How to plan handoff of DIY taxes for non-financial spouse

[lgerla]

I've read a lot of threads on simplification of accounts and investments to allow a smooth transition for a non-financially inclined spouse after one's death.

Is there a good method for assuring ease of transition of tax preparation? DH paid a CPA for years, but after finding mistakes, I have been doing our taxes since 2018. I show him the software, he reads off numbers while I enter data, and we review results, but he will not be comfortable doing taxes by himself if I should pass first. Do I engage a tax service now and let them do every other year? Or, tell DH to use TurboTax or H&R Block service after I am gone? He will have the prior year's taxes in whichever one of those programs I have used as a starting point.

He will have pension income, tIRA, and IRMAA to watch out for, all of which I do now. Looking for best practices.

[FiveK]

He will have pension income, tIRA, and IRMAA....

Soc. Sec. also? Brokerage and bank statements?

If IRMAA is a concern, that implies an income higher than what the Tax-Aide and VITA free tax prep programs are geared towards. IRMAA also implies the need to plan ahead when doing Roth conversions. If IRMAA tiers will be exceeded due to "unavoidable" income such as RMDs, then planning may be irrelevant.

It also implies that the few hundred dollars a decent CPA would charge may be money well spent - assuming you can find a decent CPA....

[FrugalInvestor]

We've been looking for a young-ish (compared to us) tax preparer over the last few years. The first one who seemed to be very competent fired us to move toward more small business customers. The current one hasn't been quite as helpful as I'd hoped...but may work out. If not, we'll try another. Fortunately our taxes are very straightforward (and getting more so with time) so for us it's not so much being able to handle complicated tax situations as it is giving a little guidance where appropriate and working well with my wife.

My plan is to search until we find someone we're very happy with. Fortunately tax preparers seem to be plentiful so I'm optimistic that we'll find one who fits our needs.

[jebmke]

I've been doing our taxes from the start. At some point I may not be able to -- either because I croak or become incapable. I've done two things:

One, for a few years now I've been simplifying our entire financial life. Our taxes are now easier to do even for me.
Two, I've identified two local firms that can take over should I not be able to do them.

I keep all the tax records in one place with a check list of all documents required. Business cards for the firm are kept with the files. It should be easy enough for someone to take over.

[lgerla]

Thank you for the replies. Yes, there are brokerage statements also and an inherited IRA for the next nine years.

I have the expected document list for each year and instructions. I'm simplifying as much as possible but each year seems to bring a new wrinkle or two. We are doing Roth conversations to mitigate RMDs the last two years and for two more planned years.

Everything is organized, and he would not mind paying someone to do the job. Our retirement town is small, but I may interview a couple of tax people to see if they could be a good fit. He was attached to our last CPA, who did a great job, until he didn't, and the assistant who handled things made mistakes DH would not have caught on his own.

I guess I would like to audition a firm, so to speak.

[cheese_breath]

Do you have any adult or near-adult children or relatives who could help? If DW had passed before me I would have expected her son to help her.

[jebmke]

Thank you for the replies. Yes, there are brokerage statements also and an inherited IRA for the next nine years.

I have the expected document list for each year and instructions. I'm simplifying as much as possible but each year seems to bring a new wrinkle or two. We are doing Roth conversations to mitigate RMDs the last two years and for two more planned years.

Everything is organized, and he would not mind paying someone to do the job. Our retirement town is small, but I may interview a couple of tax people to see if they could be a good fit. He was attached to our last CPA, who did a great job, until he didn't, and the assistant who handled things made mistakes DH would not have caught on his own.

I guess I would like to audition a firm, so to speak.

Look for a firm that is more than a “one man band.” People have a bad habit of dying, retiring or being too busy at the wrong time.

[chassis]

I've read a lot of threads on simplification of accounts and investments to allow a smooth transition for a non-financially inclined spouse after one's death.

Is there a good method for assuring ease of transition of tax preparation? DH paid a CPA for years, but after finding mistakes, I have been doing our taxes since 2018. I show him the software, he reads off numbers while I enter data, and we review results, but he will not be comfortable doing taxes by himself if I should pass first. Do I engage a tax service now and let them do every other year? Or, tell DH to use TurboTax or H&R Block service after I am gone? He will have the prior year's taxes in whichever one of those programs I have used as a starting point.

He will have pension income, tIRA, and IRMAA to watch out for, all of which I do now. Looking for best practices.

Pay for a tax preparer. Don’t pass it off to the spouse.

[carolinaman]

I have the same issue including QCDs, RMDs and avoiding IRMAA premium. My wife would be unable to do our taxes without a lot of help and would not likely spot errors. I talked with a CPA this year because I had a special situation that would involve entering tax info for prior years. He wanted $1,000 which was probably reasonable for the amount of work. My sense was that he was more geared towards small businesses.

IMO, CPAs are often overkill for most taxpayer needs. Ideal for me would be a competent non CPA tax preparer, but not sure how to find one. My daughter could do them, but she lives 4 hours away and has a busy life, so I hate to saddle her with this.

[Katietsu]

You have everything documented. It seems that you might have many years before this is relevant. I think you have done all there is to do.

Have you printed (be it to paper or to PDF) the full Turbotax return that includes all worksheets and supporting documents? I have done that. You can see where there are missing pieces of historical information. I filled those in. I think anyone competent armed with that information should be able to do my return.

[dcabler]

Our process today is that I enter all of the data. Every source of data is printed out and placed in a folder
I then let it sit for a couple of weeks.
Then I open up the software again and go line by line for all of the entries and she verifies all of it vs. the printouts.

That's it. She completely understands everything.

However, in the "if I die first" instructions, I strongly suggest that she employ a CPA for taxes. Heck, we'll probably eventually go that route regardless at some point in the future...

Cheers.

[InMyDreams]

He will have pension income, tIRA, and IRMAA to watch out for, all of which I do now.

TaxAide and VITA will both do tIRA and Pension incomes. No charge. Some AGI limits (but not asset limits).

In regards to IRMAA - are you asking how to help him avoid or lower it?

What I see as problems for Taxpayers coming to TaxAide -
* Did they do their RMD during the tax year. Sometimes people didn't realize they needed to start. Sometimes it seems they've paid in the past, but forgot (apparently a symptom of cognitive decline).
* Did they gather all their tax papers?
* Did they read and understand the questions on the screening tool, and answer appropriately?

[CuriousGeorgeTx]

DW is very intelligent but doesn't enjoy the nuts and bolts of finance and tax that I do. We found a local CPA who came well recommended. Met with him once. He looked over what I have been doing and said "you don't need me. Get out of here. [Wife] can come back if something happens to me. So she is satisfied that she has someone pre-vetted to turn to if necessary, and I have the validation that I don't need him, at least for now. Finding people like this isn't easy.

[CuriousGeorgeTx]

DW is very intelligent but doesn't enjoy the nuts and bolts of finance and tax likeI do. We found a local CPA who came well recommended. Met with him once. He looked over what I have been doing and said "you don't need me. Get out of here. [Wife] can come back if something happens to you." So she is satisfied that she has someone pre-vetted to turn to if necessary, and I have the validation that I don't need him, at least for now. Finding people like this isn't easy.

[dcabler]

DW is very intelligent but doesn't enjoy the nuts and bolts of finance and tax that I do. We found a local CPA who came well recommended. Met with him once. He looked over what I have been doing and said "you don't need me. Get out of here. [Wife] can come back if something happens to me. So she is satisfied that she has someone pre-vetted to turn to if necessary, and I have the validation that I don't need him, at least for now. Finding people like this isn't easy.

Exactly - Oh and they're just as mortal as the rest of us and not guaranteed to still be around when finally needed.

Cheers.

[eddot98]

Geez, another thing for me to worry about. DW has been very reluctant to get involved in our finances and, unfortunately even with trying to simplify, my financial system is complicated. Taxes have been getting easier, but tax planning has been getting more complicated. Kind of like you, there is a pension, SS, RMD’s from two accounts, QCD’s, dividends and interest, and IRMAA to avoid.
I have used H&R Block software for years and I do have copies of old taxes and 1099’s, etc. and there is a H&R Block office in our town seasonally, so there’s that.

[JaneyLH]

After having my financial advisor do my taxes for "free" for 3 decades, when I went DIY for finances I also went DIY for taxes. I find the idea of tax preparation frightening and abhorrent. Yet, it's a breeze with TT except for the first year when for some reason I couldn't do the automatic link with Vanguard to automatically fill in the tax forms -- I decided it was easier to just transfer the numbers over than to figure out the technical problem.

I made a mistake and left one number out. It cost me several hundred dollars. But ever since it's been a piece of cake. Of course, I don't have anything really tricky going on. If I did, I'd probably hire someone.

[AlwaysLearningMore]

Have you considered having spouse first run TurboTax, and then have a CPA do the actual return? If the final figures are too far off, that would be concerning.

[goingup]

I've read a lot of threads on simplification of accounts and investments to allow a smooth transition for a non-financially inclined spouse after one's death.

Is there a good method for assuring ease of transition of tax preparation? DH paid a CPA for years, but after finding mistakes, I have been doing our taxes since 2018. I show him the software, he reads off numbers while I enter data, and we review results, but he will not be comfortable doing taxes by himself if I should pass first. Do I engage a tax service now and let them do every other year? Or, tell DH to use TurboTax or H&R Block service after I am gone? He will have the prior year's taxes in whichever one of those programs I have used as a starting point.

He will have pension income, tIRA, and IRMAA to watch out for, all of which I do now. Looking for best practices.

From prior posts it seems you're in your early 60's. Unless there is an immediate need for contingency planning, why not plan to do your own taxes for many years to come. You could put the names of a couple CPA firms in your "in the event of my death" planning notebook.

[Agent 99]

I hired a CPA firm after many years of doing it ourselves for many reasons. The firm I use is set up so that I can upload all my forms, etc. securely without having to go in for a visit although if I needed/wanted to they would see me in person. The firm is in my state but not local. Is there any reason why the preparer must be in state? If not, check with friends or PM me and I can recommend the firm I use. I get auto reminders to pay quarterly taxes. And I’ve been able to go paperless for the most part.

[CuriousGeorgeTx]

An advantage of DYI taxes is that you have the opportunity to see what actually moves the needle on your taxes, which can help with your tax planning.

[CuriousGeorgeTx]

Exactly - Oh and they're just as mortal as the rest of us and not guaranteed to still be around when finally needed.

Cheers.

True. I check every year to make sure he is still in business, but it is a risk. I keep telling myself that I need to simplify things, but the optimizations add enough value that I don't want to quit tinkering.

[bsteiner]

I've read a lot of threads on simplification of accounts and investments to allow a smooth transition for a non-financially inclined spouse after one's death.

Is there a good method for assuring ease of transition of tax preparation? DH paid a CPA for years, but after finding mistakes, I have been doing our taxes since 2018. I show him the software, he reads off numbers while I enter data, and we review results, but he will not be comfortable doing taxes by himself if I should pass first. Do I engage a tax service now and let them do every other year? Or, tell DH to use TurboTax or H&R Block service after I am gone? He will have the prior year's taxes in whichever one of those programs I have used as a starting point.

He will have pension income, tIRA, and IRMAA to watch out for, all of which I do now. Looking for best practices.

The appropriate level of preparer, enrolled agent, accountant, or accounting firm, will depend on the complexity of his situation whether he just wants someone to do his tax returns or he wants help with his planning, and his budget for the project. It can range anywhere from an H&R Block person to a Final 4 accounting firm and many levels in between

[nonnie]

In lieu of a CPA, consider an enrolled agent most likely able to do everything you need and licensed to practice before the IRS. Many resources out there to find one--national societies, state societies, etc. Here are some links to start you off

https://taxexperts.naea.org/expertdirectory
https://www.irs.gov/tax-professionals/e ... mation-act

[lgerla]

Do you have any adult or near-adult children or relatives who could help? If DW had passed before me I would have expected her son to help her.

Yes, we have adult children, but I'm sure DH would rather pay a professional.

Look for a firm that is more than a “one man band.” People have a bad habit of dying, retiring or being too busy at the wrong time.

Yes, that is important. DH was very confident in our last CPA, it was when he semi-retired and the assistant stepped in that we started having issues.

Pay for a tax preparer. Don’t pass it off to the spouse.

I'm sure he will want to, and not use a volunteer service. If in a few years' time when I'm ready to turn it over to someone again, I'm hoping to be able to interview and find the right firm for our situation, to include a mid-year checkup and guidance in the last year of filing MFJ in case he wants to accelerate a withdrawal.

You have everything documented. It seems that you might have many years before this is relevant. I think you have done all there is to do.

Have you printed (be it to paper or to PDF) the full Turbotax return that includes all worksheets and supporting documents? I have done that. You can see where there are missing pieces of historical information. I filled those in. I think anyone competent armed with that information should be able to do my return.

Yes, physical and digital files and each year's software are all where he can find them. He knows how to download the 1099s and I have an annual spreadsheet where I record taxable events, such as back door Roth (I just retired this year), Roth conversions, taxable sales, inherited IRA drawdown, etc. This year, I am having him add stuff to it so he is more familiar with what goes into the tax return at the end.

[lgerla]

I hired a CPA firm after many years of doing it ourselves for many reasons. The firm I use is set up so that I can upload all my forms, etc. securely without having to go in for a visit although if I needed/wanted to they would see me in person. The firm is in my state but not local. Is there any reason why the preparer must be in state? If not, check with friends or PM me and I can recommend the firm I use. I get auto reminders to pay quarterly taxes. And I’ve been able to go paperless for the most part.

No reason to be local, it would be ideal to be able to schedule a mid-year checkup as well.

An advantage of DYI taxes is that you have the opportunity to see what actually moves the needle on your taxes, which can help with your tax planning.

This is exactly right, and DH agrees after seeing the advantages. Even if I hire it out in the next couple of years, I will still probably do it myself as a check, out of habit, and because I don't like surprises.

The appropriate level of preparer, enrolled agent, accountant, or accounting firm, will depend on the complexity of his situation whether he just wants someone to do his tax returns or he wants help with his planning, and his budget for the project. It can range anywhere from an H&R Block person to a Final 4 accounting firm and many levels in between

That is what I'm thinking about. Currently there is no real need for a CPA or accounting firm, but if I'm not here, I would want his tax preparer or enrolled agent to keep him aware of future IRMAA limits and final MFJ filing, changes to RMD rules, etc. Maybe I'll just write this out in my final instructions so he knows what questions to ask. We are in Florida and do not have a trust, I think he is capable of staying on course with our financial plan.

In lieu of a CPA, consider an enrolled agent most likely able to do everything you need and licensed to practice before the IRS. Many resources out there to find one--national societies, state societies, etc. Here are some links to start you off

https://taxexperts.naea.org/expertdirectory
https://www.irs.gov/tax-professionals/e ... mation-act

Thanks for this, I will use this as a starting point.

[bsteiner]

...

The appropriate level of preparer, enrolled agent, accountant, or accounting firm, will depend on the complexity of his situation whether he just wants someone to do his tax returns or he wants help with his planning, and his budget for the project. It can range anywhere from an H&R Block person to a Final 4 accounting firm and many levels in between

That is what I'm thinking about. Currently there is no real need for a CPA or accounting firm, but if I'm not here, I would want his tax preparer or enrolled agent to keep him aware of future IRMAA limits and final MFJ filing, changes to RMD rules, etc. Maybe I'll just write this out in my final instructions so he knows what questions to ask. We are in Florida and do not have a trust, I think he is capable of staying on course with our financial plan.
...

Any preparer, enrolled agent, accountant or accounting firm will know that he can file a joint return with you in the year of your death unless he remarries later in that year.

I don't think many accountants focus on Medicare Part B premiums. There isn't much you can do about them.

I also don't think many accountants focus on RMDs. There isn't much you can do about them. Some accountants may be able to help people decide on Roth conversions but most don't get involved in that. If you have a window between when you retire and when RMDs begin, you may want to think about whether some Roth conversions might make sense.

[Katietsu]

That is what I'm thinking about. Currently there is no real need for a CPA or accounting firm, but if I'm not here, I would want his tax preparer or enrolled agent to keep him aware of future IRMAA limits and final MFJ filing, changes to RMD rules, etc. Maybe I'll just write this out in my final instructions so he knows what questions to ask. We are in Florida and do not have a trust, I think he is capable of staying on course with our financial plan.

I understand that those who frequent these forums, myself included, spend a lot of time on all these details. But, for most people, none of these will make a difference in their life. The typical scenario is that people set up automatic RMDs, they pay whatever medicare charges, and they hand over whatever tax documents they receive to a preparer. If it turns out that this is what your husband would do, he should be fine.

Instead of focusing on simple tax preparation, it looks like you might want to identify a few hourly fee options for financial planning, which is more in line with your concerns. This might mean identifying particular individual or it might mean identifying a process and criteria to find the right person.

[lgerla]

As the end of the tax year approaches, I thought I would add an update and my solution, sort of a tax/income strategy policy statement, which has given me more confidence to continue doing our own taxes but be ready in case a preparer is needed.

I created a summary at the front of our tax planning spreadsheet that DH is familiar with. He read it over and suggested changes that make sense to him. I also printed it and put it in our current-year tax folder. In 2024, I’ll update the summary and print it out for the tax folder. This will at least alert a tax preparer for the kinds of things to expect with our tax return. In the next few years, this list will be much simplified. Below is a shortened version in case it is helpful to someone.

Tax Strategies for Mr. and Mrs. lgerla as of Nov 2023

1. Projections, Reporting, and Tax Return

• This spreadsheet forecasts income, deductions, and taxes through 2036. Past years contain actual figures from filed tax returns using H&R Block software. Other spreadsheets used to forecast current-year figures are in the shared taxes folder.

• 2023 goals completed this year: IRA to Roth conversion, Inherited IRA RMD, employer stock sales, and backdoor Roth while managing income to 24% tax bracket and Tier 2 IRMAA.

• FOR 2023 and 2024: Keep withdrawals, RMDs, and conversions within 2023 and 2024 IRMAA income tiers, as claimed on the SSA-44s for both years (do not use the 2-year lookback numbers from 2025 and 2026 projections).

2. 2023 Sources of Income (pension, SS, W-2, 1099s)

3. Tax-deferred accounts (inherited IRA, IRAs, 401(k); RMDs, withdrawals, and rollovers taken, conversions made, year to finish inherited IRA)

4. Tax-free accounts (Roth IRAs that are fully qualified)

5. Taxable accounts (brokerage account that is managed to minimize dividends and interest; has tax-loss carryover)

6. Medicare Income-related Monthly Adjustment Amount (IRMAA) (description and process for determining 2 years in advance).