Taxes and Investing

The Master Archive!

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Deal Breakers for Investors and Business Owners

By Keith Taxguy / February 6, 2017 /

The most dreaded words a salesperson can here are, “I need to talk it over with my accountant.”

Accountants have a reputation for breaking deals. Behind the scenes we are actually called ‘Deal Breakers’ as a derogatory term. But the name isn’t fair. What we really are doing is protecting our clients.

The investor or business owner already thought of all the things that can go right. Accountants throw cold water on the deal by examining the numbers. They don’t always stand up to the hype.

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Tax-Loss Harvesting is Killing Your Nest Egg

By Keith Taxguy / February 3, 2017 /

Sophisticated investors have been harvesting losses manually for decades to acquire tax benefits. Betterment and Wealthfront made harvesting losses easier and more efficient than ever since 2008. Betterment alone has reached $5 billion under management.

Personal finance bloggers tend to love tax-loss harvesting without much mention of risk. A few bloggers have expressed doubts over the whole process, but their numbers are few and their voices drown out by the scream of the crowd. Betterment’s affiliate program has caused concern positive reviews are biased. Betterment’s affiliate program has tightened for bloggers investing with the company and with published reviews due to recent SEC rule changes. As a result, many bloggers must end their affiliate relationship with Betterment or take down their reviews of the company.

The truth about TLH is not as clean cut as some would have you believe. Taxes and performance are two issues every investor needs to consider prior to investing with any company engaged in TLH.

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The Right Way to Own Investment Properties

By Keith Taxguy / February 1, 2017 /

During the 1980s and 90s I owned a lot of real estate. It started slow and exploded into a 176 building pain in the ass. To be fair, most of the investment properties we owned were either single family homes or duplexes. A few multi-family buildings, a boarding house and a storage facility rounded out the mix.

With so many properties running through my personal accounts and a partnership with dad and brother, I learned a few things along the way. One hundred seventy six buildings is a lot of buildings. Good thing I didn’t own all of them at the same time. Mistakes were sure to happen.

By the early 2000s the real estate empire was gone. I was burnt out and sick of working with tenants. Countless property managers helped us over the years, but it was not enough. Managing over a hundred units much of the time over a footprint covering most of NE Wisconsin took its toll. To complicate matters, I also ran my accounting practice with double the employees I have today (during tax season).

Starting slow was my greatest idea. It felt good to see the passive income filling the checkbook. Our teams of contractors allowed us to buy fixer-uppers and increase the property values significantly. Our best deal was the purchase of an upper-lower duplex in my hometown for $8,000. Hard not to make a profit on those.

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Tax-Advantaged versus Regular Accounts

By Keith Taxguy / January 30, 2017 /

Nick H recently emailed me a question about how much money he should invest in tax-advantaged accounts before adding to non-qualified accounts. Due to the large number of emails I receive I am unable to provide individualized tax advice unless you are a client. Nick’s question had a familiar ring. Several times per week I get a variation of the same question. Rather than ignore the request, I decided to put it into a post so all readers can benefit from my suggestions.

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Prepare Your Own Taxes the Right Way

By Keith Taxguy / January 25, 2017 /

It’s that time of year again where we need to reconcile the previous year’s income for the government. The task can be daunting, but with armies of tax professionals and online software, many people can tackle their tax return with few issues.

The trick is finding the right tax software when you plan on preparing your own tax return. The most popular online packages are dummied down versions of better tax software programs. The Q&A required by most online programs can become daunting (and time consuming) if you have any tax knowledge at all. The biggest problem is finding tax software that is professional grade that offers just enough help to not be invasive.

I want to introduce you to an online tax program I think is superior to other online software: Drake Software. The banner below is a direct link to the software for individual users. It was featured last year on Mr. Money Mustache. It also happens to be the same tax software I use in my office.

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Organize Your Life to Maximize Net Worth and Minimize Taxes

By Keith Taxguy / January 17, 2017 /

There are several ways to convince someone to speak at your event. Stephen Baughier used the most sure-fire method ever. Stephen noticed I wrote a blog post back in August listing some people I would like to meet someday. He checked two people on the list and found JD Roth open to attending. He then called me and said, “Hey, Keith. I saw on your blog you wanted to meet JD Roth. Well, he is speaking at Camp Mustache SE in January. We would love to have you speak as well and you can meet a man you admire.” How could I say no?

Picking a topic of discussion is something I allow the event organizer to decide. If they have no preference I choose something currently exciting to me. In this instance Stephen thought something about organizing your stuff in preparation for meeting your accountant/tax guy would be a good choice.

I grimaced. My organizational skills are not legend. However, I do keep a tight fist on in financial organization.

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If I Were an IRS Auditor

By Keith Taxguy / January 11, 2017 /

The IRS has a complex formula in determining who to audit so secret even the government doesn’t know what it is. This secret is the subject of much debate and some even claim to know the formula. (They also have the secret formula to Coca Cola.)

In my neighborhood if you have an S corporation and get audited, I apologize. The lady who handles S corporation audits at the IRS around here was once an employee of mine. I take full responsibility for my limited role in training her. I am ashamed of my behavior.

But an IRS audit is not really an issue for most people. IRS audits are at all-time lows and do not look to be expanded much in the future. Most audits are not the dreaded visit to the IRS office or the auditor showing up at your place. Most audits are of the correspondence type, where they send you a letter. Correspondence audits are generally narrow in focus and are the result of a misplaced number or a mismatch on the tax return with information the IRS has.

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Financial Independence for Normal People

By Keith Taxguy / January 9, 2017 /

Discussions around here have focused on early retirement and financial independence with a few assumptions: either you own income properties, own a business, or have a side hustle. But what about the other 95% of the people working their tail off, day in and day out, looking for a retirement plan? For those fine folks I have a treat today. We will focus on normal people and wealth accumulation. We will avoid tax talk because income level and type of income create too many variables muddying the conversation.

You would think it should be simple if you are a wage earner only, but it’s not. There are several choices you need to make to maximize your wealthy building. Accelerating to the early retirement line is straight forward if you know where to start. Without passive income like rental properties you only have your earned income (wages) to rely on. Your passive income will be limited to dividends, interest and capital gains.

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