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.