Use of tax software for planning
by LFremont » Fri Feb 28, 2014 11:41 pm
I am retired and have been living pretty much on SS and payments from a retirement plan. I have reached the age now where RMDs are necessary and, I plan to begin drawing on my savings, some of which are tax deferred, some not. Things got complicated really quick, with various levels of taxation of SS, etc. I'm wondering if tax software, particularly Turbo Tax might be an answer to dealing with the complexity of tax planning. I'm wondering if it is useful for this purpose or whether I need to find a financial consultant to help me out. What are other peoples experience? Is the software helpful or are there better ways of addressing this?
LFremont
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Re: Use of tax software for planning
by livesoft » Fri Feb 28, 2014 11:42 pm
I use TurboTax every year to calculate "what if" scenarios of future tax years, so yes, the software is helpful.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Use of tax software for planning
by simpsonlang » Sat Mar 01, 2014 8:51 am
Esplanner Pro can map that out but what might be more useful in your situation is http://maximizemysocialsecurity.com made by the same person. I personally use Esplanner Pro and think it's useful to get a rough idea on future years but have no experience with the maximizesocialsecurity site so if you find it useful I would love to know.
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Re: Use of tax software for planning
by JW Nearly Retired » Sat Mar 01, 2014 11:00 am
LFremont wrote:Is the software helpful or are there better ways of addressing this?
I can't think of anything better. We use tax software (in our case HR Block/aka TaxCut) all the time for this purpose. It's going to be all set up from doing your 2013 income tax already so you can just save that as a WhatIf-2014 return and then make your RMD and/or other changes to see their effect.
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Re: Use of tax software for planning
by Sheepdog » Sat Mar 01, 2014 11:32 am
I also use tax software for tax planning. I will check it occasionally during the year. My goal is as little tax as possible....none, if practical. My income comes from SS and IRAs. I will take from the IRAs until taxes would be due, then I will take from my Roths, if necessary. For over 10 years, tax software makes those calculations for me.
People should not say everything they think. They should think about everything they say.
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Re: Use of tax software for planning
by Billionaire » Sat Mar 01, 2014 11:42 am
Within a few weeks/months after I file my 2013 returns using Turbo Tax, I will start a new return(with new name such as EST - 2014) with estimated amounts for 2014 taxes. I usually wait for a quarter-end and extend out W-2 earnings, etc. It has proven to be very beneficial. In 2013 I only owe small amounts for Fed and State due to my estimating skills. Even if the tax rates change from year to year, it shouldn't result in that big of a difference. If you use this method, just make sure you are always working on your estimated version when updating it.
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Re: Use of tax software for planning
by caroljm36 » Sat Mar 01, 2014 12:22 pm
JW Nearly Retired wrote:
LFremont wrote:Is the software helpful or are there better ways of addressing this?
I can't think of anything better. We use tax software (in our case HR Block/aka TaxCut) all the time for this purpose. It's going to be all set up from doing your 2013 income tax already so you can just save that as a WhatIf-2014 return and then make your RMD and/or other changes to see their effect.
JW
Do you use a special version or will any version do this? I'm thinking about doing some Roth conversions this year.
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Re: Use of tax software for planning
by JW Nearly Retired » Sat Mar 01, 2014 12:33 pm
caroljm36 wrote:
JW Nearly Retired wrote:
LFremont wrote:Is the software helpful or are there better ways of addressing this?
I can't think of anything better. We use tax software (in our case HR Block/aka TaxCut) all the time for this purpose. It's going to be all set up from doing your 2013 income tax already so you can just save that as a WhatIf-2014 return and then make your RMD and/or other changes to see their effect.
JW
Do you use a special version or will any version do this? I'm thinking about doing some Roth conversions this year.
Any version that will allow you to do more than one return will do this. I use the "deluxe" version of H&RB at Home.
I haven't used TurboTax for many years but I'm fairly sure you can do multiple returns with that too.
JW
Retired Summer 2013
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Re: Use of tax software for planning
by Hexdump » Sat Mar 01, 2014 12:41 pm
simpsonlang wrote:Esplanner Pro can map that out but what might be more useful in your situation is http://maximizemysocialsecurity.com made by the same person. I personally use Esplanner Pro and think it's useful to get a rough idea on future years but have no experience with the maximizesocialsecurity site so if you find it useful I would love to know.
The maximize site looks especially helpful for our situation.
It says that it can help you make your decision as to when to take social security as a widow, early, etc.
My wife is 17 years my junior and her opinion on taking her social security is to take it ASAP. Maybe I can get her to take an interest in this site.
I am going to sign up and see what it says.
Hmmm, there might be a discount code somewhere.
Does anyone know of one ?
thanks
Kind of a hi-jack but this is one of the best apps I have seen in a long time. If appropriate I will start its own thread.
It gave me the answers that I was looking for and I was very impressed.
Typically, apps like this want past earning records to be entered either manually or by providing access to the SSA records.
This app works differently and is very slick.
It has you sign on to the SSA site, go to the earnings page, and CTL-C it. (Copy the whole thing to the clipboard). Not just the numbers, but the column headers, logos, ads, the whole thing.
Then you paste it into the Maximize site and it parses out the numbers it wants.
Very very kewl.
Last edited by Hexdump on Sat Mar 01, 2014 1:58 pm, edited 1 time in total.
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Re: Use of tax software for planning
by snowman » Sat Mar 01, 2014 1:43 pm
I think it's the best planning tool available - I use TT every year to do just that. I am self employed and my income varies widely. I have CPA doing my business taxes, but I do our personal taxes myself. Here is what I do, but you can certainly alter this approach to fit your specific needs.
As soon as my taxes are filed for say 2012 tax year, I start a new file for 2013 in early 2013. I actually create multiple files for "what-if" scenarios, depending on what I expect to happen in 2013-2015 on both sides - business and personal. By mid-year, I have somewhat better idea how the year is shaping up. Heading into 4th quarter, I discuss things with my business CPA, especially when it comes to deductions, depreciation, purchases, etc. Different scenarios have different affects on personal taxes. In November, as 2013 TT becomes available, I purchase it and transfer all 2012 TT files into 2013 TT. December is the month where I spend most of my time on taxes - multiple files become one, we pick the best overall option, and make final business purchases/contributions before year end.
On January 1st, 2014 our personal taxes for 2013 are essentially done. We have until April 15th, 2014 to file electronically. However, as you might have guessed, by this time I already have created new file for 2014 tax year where I track my YTD income, deductions, shareholder distributions, and federal/state withholding. And the cycle continues.
Not only does this process allow you to plan, it allows you to be in control of your taxes, rather than the other way around. It also eliminates many mistakes people make when trying to file their taxes at the last minute, usually under certain amount of stress (been there myself many years ago). Finally, you will learn new ways to approach issues specific to your personal situation (RMD, SS, etc.), saving even more money in the future. Essentially, you could use the software for ballpark long-term planning purposes, say 10-20 years down the road.
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Re: Use of tax software for planning
by frugaltype » Sat Mar 01, 2014 2:54 pm
LFremont wrote:I am retired and have been living pretty much on SS and payments from a retirement plan. I have reached the age now where RMDs are necessary and, I plan to begin drawing on my savings, some of which are tax deferred, some not. Things got complicated really quick, with various levels of taxation of SS, etc. I'm wondering if tax software, particularly Turbo Tax might be an answer to dealing with the complexity of tax planning. I'm wondering if it is useful for this purpose or whether I need to find a financial consultant to help me out. What are other peoples experience? Is the software helpful or are there better ways of addressing this?
I live on social security income, earnings from my taxable savings, and break into the taxable principal as necessary. So far I have left the IRAs alone and plan to do so except for the RMDs.
After I've finished my taxes, when form 8606 calculations are still firmly in my brain, I do projections for the next year depending on whether I do IRA conversions of various amounts. I just make a big table with a column for each conversion amount and now also the required minimum distribution (RMD), which I will start this year. I incorporate both federal and state tax effects.
Seeing the numbers in front of me gives me a good handle on what is going on. In particular, it convinced me that my plan to get a part time job (low paying but interesting, and hey, money is money) was financially unfeasible since it would impact my social security too much with taxes.
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Re: Use of tax software for planning
by LifeIsGood » Sun Mar 02, 2014 8:25 am
If you don't want to use TurboTax or other tax software, this Excel template is pretty useful - http://www.taxvisor.com/taxes/
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