# My Annual Thank You To Our Beloved IRS



## fmdog44 (Apr 18, 2019)

Once again IRS you have gone out of your way to make certain we do not enjoy the merits of smart investing/saving in order to "build" a comfortable life in retirement. I hope it is beneficial when you spend it on studying the mating habits of the purple four eyed flying doodlebugs.


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## mathjak107 (Apr 18, 2019)

why do you say that ?  we have zero long term capital gains brackets , roths that are not taxed at retirement ,extra exemptions for seniors ,etc ..in fact seniors can pull 24k out of their ira's which was never taxed just using the standard deduction as a couple and get it tax free  ... they can take up to 44k at about 4% effective tax rate ... we can even take some ira money  , buy leveraged permanent life insurance  and leave my spouse 100% tax free money ..

if i leave my wife a 1 million dollar ira , she has no clue what rmd's will be , plus it is likely at some point she will be filing single when i am plant food ...but for no where near a million i can  buy a tax free spl policy , pay for it with some ira money .. pay the taxes as a couple on the ira money and eventually she gets 1 million tax free dollars and that policy will not cost anywhere near what it pays out at .

it seems poor tax planning on our behalf is the real issue. the tools and laws are all there . it is up to us to use them ...


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## Pepper (Apr 18, 2019)

fmdog44 said:


> I hope it is beneficial when you spend it on studying the mating habits of the purple four eyed flying doodlebugs.


Can't blame the Infernal Revenue Service for that.  :bigwink:


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## mathjak107 (Apr 18, 2019)

not sure what we are blaming them for ,other then ourselves not having a tax efficient plan .


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## KingsX (Apr 18, 2019)

.

Because I live simply and debt-free on a small income... I have not been required to pay income tax or even file an income tax return for many years.  

That will change when I am forced to take IRA RMD.  Thankfully, there is now a new retirement bill in congress that will raise the RMD age a couple more years.  

.


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## fmdog44 (Apr 18, 2019)

mathjak107 said:


> why do you say that ?  we have zero long term capital gains brackets , roths that are not taxed at retirement ,extra exemptions for seniors ,etc ..in fact seniors can pull 24k out of their ira's which was never taxed just using the standard deduction as a couple and get it tax free  ... they can take up to 44k at about 4% effective tax rate ... we can even take some ira money  , buy leveraged permanent life insurance  and leave my spouse 100% tax free money ..
> 
> if i leave my wife a 1 million dollar ira , she has no clue what rmd's will be , plus it is likely at some point she will be filing single when i am plant food ...but for no where near a million i can  buy a tax free spl policy , pay for it with some ira money .. pay the taxes as a couple on the ira money and eventually she gets 1 million tax free dollars and that policy will not cost anywhere near what it pays out at .
> 
> it seems poor tax planning on our behalf is the real issue. the tools and laws are all there . it is up to us to use them ...



Rules for retired singles w/zero dependents that cannot itemize that earn too much are different.


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## mathjak107 (Apr 18, 2019)

fmdog44 said:


> Rules for retired singles w/zero dependents that cannot itemize that earn too much are different.


Well they still can tax plan better ... if they earn that much that they  can’t make use of the zero capital gains brackets or do Roth’s then what exactly are we feeling sorry for ? Taxes are still pretty low..

i have no no idea what this thread is supposed to be about


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## Aunt Bea (Apr 18, 2019)

_[FONT=&quot]"The only thing that hurts more than paying an income tax is not having to pay an income tax[/FONT]_[FONT=&quot]_."_ - [/FONT]Thomas Robert "Tommy" Dewar


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## fmdog44 (Apr 18, 2019)

Well, I just went over my 2018 tax preparer's work and for the second consecutive year I found a simple subtraction error. I used this preparer because of last years big error by another company. This time it is a small one but the mistake like last year is a simple math mistake. From now on I'll do my own even though I hate doing it.


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## mathjak107 (Apr 19, 2019)

i have been using turbo tax for 15 years now


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## OneEyedDiva (Apr 19, 2019)

Aaaaah yes. Our government is great at wasting our tax dollars. But don't you feel proud of yourself for being a *good* American and paying up?!


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## KingsX (Apr 19, 2019)

.

It irks me to know how government spends my tax money... 
so I try my best to legally give it as little as possible.

That goes for the state too.  Federal law requires all states
to give free education to illegal aliens at taxpayers' expense.
Here in Texas,  public schools are filled to the brim with them.


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## mathjak107 (Apr 19, 2019)

KingsX said:


> .
> 
> It irks me to know how government spends my tax money...
> so I try my best to legally give it as little as possible.
> ...



i can't control what the gov't spends it on  anymore then i can control what bond issuers do with my money .... but i can make sure that my fair share of taxes is the lowest number i can legally reduce them to using the tools and laws available to me .


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## Aunt Bea (Apr 19, 2019)

I agree with the quote below but I won't cut off my nose to spite my face in order to reduce my taxes.  I will spend what I need to spend on an enjoyable life and pay the taxes due.

I also believe that every American should have a little skin in the game.  Every adult rich or poor should contribute to the day to day operations of our country._

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes.
Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any
public duty to pay more than the law demands." _- Judge Learned Hand


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## fmdog44 (Apr 19, 2019)

Well said Aunt Bea despite the pain it has to be one. Taxes have been in question since day one and still there is no perfect system.


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## mathjak107 (Apr 20, 2019)

fmdog44 said:


> Well said Aunt Bea despite the pain it has to be one. Taxes have been in question since day one and still there is no perfect system.


taxes go with the territory  and they are still pretty low for most of us ..


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## Trade (Apr 20, 2019)

Taxes are what we pay to live in a civilized society.


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## norman (Apr 20, 2019)

The IRS empoyees over 80,000 people to collect taxes.  The IRS is one of the most powerful units of our government and our tax laws cause tax payers to attempt to cheat.  If they decide you have an error on your taxes and you still owe $1000.00 it is up to you to prove you don't owe.  The solution to the IRS would to close that unit of the government.   Then establish a National Sales Tax, when you purchase a item you pay the tax at that time and you are done.  No filing taxes no more IRS.   
   The present tax code was established by  politicians who spend our tax money like there is no limit and give raises to guess who.    IT SEEMS THAT THE RUES ARE:   Tax his land,  tax his bed, tax the table where he is fed, tax his tractor, tax his mule, teach him that taxes are the rule, tax his work, tax his pay, he works for peanunts any way, tax his cow, tax his goat, tax his coat, tax his pants, tax his shirt,   tax his dirt, tax his tobacco, tax his drink, tax him if he trys  to think, tax his cigar, tax his beer, tax him if sheds any tears,  find other ways to tax his ass, and when he is gone, do not relax, its time to add inheritance tax.

How did this happen spell............. POLITICIANS with the IRS to do the dirty work.


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## fmdog44 (Apr 20, 2019)

Trade said:


> Taxes are what we pay to live in a civilized society.



….and what _civilized society_ are you referring to?


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## fmdog44 (Apr 20, 2019)

norman, great post


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## Trade (Apr 21, 2019)

fmdog44 said:


> ….and what _civilized society_ are you referring to?



You mad Bro?


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## oldman (Apr 21, 2019)

If I transfer my retirement IRA’s to a Roth, won’t I have to pay taxes?


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## mathjak107 (Apr 21, 2019)

oldman said:


> If I transfer my retirement IRA’s to a Roth, won’t I have to pay taxes?



Yes ,it is taxable


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## Knight (Apr 21, 2019)

I think what is lost in all this is the frustration expressed in post #1. Being an average person not spending a lot of time researching every possible way to minamize the tax bite in retirement, I think that those that did better planning to assure that comfortable life have the right to be upset that the tax bite is spent on projects that waste money. 


The suggestion to have a federal tax on items bought makes sense to me. Everyone then has skin in the game. AND the wealhty that buy high end items will be paying for that ability to buy those expensive items.


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## fmdog44 (Apr 21, 2019)

Knight said:


> I think what is lost in all this is the frustration expressed in post #1. Being an average person not spending a lot of time researching every possible way to minamize the tax bite in retirement, I think that those that did better planning to assure that comfortable life have the right to be upset that the tax bite is spent on projects that waste money.
> 
> 
> The suggestion to have a federal tax on items bought makes sense to me. Everyone then has skin in the game. AND the wealhty that buy high end items will be paying for that ability to buy those expensive items.


Throw in the more I make the more the IRS taxes my Soc. Sec. I made about 20% more this year over last.


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## oldman (Apr 21, 2019)

It’s kind of like my dad used to say, “It’s not about how much you make, it’s about how much you keep.” 

My grandfather made a fortune in the restaurant business and left the majority of his estate to my dad. My dad was a career Army man, so we really never wanted or needed anything. In 2004, my mom passed away and she left the bulk of her estate to my sister and myself. The rest went to her church and the local SPCA. (She was a cat and dog lover.)

Today, between my SS, pension, IRA’s and the Trust, not to mention my wife’s SS, pension and IRA’s we will never touch the trust, yet we still pay in every year. I often tell my tax guy that he needs to figure out a way for me to at least lessen my tax burden. I don't mind paying my fair share, but it seems like I’m paying more than I should be. 

Answer this, if you can. My mom set up the Trust as an irrevocable Trust, but I still pay taxes each year on the money the Trust earned even though I never touch any of the money. Is this correct? In fact, I have to file a separate form (1041, I believe) just to pay the tax. I often wonder why or how Mom got talked into setting the money up in an irrevocable Trust. Any ideas?


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## Trade (Apr 21, 2019)

oldman said:


> It’s kind of like my dad used to say, “It’s not about how much you make, it’s about how much you keep.”
> 
> My grandfather made a fortune in the restaurant business and left the majority of his estate to my dad. My dad was a career Army man, so we really never wanted or needed anything. In 2004, my mom passed away and she left the bulk of her estate to my sister and myself. The rest went to her church and the local SPCA. (She was a cat and dog lover.)
> 
> ...



So you're wallowing in wealth and complaining? Things are rough all over aren't they?


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## Trade (Apr 21, 2019)

norman said:


> The IRS empoyees over 80,000 people to collect taxes.  The IRS is one of the most powerful units of our government and our tax laws cause tax payers to attempt to cheat.  If they decide you have an error on your taxes and you still owe $1000.00 it is up to you to prove you don't owe.  The solution to the IRS would to close that unit of the government.   Then establish a National Sales Tax, when you purchase a item you pay the tax at that time and you are done.  No filing taxes no more IRS.
> The present tax code was established by  politicians who spend our tax money like there is no limit and give raises to guess who.    IT SEEMS THAT THE RUES ARE:   Tax his land,  tax his bed, tax the table where he is fed, tax his tractor, tax his mule, teach him that taxes are the rule, tax his work, tax his pay, he works for peanunts any way, tax his cow, tax his goat, tax his coat, tax his pants, tax his shirt,   tax his dirt, tax his tobacco, tax his drink, tax him if he trys  to think, tax his cigar, tax his beer, tax him if sheds any tears,  find other ways to tax his ass, and when he is gone, do not relax, its time to add inheritance tax.
> 
> How did this happen spell............. POLITICIANS with the IRS to do the dirty work.



I don't like the sales tax as much as a value added tax. There is one person running for President that is advocating for such and I have donated to their campaign. I know we can't discuss politics here so I won't mention that person's name.


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## mathjak107 (Apr 21, 2019)

fmdog44 said:


> Throw in the more I make the more the IRS taxes my Soc. Sec. I made about 20% more this year over last.


you are lucky then ...i have never known my ss not to be taxed ... so it is not a thought . it has hit the taxable level for us day 1.


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## oldman (Apr 21, 2019)

Trade....Your post is pretty much why I have never asked for a solution to my issue. The money in my Trust is not really mine. I did not earn it and I will never use any of it, yet the Trust is taxed, even though none of the money is being withdrawn. All the money in the Trust will be passed onto others, who will then also be taxed, whether they use any of the money or not. 

If this taxing on the money in the Trust is going to go on forever, I may as well just donate it now and be done with it. My tax man tells me that I could “act” as a philanthropist and donate a percentage each year, or at least whatever the Trust earns. I am more than willing to do this, unless there is a way that I could avoid paying tax on money that I do not use.

I have been wondering if I could pass it on now to my children or grandchildren to avoid paying any taxes or would they then be responsible for paying taxes on the Trust? And, would there be any tax implications by just passing on the money? 

Lastly, Trade, I also want to add that between my wife and I, we do contribute a nice piece of change each year to several different charities and have no plans to cease doing so.


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## Trade (Apr 21, 2019)

oldman said:


> Trade....Your post is pretty much why I have never asked for a solution to my issue. The money in my Trust is not really mine. I did not earn it and I will never use any of it, yet the Trust is taxed, even though none of the money is being withdrawn. All the money in the Trust will be passed onto others, who will then also be taxed, whether they use any of the money or not.
> 
> If this taxing on the money in the Trust is going to go on forever, I may as well just donate it now and be done with it. My tax man tells me that I could “act” as a philanthropist and donate a percentage each year, or at least whatever the Trust earns. I am more than willing to do this, unless there is a way that I could avoid paying tax on money that I do not use.
> 
> ...



I have no idea what any of that means. But since nobody died and left me a boatload of money I guess I'll just be thankful I don't have to worry about it.


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## mathjak107 (Apr 21, 2019)

oldman said:


> It’s kind of like my dad used to say, “It’s not about how much you make, it’s about how much you keep.”
> 
> My grandfather made a fortune in the restaurant business and left the majority of his estate to my dad. My dad was a career Army man, so we really never wanted or needed anything. In 2004, my mom passed away and she left the bulk of her estate to my sister and myself. The rest went to her church and the local SPCA. (She was a cat and dog lover.)
> 
> ...


Why shouldn’t you pay taxes on the money earned in the trust ?  It is earned income whether you take it , can access it or not .. in the eyes of the law a trust is like a living ,breathing person who owns  the assets , we can call him uncle charlie . .. the trust even has to file its own taxes just like a real person.

  just like any money uncle Charlie earns is taxable whether he spends it or not so do trusts ..... heck if you don’t want the trust to pay taxes on gains and income lose money or just send it to me ... I will gladly pay the tax..

the problem is you just have no idea what a trust is or represents ..it is not a tax problem ,it is your own lack of knowledge problem


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## fmdog44 (Apr 21, 2019)

mathjak107 said:


> you are lucky then ...i have never known my ss not to be taxed ... so it is not a thought . it has hit the taxable level for us day 1.


I  think you misread my post. I always pay SS tax but this year because I made more than 2017 I paid more tax out of my SS.


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## norman (Apr 21, 2019)

If it ain't broke, don't fix it.  Cheers! 





oldman said:


> It’s kind of like my dad used to say, “It’s not about how much you make, it’s about how much you keep.”
> 
> My grandfather made a fortune in the restaurant business and left the majority of his estate to my dad. My dad was a career Army man, so we really never wanted or needed anything. In 2004, my mom passed away and she left the bulk of her estate to my sister and myself. The rest went to her church and the local SPCA. (She was a cat and dog lover.)
> 
> ...


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## mathjak107 (Apr 22, 2019)

fmdog44 said:


> I  think you misread my post. I always pay SS tax but this year because I made more than 2017 I paid more tax out of my SS.



you always have two moving  targets when you collect ss .. the more other income you make the more the pile gets taxed .. but the good news is once you hit the 85% of ss taxed any other income increases don't effect it .

the worst is when you are at the cross over points .. you can take a mere 1k extra out of an ira and see a 47% marginal tax on the extra 1k because of the two moving targets ...the less income you have the more aware of this stuff you need to be .

Harry is an individual with $36,000 of income but a hefty $22,000/year of Social Security benefits. His Social Security provisional income is $36,000 + $11,000 = $47,000, which is $13,000 over the upper threshold for individuals. As a result, $15,550 of his Social Security benefits are subject to taxation (which is 50% of the amount from $25,000 to $34,000, plus 85% of the excess of provisional income above the $34,000 threshold), which puts his AGI at $51,550. Even after a standard deduction and one personal exemption, Harry's taxable income would be $51,550 - $6,100 - $3,900 = $41,550, which places him in the 25% tax bracket.

If Harry now takes an additional $1,000 from his IRA, his provisional income increases to $48,000, his taxable Social Security benefits increase to $16,400, and his AGI rises to $53,400. The net result: Harry's AGI increased by $1,850 for "just" a $1,000 IRA withdrawal, and with a 25% tax bracket his liability will be $1,850 x 25% = $462.50, which equates to a whopping $462.50 / $1,000 = 46.25% marginal tax rate!


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## oldman (Apr 22, 2019)

mathjak107 said:


> Why shouldn’t you pay taxes on the money earned in the trust ?  It is earned income whether you take it , can access it or not .. in the eyes of the law a trust is like a living ,breathing person who owns  the assets , we can call him uncle charlie . .. the trust even has to file its own taxes just like a real person.
> 
> just like any money uncle Charlie earns is taxable whether he spends it or not so do trusts ..... heck if you don’t want the trust to pay taxes on gains and income lose money or just send it to me ... I will gladly pay the tax..
> 
> the problem is you just have no idea what a trust is or represents ..it is not a tax problem ,it is your own lack of knowledge problem




Of course it’s my lack of knowledge. That’s why I am asking questions. Here’s other situations similar, although not the same, that may help you understand why I am confused. When I retired, I had to move my 401(k). I had a choice of either cashing out or moving it to a retirement IRA. I did the latter, which the IRS called a “Trust To Trust” transfer and there was no tax liability. Another one, my wife and I bought savings bonds as a hedge against any stock or other investment losses. We bought bonds for almost 40 years, so we have quite a few in the safe. At that time, we had a choice to either estimate the gain and pay the tax on those bonds yearly, or wait until we cash them in and then pay the tax. If we never cash them in and pass them onto our heirs, then they would assume the tax liability. 

Continuing on, my best friend had his 401(k) set up to only invest after tax money. When he retired, he withdrew his portion of the money, (only the part that he invested with after tax money) and opened a Roth IRA. The other money that was the money the after tax money had earned was moved to a retirement IRA and he had no tax liability. 

So, taking these situations into account, I have to believe that because I inherited money that I never earned and have never used one cent of, that there should be something in the tax laws for me to avoid not paying any taxes on that money until I either take it out or pass it on. I went to the local IRS office and the agent told me that there “may” be a way to do this and he was going to send me a booklet from the IRS that would explain my options, but no booklet ever came. I have also asked several other tax accountants that some have said there is no way around this, but a few others have said that it could be done, but there would be some steps involved to get the money moved from the Trust to either a gift or another form of inheritance. I think this is may be what the IRS agent was referring to. 

I think my next move will be to go back to the IRS and sit down with them, especially since the tax laws have again changed.


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## mathjak107 (Apr 22, 2019)

a trust is a "person " .... it is treated as a living breathing individual , other then you .. it is if you gave the assets way to some other person ... that is why and how it is taxed . it is not your money any more. it is in no way like an ira , a roth or anything else you own . all you are is someone this other person is giving some of their money to yearly if they want some .. so the trust has nothing to do with your taxes and the money used to pay those taxes should be coming from the trust so you really have nothing to complain about or have your accountant fix since it is not about you. the trust pays it's own taxes


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## oldman (Apr 22, 2019)

Last question and then I'll leave this dog alone. What I see happening is that I file a Form 1041 (I think that's the number.) and the only tax that I have been paying is on what the trust earns and not on the amount initially received. My confusion was that in the IRS code, it reads that trusts are taxed on the amount of the "disbursement." I took that to mean the amount that I physically received, but in reality what that means is what the trust receives and because I am the beneficiary of the trust, I pay tax on that disbursement. My sister did not have this issue because she cashed out almost as soon as she received it. 

I never really spent a lot of time thinking about this because as long as the initial amount wasn't being touched, I trusted my tax guy was doing the right thing and because I never heard anything from the IRS, I was OK with it. I guess that I should have been more" into it," but just preferred to believe that everything was being done properly, although I did have questions. 

Now, I can close the book on this matter. Thanks for your help.


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