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Tackling Taxes

October 19, 2022 We had the opportunity this last week to meet with Mark, a Summit Financial Advisor. We came armed with a laundry list of topics, with corresponding print outs and back up information, that we wanted to discuss. Topics on our agenda included discussing estate planning, prioritization of various retirement account options, an employee stock purchase plan through Robin’s employer, and tax planning.We came out of that meeting with a much clearer understanding of options available to us, and the pros and cons of each. I think one of the most impactful discussions was related to our discussion of tax planning. Robin and I have been struggling to balance our taxes for the last few years, making adjustments to our withholding – but never seeming to strike the right balance. For our state taxes, we always seemed to get a fairly stable refund, but on the federal side we continually find ourselves having to pay in. We shared this info with Mark, and he was quickly able to point out the likely cause of our issue – our ROTH account contributions. In hindsight this makes perfect sense as the timing aligns, we started to have a balance due come tax time when I began my Roth 457 account contributions at my job, and the increase in our balance due corresponded with Robin beginning Roth 401k contributions at her job. What this effectively did was increase our Adjusted Gross Income (AGI) dollar-for-dollar, since the ROTH contributions are taxed going in. So, what we are looking into now is adjusting the percentage of contributions to a split between traditional and Roth. The advantage of the traditional contribution is that is has the opposite effect on the AGI, reducing it dollar-for-dollar. Another possible benefit is that right now we are close to the lower threshold of a tax bracket, so if we can lower our AGI utilizing traditional contributions, we may be able to get into a lower tax bracket.That dovetailed nicely into another one of our topics, which was prioritization of various retirement account options. We discussed where our current contributions are going, prioritizing options available, and what adjustments we may be able to make to help us from a tax planning perspective.Robin and I are excited for our homework to continue to dig into these adjustments to close the gap (or even eliminate) our tax balance due and can’t thank Mark enough for taking the time to walk through all our questions. You might also be interested in As the year comes to a close, so does Season 14 of Project Money. In preparation for writing our final blog post we reflected over what has occurred over... In the last week we had to take Robin’s car, a 2019 VW Atlas, in for a couple of recall notices we had received. Nothing completely out of the ordinary... One of the topics we had mentioned in our posts from earlier this year was an employee stock purchase plan offered by Robin’s employer. We have never participated... Being part of Project Money has pushed our family to take a more active role in managing our finances, necessitating weekly conversations that have spurred... With Thanksgiving behind us, the countdown to Christmas has “officially” begin. This year, as part of our Project Money journey, we have been planning... I had been putting this off for a few weeks/months now, optimistic that Fall might stretch on a little bit longer – but this past week’s winter weather... Over the last few weeks, we have been working to refocus, and get back to some of the basics as we start to head into the end of year holiday season... Over the past few weeks and months, I had seen several news reports about I Bonds, usually with a corresponding endorsement of their attractiveness as... We have reached the point of the year where we have one foot firmly planted into heating season and thought we would reflect on what energy saving tips...