Tuesday’s need-to-know money news

Today’s top story: The 4 best times to file taxes. Also in the news: What’s different in this year’s tax filings, 5 traits shared by the best financial planners, and could this be the year to buy a house?

The 4 Best Times to File Taxes

Never Mind Tax Reform — What’s Different When I File This Year?

The Best Financial Planners Share These 5 Traits

Is 2018 the year to buy a house?
Could this be the year?

Monday’s need-to-know money news

Today’s top story: How to leverage great credit without borrowing a dime. Also in the news: How to get your taxes done for free, how to hang on to more cash, and how to save for your kid’s college and still live.

How to Leverage Great Credit Without Borrowing a Dime
Capitalizing on great credit.

How to Get Your Taxes Done for Free
Examinging the offers.

To Hang On to More Cash, Let Go of These in 2018
Time to get rid of those delivery apps.

How to Save for Your Kid’s College and Still Live
The saving doesn’t have to be painful.

Q&A: Revocable living trusts don’t help with taxes

Dear Liz: Thanks for your recent column on setting up a living trust. This sounds like something that I should do, but I have a few questions. Would federal and state taxes be due on earnings on assets in the trust? Would these taxes due be paid out of earnings of the trust? Would I continue to pay taxes on my income from sources other than the trust?

Answer: Revocable living trusts are an estate-planning tool used to avoid probate, the court process that otherwise follows death. Unlike many other types of trusts, revocable living trusts don’t trigger special tax treatment. You’re still considered the owner of the assets, so you’ll continue reporting earnings and income on your individual tax return, as you previously did.

Revocable living trusts also don’t get special estate tax treatment. Revocable living trusts are designed to eliminate the potential costs and delays of probate, not of the estate tax system. Living trusts may include provisions meant to reduce estate taxes, such as language creating a bypass trust upon death, but those are the same kinds of provisions that can be included in wills.

Monday’s need-to-know money news

Today’s top story: 7 questions to ask before you hire a tax professional. Also in the news: The security of your hotel’s mobile room key, side hustles you can start with no money, and how to pay off student debt while still saving and investing.

7 Questions to Ask Before You Hire a Tax Professional
Asking the important questions.

How Secure Is Your Hotel’s Mobile Room Key?
Risking safety for convenience?

Side Hustles You Can Start With No Money
No investment necessary.

How to Pay Off Student Loan Debt While Still Saving and Investing
Paying for the past, planning for the future.

Q&A: Cash gift to daughter shouldn’t trigger fine

Dear Liz: I gave my daughter $30,000 in 2015. I was fined $5,000. Why? I had not talked with another daughter, who does my taxes, so I was not aware that I could give only $14,000. If I had known, I could have given her the money over two years. Why wouldn’t they advise me as such?

Answer: It’s not clear whom you mean by “they,” but you need to have a chat with the daughter who does your taxes, because it’s extremely unlikely you were fined by the IRS for your gift.

In 2015, you wouldn’t owe gift taxes until you had given away more than $5 million in your lifetime above the $14,000-per-person annual limit. (That lifetime limit, by the way, has been raised to over $11 million, and the annual gift exclusion limit is now $15,000.)

If you had to pay an extra $5,000, it was for something else. Let’s hope the tax-preparing daughter didn’t decide to “fine” you for favoring your other child.

Wednesday’s need-to-know money news

Today’s top story: Is your driver’s license enough for domestic flights? Also in the news: How to have a proper parental fight over college costs, what will happen to your taxes under the new tax rules, and what will get more expensive in 2018.

Is Your Driver’s License Enough for Domestic Flights?
Big changes are coming on January 22nd.

How to Have a Proper Parental Fight Over College Costs
Facing tough decisions.

Will Your Taxes Go Up or Down Under the New Tax Rules?
It’s a whole new ballgame.

What’s getting more expensive in 2018? The gas for your car
Get ready to pay more at the pump.

Q&A: Why failing to pay your taxes is a risky form of protest

Dear Liz: I write in earnest hope that you might consider giving advice to those wondering about withholding federal taxes as a form of protest over the enactment of the new tax bill. What are the possible legal ramifications of withholding federal taxes?

If one is willing to accept the possible consequences, how might one go about the nuts and bolts of not paying federal taxes, and are there any measures one might take to mitigate the legal consequences somewhat? For instance, if one spouse withholds taxes but the other pays, does filing separately at year’s end afford any layer of protection to the paying spouse?

Answer: Please find another way to protest.

The Internal Revenue Service has extraordinary powers to collect what it’s owed. The agency can seize your bank accounts, property and a portion of your income. People who willfully fail to pay their taxes can wind up in prison. Filing taxes separately may keep the paying spouse on the other side of iron bars, but it won’t prevent his or her life from being disrupted.

Our duty to pay taxes doesn’t rest on our approval of every single aspect of the tax code. If that were the case, few of us would pony up. Fortunately, in a representative democracy you have plenty of legal options to work for change. The same Constitution that gives Congress “the power to lay and collect taxes” also gives you the right to express your opinion, to assemble in peaceable protest and to vote for new lawmakers at the appropriate times.

If you want to work for change, do so in ways that actually have a chance at success, rather than one that will succeed only in making your life worse.

Tuesday’s need-to-know money news

Today’s top story: Why you should hit the stores on the day after Christmas. Also in the news: Online colleges, tips to help you choose the right credit card, and how much you actually save when you write something off on your taxes.

Why You Should Hit the Store on the Day After Christmas
Putting those gift cards to good use.

Is Online College for You? Answer 5 Questions to Find Out
Weighing the pros and cons.

7 Tips That Will Help You Choose The Right Credit Card
Be selective.

How Much You Actually Save When You Write Something Off on Your Taxes
Calculating your savings.

Thursday’s need-to-know money news

Today’s top story: Will your taxes go up or down under the new tax rules? Also in the news: Freezing your child’s credit, 3 safe, easy ways to gift money for the holidays, and how much you should have saved at every age.

Will Your Taxes Go Up or Down Under the New Tax Rules?
Where do you stand?

Should You Freeze Your Child’s Credit?
Protecting your child’s identity.

3 Safe, Easy Ways to Gift Money This Holiday Season
Easy holiday giving.

How Much Should You Have Saved at Every Age?
How are you doing so far?

Q&A: Retirement can bring some complex tax questions

Dear Liz: I was in the twilight of my career when the Roth became available, and I contributed the maximum for those few years before retirement. After retirement, I dropped to the 15% tax bracket, so I did Roth conversions of my regular IRA to fill out that tax bracket until I was age 70½. My reasoning was that I would likely be in the 25% tax bracket when I started my required minimum distributions from my IRA, and that turned out to be true.

The scary part is that the tax-deferred money in the rollover IRA has continued to increase each year in total in spite of the required minimum distributions. My tax preparer says he has clients who would be happy with my problem, so I should tread softly with my tax complaints.

One thing I regret is funding a nondeductible IRA for a few years before the availability of the Roth IRA. The nondeductible contributions only represent about 1% of the total. That means I can’t access that money I have already paid taxes on unless I have depleted all of my tax-deferred monies. Do you have any suggestions?

Answer: Absolutely. Listen to your tax preparer. Most retirees would love to have these problems-that-aren’t-really-problems.

You were smart to “fill out” your tax bracket by converting portions of your IRAs. For those who aren’t familiar with the concept, it involves converting just enough from an IRA to make up the difference between someone’s taxable income and the top of his or her tax bracket.

The top of the 15% bracket is $75,900 in 2017, so a married couple with a $50,000 taxable income, for example, would convert $25,900 of their IRAs to Roths. They would pay a 15% tax on the amount converted (plus any state and local taxes), but the Roth would grow tax-free from then on and no minimum distributions would be required.

These conversions can be a great idea if people suspect they’ll be in a higher tax bracket in retirement.

Now on to your complaint about getting back the already taxed contributions to your regular IRA. Withdrawals from regular IRAs are taxed proportionately.

The amount of your after-tax contributions is compared to the total of all your IRAs, and a proportionate amount escapes tax. So if nondeductible contributions represent 1% of the total, you’ll pay tax on 99% of the withdrawal. You’re accessing a tiny bit of your after-tax contributions with each withdrawal.

If you don’t manage to withdraw all the money, that’s not the worst thing in the world. It means you didn’t outlive your funds. Your heirs will inherit your tax basis so they’ll access whatever you couldn’t.