Retirement 101

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 I am not a financial expert. The whole subject of taxation confuses/bores me but I realize it is a necessary evil to know something about it. I write about it mainly to remember what has happened, but perhaps someone else can be spared some pain by reading of our experience.

If you are blessed with work during your life and have been able to put any of it into savings, there will come a time called retirement (age 72) when the government says you have to start using this money. You must take out a certain percentage of your savings every year, called an RMD or required minimum distribution. If you don’t get the hang of it the very first year, you are given a little mercy – if you apply for it. It’s almost a “given” and happens to people all the time. It happened to us. I think I’ve written about it already.

2016 was a year for mistakes. We missed the RMD by four days for one, and we also made a mistake in figuring what we owed. As a result the IRS punished us with a penalty –  50% of what our RMD would have been. When we discovered what had happened, we hired a CPA to submit an amended return for 2016. He also discovered our mistake which resulted in us being owed a return for that year. No one was alarmed at this point. It was expected that we would be forgiven the penalty for the RMD.

We started getting letters telling us to pay our penalty. They were counting the days we were “overdue” and charging interest on the debt. Twice over a period of several months our CPA called the IRS hotline, explained the situation and was told that since the amended return had been filed they would eventually get to it. We could ignore the letters. They said they put a hold on any further action and wouldn’t be bothering us about the matter.

But the letters didn’t stop, and the amount they said we owed kept climbing. Finally one day we got a notice that since we hadn’t paid, the IRS was going to start taking it out of our social security checks. Yes, they can do that. Once again, our CPA spent a couple of hours on the phone trying to find out why this was happening. The IRS couldn’t locate our amended return. One office had sent it to another and in between, it disappeared. It was resubmitted immediately and once again we were assured that any action against us would be put on hold. Nevertheless, money was taken out of the husband’s SSI check that month.

Our CPA had decided to get an extension for our 2017 taxes. He reasoned that we should get 2016 out of the way first, especially since the IRS didn’t seem to be getting the message that we didn’t owe them anything. We were due a return for 2017 and he was afraid they would take it. By this time, he had gotten a tax advocate for us – a person who almost walks your return from office to office until it is resolved and no longer a problem. His extensive conversation with the IRS gave him assurance that it would be okay to file for 2017. There would be no action to take the return we were owed.

Today we got a letter saying they took our 2017 return and applied it to our “debt”. It’s beginning to seem like the only sure thing is that they WILL DO everything they say they WON’T DO.  I feel like my favorite government agency has me on a hit list. In their defense, I have heard that they have had severe budget cuts and have way too few employees. But how is this ever to be solved? We pay a lot of tax – it’s not like we are paying less than we owe.

I’m just saying, if this ever gets straightened out, I’m throwing a party. #frustratedtaxpayer

A to Z: Selling Our House (Letter E)

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Today’s letter E sign was encouraging.

More excitement (another E word!) today, if you want to call it that. The plumber came! He cleaned drains, replaced corroded valves, and fixed the shower that always gave us cold water when we turned it to hot, and hot water when we turned it to cold. All these things and a few more were called out in the home inspection (more about that when we get to letter I). And if that wasn’t enough fun, the termite inspector came too. South of the Mason-Dixon line, every frame house has dry wood termites about every 12 years and needs to be tented. I got a tutorial on the critters as we went through every room of the two houses, including attics. The good news – we don’t have any.

E is for Escrow

It’s a little boring, so I’ll be quick. Escrow just means that some third party has come in and is helping two others complete a transaction by keeping money or a deed in their possession until all parts of the contract have been fulfilled. When we get our buyer, escrow will be handled by a title company. When everything stipulated in the contract is complete, we will go to the title company, sign all the appropriate papers, pay all our fees, and the money for the sale will be released. It has been held in escrow until this time.

Another escrow moment, which I understand more and appreciate, is the quasi “savings account” collected by the bank to pay the taxes and insurance on property. Those yearly costs never bother us anymore because they are collected a little at a time, added to the mortgage payment. The bank is the third party helping us and the insurance company, or the tax collector, complete our transactions on time. It’s a good thing.

E is also for Escape, because I have found that selling the house feels a little like I’m RUNNING AWAY from something. I’m tired of being a landlord and dealing with the problems that tenants present. I’m weary of raking leaves and picking up branches, trying to keep an acre of lawn looking good and maintaining a large, older building. I’m tired of so much traffic and being in the city. Most of all, I’m tired of being so far away from so many people that I want to be with. I don’t expect the next place to be perfect and trouble free but I’m ready for some new problems, in a new place.

With all the challenges that this sale and move present, the whole experience is a lot like the Great Escape. That is what I shall call it.

My apology to all my family and good friends locally. I’m not trying to run away from you and will miss you terribly!

Death and Taxes

Two things that are said to be certain, and I add, equally unwelcome.  By taxes, I mean filing a tax return and then finding out that an enormous sum of money is owed.

I don’t even do the filing for our little family of two.  The husband does it with the help of a computer program.  It asks the questions and he fills in the blanks with our information as best he can.  Once in a while it does get confusing however, and whether it was human error or a computer glitch we can’t be sure.  A mistake was made and went unnoticed for a couple years and since it was a mistake in our favor, we wanted to correct it this year before filing. Back in April when it was due, we weren’t ready so the husband filed for an extension. The deadline was last Tuesday.

We all put off things we don’t like to do, so I am totally not mad at the husband. I actually thought he had done it because he did talk about it several times.  Monday before THE Tuesday, I came home from an evening meeting, ready to get to bed and he said the words that make my blood run cold every time I hear them.  “I’m going to prepare the tax return tonight. I need you to pull some files.”

We have two filing systems between us.  He keeps everything, in it’s original envelope, no matter how stuffed the file gets.  I throw everything away that I don’t think we need based on very little actual knowledge of what is needed.  Neither one of us can find anything.  Nevertheless, I always get asked where things are.  That’s when I pretend to riffle through the file cabinet for a minute and then run away when he’s not looking.  Really, I had to get to bed so I could go to work the next day.

I thought it would be all done by the time I got home the next day, D-day, but it was still going on.  There were questions, dates to be reckoned, receipts to be found, decisions to be made and folders and piles of relevant paper everywhere.  In the midst of it all, and at the height of the dread, I came to a realization that we could do better than this.  Maybe if I started now 2013 could be a different kind of year. I could have all the records ready, in one place.  Maybe we could be done in one night. How awesome would that be? (Very awesome.)

from the BRR
from the BRR

So I did start.  I went through the box of random receipts, the BRR, where three years worth of contents of purses and pockets were stored.  Did you know that they make those things with disappearing ink?  I have promised myself that I will not save another receipt without writing the category of the purchase, the price and the date on the top. I am on the learning curve and liking it.

The husband did finish the job – at 11:58 pm, because he didn’t want to wait until the last minute.  We owed money and it’s going to be a painful month.  I’m just sayin’… death and taxes.