Dear Liz: I have a question about an unethical accountant. I am a retiree living off my investments. My accountant continually put me on overtime and every October told me how much to pay. Finally, I created an account with the state tax agency and discovered that I was being charged interest, fees, and penalties for failing to pay estimated quarterly taxes. What really angers me is that I was never told that I had to pay these taxes every quarter. It’s been going on for at least 15 years. What are my options? Is there an entity that governs the behavior of accountants?
To respond: There are – if your tax preparer is actually an accountant. Some tax preparers use that title even if they don’t have an accounting degree, said Henry Grzes, senior director of tax practice and ethics at the American Institute of CPAs.
If your tax preparer is actually a public accountant, you can file a complaint with your state accounting board. You can find a list of boards here. Alternatively, you may consider contacting the Better Business Bureauyour state consumer protection agency or the Consumer Financial Protection BureauGrzes said.
A good tax preparer will alert clients to ways to lower their tax bill and discuss reasons for filing an extension as well as the need to make estimated quarterly payments, Grzes said. But there are no federal regulations governing the preparation of tax returns, although some states have such lawshe said.
For example, anyone who is physically in California and prepares tax returns for a fee, and who is not an attorney, CPA, or registered agent, is required to register with the California Tax Education Council, said Grzes. The CETC website contains information on how to file a complaint against a tax preparer that is not regulated elsewhere.
Reduce taxes in retirement
Dear Liz: It looks like the required minimum distributions will require me to withdraw an additional $3,500 per month from my retirement funds from age four to age 72. This additional taxable levy will have a significant impact on my tax obligations, as I am now fully retired. Are there any strategies right now to reduce the hit? Since my current tax rate is 12% federal and 9% state, maybe I should convert some of these funds to a Roth IRA?
To respond: Partial Roth conversions when your tax bracket is low can be a great way to reduce future mandatory withdrawals and save on taxes in the long run.
Let’s say you are married and filing jointly and have taxable income of $60,000. The 12% federal tax bracket ends at $83,550, so you can convert more than $23,000 of your retirement funds without increasing your federal marginal tax rate. Conversions can affect other aspects of your taxes and finances, so consult a tax professional before proceeding.
Another way to potentially lower your tax bill can be to temporarily suspend your Social Security payments and take more out of your retirement funds. Because of the particular way Social Security is taxed, people often face a sharp increase and then a decrease in marginal tax rates when they have other income, the so-called “torpedo tax”. A tax professional should be able to determine whether deferring or suspending Social Security payments might help you lessen the effects.
Digital is safer than paper
Dear Liz: You pleaded for dematerialization. My preference for paper financial documentation over electronic versions is that paper provides “proof” in case something compromises online or email reporting. What am I missing?
To respond: Proof of what, exactly?
This is not a rhetorical question. If you don’t understand why you are keeping a document and what the alternatives are, you risk drowning in paper.
Consider your bank statements, for example. Your paper document is only a reproduction of the digital files that the bank stores securely and backs up regularly. If you do the same, regularly downloading statements and saving them to secure storage, there’s no reason to convert paper files. Paper is indeed more vulnerable, as it can burn in a fire, be destroyed in a flood or simply see its ink become unreadable. In the rare cases where you actually need to provide a paper document, you can simply print it.
Many people don’t even bother to upload their statements. Many financial institutions allow you to access five or more years of statements for free, that is, for as long as you are likely to need such access.
There are a few documents you should keep in physical form, either because they are more useful that way (passports and driver’s licenses, for example), or because accessing or replacing them can be complicated (birth certificates , citizenship certificates, divorce diplomas and military diplomas). discharge papers, among others). However, even these documents must be scanned and stored securely in case they are lost or destroyed.
Liz Weston, Certified Financial Planner, is a personal finance columnist for Nerd Wallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.