I didnt pay taxes on it. Long story short, do i need a CPA consult this year? Appreciate any enlightment....

Sorry, but you will need to pay FederaI income tax on all of that income. The reason TurboTax asks about the Government securities income is because it is exempt from state income taxes. But, if you are a Florida resident, there is no state income tax.

Retired guy is probably right but think you should consult an accountant to make sure you can sleep at night.

Even on this little bit on income huh? This year on my year to date earnings, Vanguard says its $45000( fell from $60000 high for this year) total but taxable earnings are only $15000 so far.

Do as you think is best. Personally I hate getting mail from the IRS but that is me.

I have use Turbo tax and you should be able to do your own taxes. Use the interview option and Turbo tax will take you through all the questions. However you may not understand a question and answer it wrong so always watch the total tax due window and see if it goes up or down for each entry. US gov income is taxable for the Fed Gov. The 1099 you receive will tell you taxable and non taxable income. Thus when you enter it your tax due will increase. You could also email Vanguard and ask if the income is taxable for Federal. On the state level you could have interest income that is not subject to state income taxes.

In January, Vanguard will send you a 1099-DIV form which will show your ordinary dividends, qualified dividends, capital gain income, and capital gain distributions. You can copy every number from every box on the 1099-DIV form directly into the TurboTax program. You may also get a 1099-B form or a retirement 1099 form if you sold any shares or took an RMD. The TT software will automatically calculate the tax you owe. Easy peasy.

They give you a percentage to apply to total interest at year end. No effect on federal liability

I don’t know whether you need a tax accountant. No one on TOTV actually does.

VMFXX mainly holds US government securities and the fund’s income to its investors is dividend income and subject to Federal taxes. The annual tax form 1099 you get from Vanguard should describe the income as dividends and you enter the income amount on the 1099 in the relevant box of the TurboTax form. You may already know that. Generally, an investor will be taxed by IRS on such income.

Do you know which kind of ‘government’ securities that TurboTax asked you about? If not, check the TurboTax help feature. Use that help feature or Intuit’s TurboTax community forum frequently if needed rather than guessing.

Also, it’s best to understand differences between ‘government’ securities. The main types are US government and municipal government securities.

VMFXX is a money market fund. All income you receive will be taxable income for your Federal taxes. You only get a tax exemption for Government securities income if you file a state tax return.

Unless you're very wealthy and keep all your OTHER money in cash or zero-interest bank accounts, you have other income. I'm assuming that $15,000 taxable income is - the income from the Vanguard accounts. Not your total income. I doubt Vanguard keeps track of any income you earn that isn't one of their accounts.

If you receive social security, then that's income. If you receive a pension, that's income. If you receive interest from the other 40% of the funds you say you have, then that's income. If you rented out a room in your house for a month, that's income.

ALL of that income is tallied when it's time to figure out how much (if anything) you owe to the IRS. You take whatever deductions you're eligible to take - either itemizing or the standard deduction. Whatever is left, you pay income tax on. The amount and percentage will depend on the difference.

While I currently hold a significant portion of my portfolio in VFMXX it is there for short term purposes only, as in 'cash on hand'. I keep far more short term funds in a T-bill ladder. Ironically I just found this article informative about VFMXX. It brings up points I had never taken the time to research or discover. Eight Reasons Not To Own Vanguard VMFXX.

My situation is quite simple. I have no other income currently. Haven't collected SS yet. I'm 64. Vanguard is it along with my small bank balance interest which might hit $8 this year. My expenses are minimal. I keep things simple or try to.

This article is deep...lol. All I know is I'm happy with what I'm earning each month from VMFXX. I see it going in. I don't plan on staying in VMFXX more than maybe another year. Then I don't know what. Trying to figure out how to buy into the Dinar or something. :)

Income tax filing is free in the villages. They start making appointments early in the year.

Will you pay federal taxes on that small amount? Probably not. I’m not a tax guy but I’ve been doing this for many years, If you make < $89,000 and married filing jointly, using the standard deduction of $13k each, you will pay no federal tax. That $89k income is based on normal taxable dividends, short and long term capital gains (they are calculated differently), interest, maybe a part of your social security, etc..

If you take money out of your Ira/401k, non-taxable assets, then things change.
I have been using turbo tax premier because of the easy way it accesses all the brokerage accounts.

You don’t need to wait until next year (receiving your 1099’s) to do what you need to do for this years filing (2023 tax year). During the last week of December, I know exactly what all my 2023 dividends, short term and long term capital gains, my social security income was for 2023, and from this info, I can calculate my taxes and do any tax harvesting/selling/etc before dec 31. Been doing this for years. I will get the 2023 turbo tax app in December, calculate all my last minute gains/income/tax harvesting/etc, and will start playing the different scenarios in turbo tax to see what are my best moves to make in 2023 for my taxes. Then I don’t file my taxes until i actually get my 1099’s electronically.

why
 

cpa won't stop you paying tax why not just do turbo tax or signup for aarp to do it at colony rec

Don’t forget your SS will be taxed if your income including your SS is over $37,000. 85% of social security is taxed if you exceed the threshold. Turbo tax will handle it just fine.

If quite simple.............I would say no.

TT asks a lot of questions and walk you thru the process.

The year-end tax forms provide information regarding taxability and exemptions.

Worse case.........try TT early in 2024, if you hit a wall, sniff out help......either TT or a local body.

Do you know if the income is treated as interest or ordinary/qualified dividends?

If anybody wants free tax preparation software, check out Cash App. I used it for the past 2 years without any issues. Before that I used the free version on Credit Karma. After Turbo Tax's owner (Intuit) bought Credit Karma they eliminated that benefit.

During the year I also do "now look" estimates with Excel based "freeware" developed by Glenn Reeves. Federal Income Tax Spreadsheet Form 1040 (Excel Spreadsheet) Income Tax Calculator

VFMXX is a money market fund that generates interest or ordinary dividend income, and maintains a stable one dollar per share asset value. Vanguard does not distribute any qualified dividends from the VFMXX fund. All income is taxed at your ordinary income tax rate. Vanguard reports the income to you on a 1099-DIV form, even though some of the income is actually considered interest income. So in that respect, the terms "interest" and "ordinary dividends" basically mean the same thing.

Taxes
 

Turbo tax can also download your info into your form so it will be correct. They will also show you how to do it

I'm a CPA. My answer is no - you do not need to consult a CPA. If your tax last year was more than $1,000 you will need to make sure that the tax you paid in through withholding or estimates are at least what your tax was in 2022 to incur no penalties - just a balance due in April 2024 depending upon what your final tax is for 2023.

As to the poster who said anyone on TOTV doesn't need an accountant there are many situations where a good CPA CAN save a taxpayer money. Yes there are many on TOTV who do know many aspects of the tax law but this is what I do full time, reading extensively, and attending seminars and webinars and having discussions with colleagues to keep up on the latest and greatest from the IRS. There are over 60,000 pages of tax code, regulations and issuances from the IRS! Good luck to the preparer who doesn't know all the the key items to reduce your taxes. Turbo tax is excellent (I use the professional version - Pro Series) and it asks a lot of questions but IMHO it doesn't replace a professional tax preparer for all taxpayers.

Why are you asking us? Either Google or call a CPA.

Always check the info that gets downloaded. One year, Vanguard reported one of my transactions twice in the TurboTax download. I caught it by checking the worksheets.

I need to be prudent as I do not want to risk my license, so let's start off with it always being a good idea to work with a licensed professional. One may say that with the modest numbers you are talking about, a program like Turbo Tax should suffice. Anything a licensed professional "may" be able to save, would most likely be more than offset by their invoice to you. This is especially true if you are a Fl Resident. Other states (NY) can get a bit complicated. I had my office in NYC, warehouses in NJ, residence in NYS. That can get a bit complex. Good luck.

Wondering, huh?

Me, too.

I am wondering why the need to barge into a conversation among posters who are contributing and enjoying the thread — only to try to make the OP feel like she is not smart.

Geez.

Some of us learn from each other here by asking questions….

Good questions usually mean the asker is looking for a starting point to learn more through extending research or equipping oneself with the working vocabulary that can help when speaking with a professional.

Comparison: These threads are basically a little bit like Wikipedia. Any serious asker of questions knows that Wikipedia can be a starting point, but it is not a definitive reference source. Those who understand that always know to back-source Wikipedia.

Also — there is the value of remaining anonymous when talking about our money.

I think our OP might be from Ohio. So am I. We Midwest women who are interested in talking about investing and taxes don’t go around talking about such things with our friends and family — unless there is a good and private reason to do so.

Our OP is doing her homework. She has indicated elsewhere that she has found a fee-only advisor that she is happy with. Smart move.

Smart Midwest women do not take up with those guys who only want to buy them dinner first.

And, thank you to all of our regularly helpful posters who have added information here to be helpful to the OP.

(I always count on retiredguy123 to come through — and in this thread, may I especially thank Haggar the CPA.)

Please, carry on. This is such a good thread — for some of us. The rest don’t have to look.

Boomer

You likely needed to report your income from the Vanguard fund for Federal tax purposes.

You might look at your form 1040 tax return of last year. Page 1 of the standard form 1040 on line 15 (see form at link below) is your taxable income. Above that line you will see a line for dividend income on line 3. Your Vanguard fund dividend income from your form 1099 is likely in the line 3b amount and perhaps explicitly stated on Schedule B of your tax return as Ordinary Dividends.

You can determine whether the dividend income from the Vanguard fund is part of your total reportable income on line 9 by using a calculator to add the amounts on the earlier lines identified on line 9 (i.e., add lines 1z, 2b, 3b, 4b, 5b, 6b, 7, and 8) and comparing the calculator result to line 9. Then you will know whether your dividend income from the Vanguard fund was part of your reportable income for Federal tax purposes.

STANDARD FORM 1040 FOR 2022:

https://www.irs.gov/pub/irs-pdf/f1040.pdf

Vanguard Mutual Fund Profile | Vanguard (look in the Distributions section)

Topic No. 404, Dividends | Internal Revenue Service

If you think mail is bad, try calling them. I waited one day for 2 hours to talk to a rep. Right at the 2 hour mark, my call disconnected. Infuriating. Budget cuts i guess....but that's ANOTHER story.....

Budget cuts? No way. The IRS budget is projected to increase by $80 billion over the next 10 years.

When you says tax, do you mean my refund? I had $2600 refund on federal. My total income was $79000, most of which was from an inherited IRA. Is the penalty on the state taxes(Ohio) , cause i had a an underpayment on the Ohio tax for underpayment of school district taxes for $29? Maybe i do need a CPA this year to explain this to me? Wait, tax withheld on federal $15000.

My understanding is Trump cut the IRS budget when in office leaving them to cut staff and that is why i couldn't talk to a rep. Actually the cuts started before Trump went into office but continued with his tenure. Don't ask me any questions. That's all i know. :)

As I understand it, the "Inflation Reduction Act" increases the IRS budget by $80 billion over the next 10 years.

I'm trying not to sound completely stupid when i call them.

I believe this is what the budget was cut over the last 10 years. Since dems are in office, they are reversing things. Again, I'm no expert.

Inherited IRA and Property in another State are Complications in your Tax Returns
 

I am not a CPA nor Tax Preparer other than my own via TurboTax. However I have been researching rules for inheritance for our children. I think that you accurately recognize the need for some help in understanding how to handle inherited IRA and property in another state.

Perhaps someone on this site can suggest a good Tax Preparer/CPA who can simplify the rules and give you a plan and good understanding. Inherited IRA's have rules as to how long you have to distribute the assets depending upon whom the IRA was inherited from and when the transfer occurred. This is too complex and private to be discussed on a public forum.
Perhaps Boomer may have some suggestions.

Actually, i'm past the point of needing help with inherited IRA. I cashed it out but i am aware of the 10 yr thing to disperse taxes under the secure act. I don't have property in another state yet.

Not really but for each individual to determine, the only private issue is the amount, and even then, round numbers can be used, or made up numbers. The complexity is dependent upon the quality of the explanation, and this bbs has had many, many discussions on the same topics over and over again, so searching the forum and looking at the links many have provided will provide one with general enough information to ask intelligent questions.

What many are missing here is how all the pieces fall together, as turbo tax doesn't have a good output for that in my opinion. It is a tax return software, not an analytical software to give you strategies, which have to be in place prior to filing.

I have responded to IRS letters about a missing or bad or erroneous or late filing and its not the worst of all letters. . . although depending upon the mistake, certain ones will trigger additional audits in the future, but also pay the fee for the INtuit representation if you are unsure about the output, and they will help represent you.

I had a missing RMD one year, I actually put the missing amount into the tax return, even though it was not distributed, and paid the tax, and put a note into the return about the missing distribution. Never heard back from the IRS and its been almost 5 years. . .

The link to the 2023 excel tax workbook is an excellent place to start getting an idea, as long as you have all the paperwork to find the answers.