What I am about to tell you is 100% factual to the very best of my memory. I also feel that anything I share is now beyond any federal or state statutes of limitation requirements. Finally, I will tell you that even at the time every decision I made was with 100% honesty and with only good intentions.
We’re here to talk about Turbo Tax. However, we need to “talk some story” before we get to the subject of TT. Not many people read my stuff for a white paper on Turbo Tax. They come to see what “happened in the background”. What led me to TT has a good deal of background…I know you’re not going to want to miss that.
For the first time ever I’m going to be using the TurboTax program to compute and file my 2020 Federal and California state income taxes. To be honest I’m a little bit leery about that.
However, our oldest son JJ has highly recommended TurboTax. He knows quite a bit about this stuff. In the past, several Procter & Gamble people have recommended TurboTax as well.
Here’s why I’ve been skeptical about TurboTax up to this point and maybe I still am. I will admit I am not much of a perfectionist. I enjoy analyzing the situation and then providing a solution that I think is, “good enough”. For me, good enough is good enough. Some people think good enough is not really good enough. I would debate that line of thinking until the cows came home.
However, I do have some exceptions to my good enough general theory in life. When it comes to my car I want everything to be nearly perfect. Where I grew up people were judged by their car no matter if they paid $170 for it or much much more.
I was quite the character in high school. I majored in sports and minored in girls. I can honestly tell you I NEVER remember taking a book from school home during my entire four years of being in high school.
Whenever I had a date I would meticulously clean and polish to the nth degree the right side of the car. The left side of my car might have looked like I just completed a muddy version of the Baja 500.
My theory was that when I pulled up to my date’s house I would park at an angle that showcased the right side of my car. Quite often I picked my date up in the daylight. Of course, as a gentleman, I would always get the door for her. Think Eddie Haskell (above). Don’t get that reference? Google it. By the time our outing finished it was nightfall. The only part of the car my date ever saw was the right side of the car.
I remember dating one girl who I will call Ruth Schmidt. I’ll call her that because that was her name. Ruth had about the coolest dad of any girl I can ever remember dating. What a nice guy.
One night when I picked Ruth (above reasonable facsimile) up for a date her dad came out to say hi. He had one special request. Mr. Schmidt had just installed a new concrete driveway. He asked that when I dropped Ruth off after our date that I not drive onto the driveway. That seemed fair enough.
Off Ruth and I went to whatever night of entertainment we were about to enjoy. I have forgotten that part.
You should know that all of this stuff happened decades ago. Do I have a perfect memory? No, I do not. Do I think what I am telling you actually really happened? Yes, I do. But my memory isn’t perfect. As long as I think I remember it then I believe it to be true. Fair enough?
So when I returned Ruth to her home to “say our goodbyes” (wink) I momentarily forgot that I wasn’t supposed to drive onto her dad’s brand new concrete driveway. That was a mistake… and it was bad timing.
I was driving my tricked out two-tone turquoise and white with baby moons and black rims 1955 Pontiac Chieftain. The car at that point was about 11 years old. We continued to say our goodbyes while the car idled quietly in the driveway.
Just as we were “wrapping things up” something that only the most demonic and sadistic anti-high school dating gods could ever imagine…happened. My radiator hose exploded. The broken hose spewed orange rust-filled hot water all over Mr. Schmidt‘s brand new driveway. Frankly, this was one of the worst things that had ever happened to me in my young life at that point.
I can’t recall if this was brought to the attention of Mr. Schmidt in the dark of the evening when it happened or if I came back the next day to admit my sins. This was an encounter with Ruth’s dad that I did not want to have…but I had to.
I do know this. If I had a brand new concrete driveway and my daughter’s boyfriend came along and screwed it up the way I did Mr. Schmidt’s driveway I probably never would have gone to work for Procter & Gamble. I would now be sitting in San Quintin‘s prison serving 99 years to life for murder. I also know this. If this had happened with my wife Carol’s dad…I would have been killed on the spot.
But just to prove that I am an excellent judge of character and Mr. Schmidt was the nicest girlfriend’s father I ever met he took it all really well. He didn’t kill me. He didn’t slash my tires. I think he even let me date his daughter another time or two. I suspect that Mr. Schmidt is probably no longer with us. However, if he were and I won the lottery he would win the lottery.
Oh? Were we talking about TurboTax? I guess we were. I initially decided that TurboTax was only going to be a preliminary entry in today’s newsletter. However, I have just decided it’s going to be the main topic.
I have always had a CPA do my taxes. I never liked the idea that I might make a mistake with my taxes. I feared the taxman might come after me quarters or years later. He would knock on my door and ask me to pay not only what I truly owed but also interest and penalties.
What I am about to tell you is exempt from any penalty because of the statute of limitations. I know that the statute of limitations has never applied to fraud. I can happily tell you that I may have made a mistake in judgment from time to time but I have never committed fraud.
During the early part of our corporate career, we moved around quite a bit. In my first 10 years of employment, we started in Peoria, Illinois, and were transferred to Fairfield, Ohio – Phoenix, Arizona – Mission Viejo, California – Ridgefield, Connecticut – Inverness, Illinois and finally back to Laguna Niguel, California before ending up on our own for the past 30 years or so in San Clemente, California.
I had grown up in the general Peoria, Illinois area. After a year on my sales job, I was offered a promotional transfer to Memphis, Tennessee (above). Nobody in my family had ever relocated to take a better job. That concept was foreign to me. However, the company had very few sales people in Peoria. I wasn’t going to become president of the company by staying there. If I was going to move up I was going to have to move out. But, was Memphis, Tennessee really where I wanted to go?
The regional manager met with me and gave me a couple of days to think over my decision about moving to Memphis. He asked me to call him Monday morning and let him know if I was accepting the offer. I called at the appointed time only to have his secretary tell me he was going to be out until noon. I was really on the fence with this decision about moving to Memphis. At 9 a.m. when I first called my manager I was going to do it. From 9 a.m. until noon I’ve facilitated back-and-forth until I finally got in touch with the boss. By that time I decided I wasn’t going to take the job. He was disappointed but we both moved on from that decision.
About two weeks later we had a sales meeting. A couple of the district managers who were probably in their early thirties at the time, when I was 23 years old, sat me down at lunch. They graciously explained that they wouldn’t be offering me lots of promotional opportunities and when they did I needed to accept them. They got their point across. In another couple of weeks, I was offered a job in Cincinnati and I took it.
Once my wife and I got into corporate relocations it was never a big deal after that. It was just that the first time the idea of moving from my hometown was somewhat difficult.
While we were living in Cincinnati the company decided to create a new health and beauty aids division. At that point, they were essentially doubling their salesforce. I was offered a chance to move to Salt Lake City (above) by the same manager who I had turned down for Memphis. Back then just as I am now I was a big racing fan.
I asked my manager if he had any other cities that might work for my relocation. He asked me why I didn’t like Salt Lake City. I told him that there wasn’t much racing in Salt Lake City. We agreed that he could switch my opportunity to Phoenix, Arizona. Phoenix had a lot of racing.
Then one of my good friends at the time got the Salt Lake City job. He was a recently divorced, protestant, sports guy who had roomed with the Pittsburgh Pirates pitching star Kent Tekulve in college. I will call my buddy “Dan” because again that’s his real name. Dan ended up marrying a Mormon girl, converting to Mormonism and having kids and grandkids and now he and his wife have been married nearly 50 years.
So you might be asking yourself, “Randy, I came to hear you talk about TurboTax and now you’re telling me about Ruth and Dan and how you got to Phoenix, Arizona. Where’s the Turbo Tax stuff?” Thank you for keeping me on track!
Each time I was relocated the company gave me a little bit of a bump in salary and a month’s pay to cover miscellaneous expenses that might be incurred when a family moved. This could be for new drapes, cable TV installation or really just about anything. The one month of salary was paid by check.
Back then the company had a policy of “grossing up” your income taxes. For tax purposes, there was an imputed income to the employee based upon how much a corporate relocation move would cost.
There are a lot of expenses in relocating a family. The company would pay the real estate fees to sell our house. If we couldn’t sell our house in a reasonable amount of time they would buy it from us. If we needed a bridge loan they would give it to us until we got settled in the new place. Then there was the moving of furniture, household belongings and cars by a professional moving company. There could also be hotel expenses between the time we left our old home and the time we could move into our new home. All of this amounted to a large amount of money that needed to be directed my way as imputed income.
Let’s just say for round numbers that the imputed income of a complete move was $50,000. The government wanted their tax on that $50,000 that was being given to me as “imputed income”. Here’s how they handled things.
The company would gross up my taxes on this $50,000 of somewhat “phantom income”. They would simply make an estimate on what that gross-up number should be. For the purpose of today’s example let’s say they grossed-up my income tax withholding by $15,000 on the $50,000 of imputed income that I had coming my way
Then it was up to me to add the $50,000 of income to my tax return along with the $15,000 in tax withholding the company gave me to cover that extra income for income tax purposes. However, in every case in my experience, my real income tax liability was not $15,000 on the imputed income. It was always less.
I remember one year and I am making up these numbers because I can’t remember them exactly, the company withheld $15,000 in income taxes for one of our moves. My real income tax liability on that amount of income was something like $5,000. This meant I came away with an extra $10,000. That $10,000 more than paid all of my income tax liability on my salary for the entire year.
What did all of this mean? It meant that I earned a salary and bonus during the year. I got a fully paid for company car. I got a large amount of imputed income based upon a corporate relocation. Based upon only the imputed income tax withholding my total tax bill came out to be a refund. This move refunded ALL of the income tax on ALL of my annual income for the year and a refund to boot. That actually happened a few times. Corporate relocations were fantastic for many reasons and taxes were a big part of that.
As I told you I’ve always had a professional CPA do my taxes. With all of the relocations, we had in the early years I was constantly changing CPAs. That was until I realized that once I got a good CPA, regardless of where they lived, I could keep them.
I remember asking one of my CPAs a hypothetical question. I asked him if I could ask him a question just to get his advice. Then I asked if we were ever audited if he would have to tell the authorities about the question I was about to ask him. He told me that, yes indeed, he would have to rat me out.
Honestly, I have no memory of what that particular question was at this point in time. Just as honestly I can tell you that as soon as I got that response from my CPA I never worked with him again after that particular tax year.
About 20 years ago I was on the lookout for a tax professional and again our son J.J. came to the rescue. He recommended a woman who was my age. She turned out to be simply fantastic and Susan B. handled my taxes over these past couple of decades.
However, as I am sure that many of you have found out, it’s always a good idea to work with professionals who are a bit younger than you are. If you don’t, as you become 60 they become 70 and they retire when you still need them. Then you have to search out a professional replacement in the area of medicine or taxes or whatever and no one really likes to do that.
So, Susan B. has moved on from California to a nice home in Coeur d’Alene, Idaho. I am now working with her assistant who has handled my taxes for just one year. He did a good job and is really a nice guy.
My taxes are now pretty simple. My income pretty much consists of IRA withdrawals and Social Security. Yes, I have a little mixing and matching of dividends and interest but not much.
On the deductions front, I have a huge interest-only mortgage which throws off interest deductions as strongly as a hurricane throws off rain. I have a decent-sized chunk of real estate taxes, although not that much by national standards. I have charitable deductions as well.
A “normal couple” (above) would be using the standard deduction offered by the federal government. For an individual that amounts to $12,400 or $24,800 for a couple. The Urban-Brookings Tax Policy Center estimates that about 90 percent of households will take the standard deduction rather than itemizing their deductions in 2018.
I’m happy to report that our itemized deductions exceed those federal standard deductions by nearly two times. What does that mean? Well, we live in a modest seaside cottage in the sleepy little oceanfront village of San Clemente. However, in California, even modest seaside cottages can be expensive.
By itemizing our deductions it means that the government is paying a decent junk of our monthly mortgage. Do you think the government should pay for people’s mortgages? You’ll have to answer that question for yourself. I will simply say that I want to understand what the tax laws are and pay every penny that I legally owe and not one penny more.
Could I afford a modest seaside cottage in the sleepy little oceanfront village of San Clemente if the government wasn’t subsidizing some of my mortgage? I don’t know that I should answer that question in this forum. I will simply say that I want to understand what the tax laws are and pay every penny that I legally owe and not one penny more.
So all of this brings us back to my reluctance to using TurboTax. Why was I generally against the idea? Well, I’ve got a very good dentist. His name is Scott Lamming. If you need a really good dentist I highly recommend him. I’ll pay Dr. Lamming to do the fillings in my teeth and the crowns when I need them but I won’t do my own dental work. If I ever need brain surgery I won’t do my brain surgery either. That’s just me.
I told you that my life philosophy is to do just a “good enough” job to get the job done and get the next job promotion. I told you that I do like to have perfection in a few things. My cars are a good example. I also wanna have perfection in my taxes in terms of accuracy and legality. I never want to be looking over my shoulder for the taxman.
Son J.J. sent me one of his copies of TurboTax. I went about entering all the data and had lots of problems. I like to think of myself as pretty good with numbers. I think I understand the tax laws of our country pretty well at least as they impact my somewhat simplified tax situation.
When I begin to have problems with TurboTax I really wanted to throw the program away and pay the $650 annual fee to my tax accountant. I didn’t mind doing that just for peace of mind. I’m talking about the peace of mind that comes with knowing that if there’s a mistake it’s on somebody else’s head and not really mine in terms of penalties and interest.
However, J.J. has a strong history of recommending ideas to me that sometimes I initially don’t see a great value in. He can be very persistent. How persistent? My wife says that he can get us to spend more money on more things than anybody that we know.
He’s one of the main reasons that I have an Apple Watch, an Apple computer, an Apple iPad, an Apple iPhone and Apple AirPods. He’s the reason I have Apple News+, Hulu, Tesla, HBO max and Apple TV. He’s been a good son like our daughter Kristy has been a good daughter and our youngest son Jim has been a good son. It’s just that Kristy and Jim haven’t cost me as much money as J.J. has.
J.J. and I text quite frequently on all kinds of financial issues. On the TurboTax topic, we probably texted hundreds of times and even had a phone call or two. It took a while to figure out how to handle a mortgage that was refinanced during the middle of the year. Then there was the municipal bond fund that treated taxes differently in all 50 states. Just finding where to enter the information wasn’t that all intuitive in my mind.
I’ve got to tell you that from time to time I very much wanted to throw in the TurboTax towel. I thought to myself, “I’m good with numbers. I know a lot about taxes. I’m having a hard time with this TurboTax idea.”
Here’s what I wanted to know. I know that millions of people use TurboTax. I’m going to tell you that 97% of those people know less about this topic than I do. If I had a difficult time being perfect with TurboTax what were their chances of being perfect?
Did a lot of people even “want” to be perfect? Or, did they kinda look over their shoulder, not see anyone coming, and just kind of “go with it” in the hopes that the taxman would never knock on their door late at night? Honestly, I think a lot a lot of people think “good enough” is good enough for their taxes. This is especially true when those decisions benefit them in terms of cash. I don’t roll that way. I don’t want to be looking over my shoulder.
So in one final attempt, I entered all of our income and I entered all of our deductions in the Turbo Tax program. Then I crunched the numbers. I’ve got to tell you I was surprised by the result. Had I done the calculations correctly? It seemed as if I had. JJ, who knows more about taxes than just about anybody reading this, confirmed I was right on target.
Remember, my taxes are really simple. There’s an IRA withdrawal, some Social Security money and dividends and taxes. How can you understate or overstate that income?
On the deductions side, we have mortgage interest, real estate taxes and charitable contributions. J.J. constantly reminds me that the political forces of the United States have openly discriminated against states such as California and New York. I don’t know if that was consciously done or not. I do know that with properties being much more expensive in California and New York that real estate taxes, which are now limited by the new tax law, can be wiped out or severely limited as a deduction.
Regardless of all of that I was shocked and stunned at what I owed with my California state income tax liability for 2020. What was that number? I didn’t owe a single penny. Wait. I’m not saying that I didn’t owe any additional California state income tax. I didn’t owe ANY California state income tax at all.
Geez! I use the library, and the state highways and would ask the police and fire folks to help me if I ever needed it. You mean all of that stuff is free? Wow. I never would have imagined that.
My California state income tax liability was zero. I guess the next time someone tells you it tells you California is a high-income tax state you better remind them of this. You can simply say, “I’ve got a buddy who lives in a modest seaside cottage in California and he doesn’t pay a penny in California state income taxes.” There’s no need to use my name if you know what I mean.
My federal income tax was less than 4% of our annual spending budget without taxes. That seemed reasonable. Additionally, I was saving another 650 bucks by not having to pay my CPA anything.
So what’s the bottom line to all of this? There’s always a bottom line.
First, I think I am paying every penny in tax that I legally owe. Secondly, I’m very happy that some of the monies allocated by the federal government are going to pay for my home mortgage.
I am constantly chastising my friends who think that low-income welfare payments are just about the worst thing in the world. They seem to think these poor people live on “easy street” because of their welfare payments.
In reality, the government actually pays me more to live in a nice home than anybody gets in welfare payments. The federal and state governments paid about a third of the cost of my 38-panel solar array. They gave me a rebate in the thousands so I could purchase a very expensive Tesla electric automobile. I hope this doesn’t sound like I’m making a political statement. I do know this. These are all factual statements. By the way, I don’t mind political statements that are factual. I just don’t find that many political statements ARE factual!
Remember, I told you that I was driving a 1955 Pontiac Chieftain back in my high school days. My parents actually bought that car for $170. I think they got tired of driving me around when I was 16 and figured that this $170 investment was a good idea.
I told you that Ruth Schmidt was a nice enough girl to be dating at the time and that her dad was an over the top nice guy. Even from those early days, I was always trying to get a competitive advantage by doing work that was just “good enough”.
I think I’ve been pretty successful at that. I’ve been able to upgrade from Ruth who was nice enough, to the very best in class, wife Carol.
The $650 tax preparation fee that I am now saving could have bought me nearly four 1955 Pontiac Chieftains at the time. I know that I’m mixing apples and oranges with that financial connection but that comparison did sound sort of cool to me.
Am I recommending TurboTax to you? I don’t think I am at this point…yet. I have not made my first official filing with TurboTax but after I do I’ll let you know how it goes.
Thanks, Mr. Schmidt!
In conclusion, I can only tell you Mr. Schmidt and Mr. Schmidt‘s reaction to my radiator hose dumping rusty water all over his brand new concrete drive is one of the 10 best outcomes of anything that I’ve ever faced in my life. At the time I could never have predicted that experience would tie in so nicely with my experiences with Turbo Tax.
San Clemente, California
I hope you’re enjoying what I get to share with you. Did you miss getting the chance to read one of my previous contributions? No problem. Here’s the complete list.
Finance, Travel and Everyday Life past postings…
I’ve been fired! I’ve been kicked out! I’ve had to quit!
Why do our friends say to my wife, “Poor Carol!”?
This is my social security strategy…should it be yours?
France, ice racing, pizza, car museums…how do you do a trip like this?
‘Twas the night before Christmas, my Christmas message to you!
How many of my Facebook friends would lend me a dollar?
Covid experiences from readers located all over the U.S. and the world
Covid….Past….Present….and in the Future
So you wanna buy a new car!
Sweden touring plus Swedish ice racing…my last international trip before COVID
What’s easier? Picking NFL game winners or presidential election winners?
Oh my gosh! I was having a bad day!
Why me? Why did they choose me to receive the 2020 presidential election results the day BEFORE the election?
Patted down, checked for weapons, put in the back seat of a Ohio State Patrol police car and taken away…
How to get a free iPhone 12!!!!
The Financial Plan of a Lifetime – 2020
South Korea….one of my most unusual last minute experiences
Belarus….in the news!
When you go to bed at night do you pray for rampant inflation?
Psst. I know who’s going to win the 2020 presidential election
India – Part 3….read this and you’ll feel like YOU went to India!
India…..Part 2…..The First Half of the Adventure to the Most Unusual Country We Have Ever Visited
India – Part 1….the planning stage
The Aftermath of the Minneapolis Protests and Riots
Household budgeting….you know you need it