Early Retirement

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Taxes and the Sharing Economy

By Keith Taxguy / September 19, 2016 / 4 Comments

As early retirement and quasi-retirement are easier than ever in our expanding “sharing economy”, the IRS is clarifying the rules on how much you need to share with your least favorite Uncle. For many people “sharing economy” jobs are their real jobs, for others, a way to fill time during retirement or as an adjunct to early retirement.

The goal here is to drive taxes to zero. The “sharing economy” has several opportunities to earn thousands of dollars per year and legally not report it on your tax return. In cases where you are required to report the income we can use tax strategies to significantly reduce or eliminate income or self-employment taxes.

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Don’t Leave the Lights On For Me

By Keith Taxguy / September 11, 2016 / 0 Comments

A few months back I was in a conversation where the topic of sabbaticals arose. A member of the group worked for a company that allowed employees a one-year sabbatical in the past, but ended the practice when employees who took the sabbatical tended to never return. According to my friend it was the best employees who decided a sabbatical would refresh and recharge. What the company hoped would be an opportunity for star employees to get away from the frantic pace of life turned into an early retirement plan. I laughed heartily until I realized I have employees and know how hard it is to find and keep good ones.

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The Cost of Coupons

By Keith Taxguy / September 5, 2016 / 1 Comment

A winter wind whips out of the north, sleet pelting the windows, as Mrs. Accountant quietly organizes her cache of coupons at the kitchen table. She has turned couponing into a science of savings. She uses Swagbucks and other vendors to supercharge her coupon values; she gets an additional ten cents (or more) back in cash from Swagbucks for each coupon used. Her coupon book is an old photo album converted to money-saving use. As I walk past Mrs. A and head to the barn to take care of the animals it does not seem so cold for a November afternoon in NE Wisconsin.

There is something intoxicating about coupons and the potential savings they promise. I don’t use coupons myself and have had a love/hate relationship with the scraps of paper over the years. It is much easier with many coupons in electronic format today; just load and use.

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One More Year

By Keith Taxguy / August 29, 2016 / 5 Comments

When you live in northeast Wisconsin “One More Year” has significant meaning. From the beginning of his career with the Green Bay Packers, Brett Favre always talked about hanging up his cleats. As his career was clearly waning the annual refrain of “One More Year!” started to grow old. Memes were created of an old and wrinkled Favre in a full football uniform muttering a toothless “One More Year”.

It is easier to retire when you are young. As the years add up, the work we do begins to identify who we are. Stopping said work is akin to suicide. And so it goes for your favorite accountant. I had my chance to hang up my cleats before the turn of the century. One More Year syndrome set in until it is almost a joke when I say I am quitting or retiring.

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Should I Pay My Mortgage Off Early?

By Keith Taxguy / August 20, 2016 / 4 Comments

Low interest rates have raised concerns if it is proper to pay off debt early. The good news is there are ways to determine if you should pay down debt, including the home mortgage, or invest funds to accelerate net worth building. Low interest credit card teaser rates and equity lines of credit add another dimension to the ever evolving world of personal finance. There are two factors to consider when balancing between reducing debt or increasing investments: the return on the investments over the cost of capital and the risk factor.

Personal finance can learn a thing or two from corporate finance when it comes to debt and investment. Just like a business, when a household decides to pay down debt there is a tradeoff. Accelerating debt reduction takes money from other areas, mostly spending or investment, but also reduces risks associated with debt servicing. In this post I will assume you have reduced your spending to a reasonable level and the trade-offs are between debt retirement and investment only.

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Learning to Delegate

By Keith Taxguy / August 18, 2016 / 1 Comment

There is a sickness spreading in the FIRE (financial independence, retire early) community. This sickness threatens to topple the best laid plans of intelligent young men and women everywhere. The mentality is that you must do everything yourself to save a dollar and reach your FI goal as soon as possible. Except this DIY mantra is the surest way to delay FI and early retirement by a substantial amount of time.

The worst disasters at my office and lowest times of profitability are when I, as the boss, either refuse to delegate or do not have qualified employees to delegate to. The same applies in personal life. When you do every possible job yourself you lose the economies of scale a professional can bring to the table at a lower cost, faster completion, and a better finished product. Your FIRE goal can be delayed because you refused to delegate.

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10 Ways to Legally Stop Paying Taxes

By Keith Taxguy / August 17, 2016 / 9 Comments

Years ago I started a book project called The Zero Percent Tax Bracket. The idea was to write a book with all the ways a person can bring in money and legally not report it as taxable income. As I started pulling information together it became clear marketing such a book would be difficult. Since I was not focusing on tax protesting or other such BS it would not attract the wing nut crowd nor was I interested in becoming the next Charles Givens. A book called The Zero Percent Tax Bracket would probably languish on the back shelf of a bookstore with only modest sales. The idea was sound but I did not like the marketing plan.

Today I am resurrecting the idea. As a book it would need a serious shove to turn a profit for the publisher; as a series of blog posts it is an excellent way to outline all the ways to line your pocket without owing a penny in tax. You will not find all of these tax-free methods listed in the tax code. It is the unusual interpretation of tax law that always appeals to me as long as jail time is not involved. (Jail time might be okay if it is a fairly short stint of three-hots-and-a-cot, plus free healthcare at the expense of the taxpayers. Taxes are no fun, but collecting benefits—even free jail lodging—does.)

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It Is Harder to Keep It than To Get It

By Keith Taxguy / August 15, 2016 / 0 Comments

Getting rich in the Western world, especially the United States, is so easy it boggles the mind why so many are poor. There is no excuse why everyone should not have a tidy sum of wealth invested, producing a steady stream of passive income. It is so easy yet people keep searching for the answer to quick riches, which are not so easy.

The lottery keeps bringing in money when the odds a gazillion to one you hit the jackpot. The lottery is the ultimate stupid tax. The only time I gamble is when I have the advantage, as in card counting and I haven’t done that in a while either. If I’m not having fun doing it I do something else. (Casino smoke bothers me so I don’t card count anymore, but I love playing cards.)

Saving and investing is easier than at any time in history. And safer. The first modern mutual started in 1924; the first index fund on December 31, 1975. As unfair as many claim the system is, it is more regulated to protect investors from scams than ever before. Diversification reduces risks due to funny accounting and con men and diversification is so easy and automatic. (Think payroll retirement plan withholding/matching and auto investing available at all mutual fund houses.)

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