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What's a "non-qualified portfolio"?

Are you looking for this? https://www.bogleheads.org/wiki/Tax-eff ... _placement

enviroian wrote: ↑Sun Mar 19, 2023 8:31 pm I bought an individual cash management account. I thought that was the product that was paying 4% or more interest. I thought that was a money market account. If I was wrong I’ll just close out that account and transfer my cash back to the BOA savings account.

You opened an individual cash management account in which you can now buy assets - this works just like any other brokerage.

I kind of like doing my taxes with printed out forms and a pencil and an eraser and a simple spreadsheet on the side. But I do agree that a lot of it should have been made a lot simpler.

Obviously this massively depends on your tax situation and what forms you need to file. My latest return was form 1040 + schedules 1, 2, C, D, SE, and form 8995. I also fill out but not file schedule A for state itemized deductions.

This year I dealt with QBI deduction and with capital loss carry-over for the 1st time. Learned something new.

It's like tinkering with your car. Some people love it. Others don't care.

Pretty sure TurboTax is flagging this because of zero cost basis. So the real question is not why TurboTax is flagging it, but what the cost basis is. And that is not something TurboTax support would know.

Seems like sloppy record keeping by the brokerage, not to track cost basis of shares bought in 2022. Better sort this out now while the amount is small. Next time it will be $10k sale with no cost basis recorded.

And does M1 really not offer specID? This is unrelated to tracking cost basis, but is really bad too if true.

Isn't this metric simply a function of having fewer accounts with larger balance vs. more accounts with lower balance? What is the significance of this metric? (Let alone its actionability and relation to personal finance.)

Jags4186 wrote: ↑Sun Mar 19, 2023 11:06 am

Hyperchicken wrote: ↑Sun Mar 19, 2023 11:04 am Only you know the numbers.

Your cost basis shows 0. What did you pay for this stock?

Did you sell it for $27?

I'm guessing that this was a reinvested dividend. I'm sure there was a cost basis but M1 isn't reporting it because, if I am correct, M1 doesn't offer specID. I will just leave it at $0.00 and pay the couple of bucks. I'm not even certain I would know how to find out the exact cost basis.

This should be in your transaction history. Dividend reinvestment or not, does not matter - if you bought shares, you paid something. Dividend reinvestment is simply an automated buy on your behalf.

Anyhow up to you if you want to pursue this small amount. But that is how it works in principle.

Marginal tax rate for self-employment income is approximately 14% + 3/4 * X, where X is your income tax bracket.

For example, if you are in the 22% bracket, marginal tax rate for self-employment income is approximately 14 + 3/4 * 22 = 30.5%.

Self-employment tax (Social Security and Medicare) rate is 92.35% * (12.4% + 2.9%) = 14.1%. Many people quote 15.3% figure but forget about the 92.35% multiplier.

And the 3/4 factor before the income tax rate accounts for the effects of deductibility of the employer's half of self-employment tax, and the qualified business income (QBI) deduction.

Only you know the numbers.

Your cost basis shows 0. What did you pay for this stock?

Did you sell it for $27?

Taxable investments are also taxed as ordinary income before you invest the money. Capital gains tax comes on top of that. So it's ordinary income tax + capital gain tax vs. just the ordinary income tax. That's incorrect, or at least incomplete and misleading. Suppose you earn $1000. If you invest it in taxable, the $1000 earnings is taxed as ordinary income, then gains are taxed at cap gains rate. If you defer the income, there's no initial tax, but when you withdraw, the original $1000 is taxed as ordinary income, and all gains are also taxed as ordinary income. Either way, you are going to be taxed on all income and earnings. It's just a matter of what kind of tax it is. The benefit of deferring income is if you're currently in a high t...

Taxable investments are also taxed as ordinary income before you invest the money. Capital gains tax comes on top of that. So it's ordinary income tax + capital gain tax vs. just the ordinary income tax.

A cleaner solution would be to reduce withholding early in the year aiming at reaching safe harbor by the end of the year.

I don't have a direct answer, but maybe just keep the card for couple more months until you actually receive the reward?

You need to line up the dates with your paydays. It won't be automatic when you receive a direct deposit. You set up recurring contributions e.g. on the 1st and 15th of every month, and let it run.

A bit basic, will not do things like SSDI taxability, NIIT, etc., but still informative.

https://engaging-data.com/tax-brackets/

Bundle all income taxed at ordinary rates (wages, interest, etc.) and all income taxed at long term capital gains rate (qualified dividends, LT CG, etc.)

Schedule D:

Line 6 Short-term capital loss carryover. Enter the amount, if any, from line 8 of your Capital Loss Carryover Worksheet in the instructions
Line 14 Long-term capital loss carryover. Enter the amount, if any, from line 13 of your Capital Loss Carryover Worksheet in the instructions

You only need to look at your most recent (2022) tax return, as long as the carry-over has been correctly calculated in all the past years.

You only need to look at earlier historic data if you want to verify that you have filed your past tax returns correctly.

Are you married and do you have BofA credit card(s)?

If you are married and if you have BofA credit cards and if you care about your Preferred Rewards status (so that you can have more cash back on your credit cards), then...

Open a joint account with your spouse from the get go. Otherwise, it is a major effort to add your spouse later.

Why? Because the balance of a joint account is counted toward both your spouse's and your Preferred Rewards balance. Otherwise it would only count toward your balance.

First hand experience here. It's really simple. 1) Check box 7 - distribution code, then look at the back side for instructions. You should see something like: 8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2022 . Note: this will be the year the 1099 is for. If you receive a 2023 1099-R, it will be taxable in 2023. Based on the dates in the OP, it should be a 2023 1099-R . 2) Distribution amount - goes on form 1040 line 1h (used to be line 1 in prior years) - from the instructions (keyword: corrective ): Corrective distributions from a retirement plan shown on Form 1099-R of excess elective deferrals and excess contributions (plus earnings). 3) Federal income tax withheld - goes on form 1040 line 25b. 4) ...

What type of 1099 are we talking about here?

You folks have profits??

OP, you've been on this forum for 7 years, so you likely already know what the general line of thinking is going to be in the replies that you receive.

On a more serious note - yes. It's called rebalancing.

chinchin wrote: ↑Fri Mar 17, 2023 12:00 pm

Hyperchicken wrote: ↑Fri Mar 17, 2023 11:47 am That is exactly what puts "passive" into "passive index funds". Funds don't need to figure it out on their own what to invest in. They are passively following an index that someone else maintains. Hence lower costs.

But they have to pay the index provider for the license to use the index.

Sure. It's not free. It's cheaper.

That is exactly what puts "passive" into "passive index funds". Funds don't need to figure it out on their own what to invest in. They are passively following an index that someone else maintains. Hence lower costs.

What does your loan agreement say about that?

This is equivalent to the fund having paid out 50% of tax-free dividends which were immediately reinvested.

This. Can we split VOO while we're at it?

With good timing one could be +100% on FRC stock today. x 10

Another idea: get return transcripts and check them.

They go line by line and everything is in there. There's also lines per your return and per IRS' calculations, so you can compare.

You can order transcripts online and receive them either by paper mail (easier to order, does not require an account) or download a PDF (requires account set up).

It's not TLH. You need cash and so you sell assets to raise cash. And tax-wise, it is beneficial to sell lots with losses. A fine plan IMO but it's not TLH.

What exactly do you mean by "not able to locate"?

Do you have your 2020 and 2021 tax returns in front of you?
Does your return include schedule 3?
Are you able to see the form but cannot find a line in it?

It might be helpful to clarify.

It depends on the interest rate environment. For the past 10-15 years, what you said is probably true. Making additional principal payments does shorten the term, but perhaps it takes a 30 year to 23 years. That's a long time to tie up liquidity. Over those 23 years, it does not help your cash flow at all. A recast gives you a guaranteed lower monthly payment, which you're free to add additional principal to if you can't find a better use for the funds. But if something comes up (5% CD vs 2.5% mortgage) or a job loss or unexpected big expense/illness, you have flexibility without having to refi or take out a variable rate HELOC. But you are not simply getting extra cashflow. You are buying it. Extra cash flow is not free. You pay upfront (...

One reason recasting may not be very popular is this -

When one prepays mortgage, they often want to be done with the mortgage as quickly as possible.

Recasting is the opposite of this - it stretches the mortgage back to its contractual period remainder, increases the amount of lifetime interest paid, etc.

Thus the two camps are -

1) Prepay mortgage and not recast - resulting in the soonest payoff and the minimum lifetime interest paid
2) Not prepay mortgage - results in potentially higher returns elsewhere, higher liquidity, etc.

Recast is kind of the worst of both these worlds.

8301 wrote: ↑Thu Mar 09, 2023 4:32 pm No, not many are so ignorant as you hope for. Don't try to play a chess game hoping your opponent make obvious mistakes. A withdrawal of 4% is 4% regardless of its composition. In the case of VTI vs. SCHD, the former has to sell 2.5% vs. 0.6% for the latter to get the same 4%. Selling a large percentage may require more attention than selling a smaller amount.

You'd be surprised what kind of "dividend wars" we had here.

If you want your money to be invested, why is not it already invested?

Thank you. Yes, I saw 0.9235 on the SE form line 5b. I am just curious, what does this mean and why this formula is being used? This is only my 2nd year doing my taxes using TT and I am trying to learn all about my pay stub, SS, taxes etc. Hence all this confusion and awkward questions. 92.35% is there to level the field between W-2 and 1099 earners. For example, if as a W-2 employee I earn $10,000, I pay 7.65% * 10000 = $765 in employee's half of payroll tax, and employer pays $765 in employer's half of payroll tax. Now if I am self-employed, and I make $10,765, and I pay both employee's and employer's halves, I want these halves to be calculated as 7.65% of $10,000, not 7.65% of $10,765. Schedule SE approximates this math by multiplying ...

worthit wrote: ↑Wed Mar 08, 2023 12:11 pm Thanks. As you can tell, I am far from an expert. So apologies if i framed the title incorrectly.

Box 5 = $256, 076.50

Line 6 on SE = $40,549

This totals to $296,625.

No worries! We're all learning something every day.

Answering your other question - take a look at schedule SE. It has 92.35% coefficient before you calculate your SE taxes.

43908 * 0.9235 = 40549

This matches your numbers.

worthit wrote: ↑Wed Mar 08, 2023 11:23 am [...]
Column 3 = Earnings Taxed for Medicare - $296,625

W2 reported income = $230,076
Sch C - Gross = $54,235 Net = $43908

That's the opposite of what the title says.

$296,625 > $230,076 + $43,908

Are you seeing $230k in box 1 of your W-2 by any chance? Box 1 does not include your pre-tax 401(k) contribution, but that amount is still subject to Social Security and Medicare taxes.

Traditional 401(k) is pre-income tax but post-payroll tax. As posted above, box 5 is the one to look at.

That's correct.

There's a lot of hindsight reasoning now that of course it was foolish to invest in bonds during the period of near-zero interest rates.

But that is only ever clear in hindsight. There was a lot of compelling arguments that rates can go yet lower, or stay low, etc.

Bonds (like everything else) are priced by the market, including future expectations based on what is known at the moment.

It is not any easier to time bonds market than it is to time stock market.

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The actionable part: OP can now harvest $45k worth of losses!

Schedule D does not include individual sales - only the totals for short/long term proceeds/basis/gain(loss).

Individual sales are listed on form 8949. There is no requirement to file form 8949 unless cost basis was not reported to IRS, or cost basis needs to be adjusted, such as in case of a disallowed wash sale loss.

All that is to say that, if you only filed schedule D and not form 8949, you would not have listed the sale regardless.

What are unrealized gains/losses on your VTSAX position?

Somewhat related, this is the language that IRS uses:

https://www.irs.gov/publications/p15t

The numbers are intervals per year.

Semiannually 2
Quarterly 4
Monthly 12
Semimonthly 24
Biweekly 26
Weekly 52
Daily 260

an_asker wrote: ↑Sun Mar 05, 2023 2:32 pm

Hyperchicken wrote: ↑Sun Mar 05, 2023 2:10 pm This makes no sense. If you have $125 of qualified dividends, you cannot claim $175, because you did not receive it.

OK, it is wrong. But you did see how I got $175, no?

If - by holding on to VNQ for more than 90 days - my action "qualifies" the section 199A dividends, I can add them to qualified dividends, can I not?

I think you think that 199A dividends become qualified, but they don't.

This makes no sense. If you have $125 of qualified dividends, you cannot claim $175, because you did not receive it.

supaflyjae wrote: ↑Fri Mar 03, 2023 6:38 pm I've thought about it, $20k personal loan plus $20k cash but with today's rates I'm looking at $600/mo. for 3 years, which I'm not too keen on.

That's $600 / $20,000 * 12 = 36% annual interest rate. Who quoted you that, local mafia?

Or, did you mean $600 total payment, principal + interest? But then the principal portion goes into your 401(k). The loan only costs you interest which should be lower than your marginal tax rate + penalty.

bogglek3sh4v wrote: ↑Fri Mar 03, 2023 1:12 pm Not my IRA, but there wouldn't be much wiggle room as I DCA into it. I might hit my 401k limit with the bonus election though (I don't know the exact amount yet but I am optimistic)

You could slow down your 401(k) contributions for now, see where you land with your taxable income (factoring in the size of the bonus), then resume with either traditional or Roth 401(k).

bogglek3sh4v wrote: ↑Fri Mar 03, 2023 1:07 pm

Hyperchicken wrote: ↑Fri Mar 03, 2023 1:04 pm Why the rush? If your bonus takes you into the 22% territory, and you wish to stay under the 22% threshold, you can always do more pre-tax contributions through the rest of the year. Plenty of time to adjust.

how do I go about doing that, say if I am close to reaching my limits on my 401k and IRA?

Then you can't. Are you front-loading your contributions?

Why the rush? If your bonus takes you into the 22% territory, and you wish to stay under the 22% threshold, you can always do more pre-tax contributions through the rest of the year. Plenty of time to adjust.

sport wrote: ↑Wed Mar 01, 2023 4:04 pm

Hyperchicken wrote: ↑Wed Mar 01, 2023 3:57 pm What did you put on your 2021 form 1040 line 7?

I entered (3000).

I concur with the above. It should not be a problem to file 2022 return as if you put (3000) on 2021 schedule D. No need to amend 2021 return for that.

What did you put on your 2021 form 1040 line 7?

I don't get a refund from IRS. IRS gets a refund from me.
And they will get it in April.

homebuyer6426 wrote: ↑Wed Mar 01, 2023 9:21 am

greenspam wrote: ↑Wed Mar 01, 2023 8:32 am I never get a refund.
Why give the govt an interest-free loan ???

The year a person gets married, if their spouse earns less than them and they file jointly, a refund will be mostly unavoidable.

I can see that maybe being the case if they get married late in the year, and have had their withholdings taken out for the most part of the year aiming at meeting their single tax liability, and so when they do get married, they have already overshot their new joint tax liability.

Other than that, it is trivial to adjust withholdings to match their new joint tax liability. That that may not be high on their priority list is a separate matter.

The $600 estimate may easily double if not triple once they remove the bumper cover and see the damage underneath. Been there.