Tag Archives: taxes

Liquidity

Now, there’s a juicy topic!  In the world of finance liquidity means having money available for your use.

My guess is that you don’t think of yourself as a ‘finance’ person, but you do handle, use, and need money, right?  And one of the things you need from money is to be able to get your hands on it, right?  If all of your money was tied up in a retirement account, in order to get your hands on it you would have to go through hoops, fill out forms, wait, and then would only be allowed to take out so much without a penalty.  You are willing to have the money “out of touch” like that so you can sock it away and hopefully let you money grow for your retirement.  That’s a good thing.

However, a bunch of people I know are also reducing their access to their money in another way, and it’s an interesting money knot for sure: They overpay their taxes.  One friend does it because he feels that it will make him safer from the possibility of an audit.  Others do it because they actually think of their taxes as a savings account.  And yet others think of it as a way to put aside money for fun things.  Hmm…

Personally my sweet spot with taxes is to either get back or owe both Federal and State less than $1,000.   The reason I like that spot is because I’m not in essence lending my money to another ‘entity’ to use all year long.  Sure I can’t make as much interest on my money as the government can.  They can put my money with your money and invest it at higher rate than you or I can get.  But beside that point, I also don’t have the use of my money when it is waiting to become a positive tax return.

Allow me to digress for a moment.  I must admit that I do enjoy the guilty pleasure of watching some daytime Judge shows here and there.  My favorites are Hot Bench and Judge Milian from the Peoples Court. These things are always about money, because money is the basic way that courts have of solving issues. It’s amazing how many times people end up in court because they borrowed money from someone with the promise of paying it back once they got their tax return—and then somehow didn’t pay it back.

Here we are just after Tax Day, maybe you filed early, maybe you filed on time, maybe you got an extension.  The more interesting question is, did you give the government a bunch of your money to use free of charge for months, and at the same time deprive yourself of having the money on hand during the year? Oh, and while we are at it, during the year, did you incur or pay any interest on your credit cards?

If you did, you are certainly not alone, and I get it. Overpaying in taxes to get a bigger return can feel like a good idea.  My guess is the part of you that makes the decision isn’t really your competent adult part, but more your kid side that wants to be handed some fun money all at once.  There are other ways to create some fun money—really!—and they don’t cost you as much in liquidity or interest.

Whatever happened with your taxes in 2016, you have a choice to do it the same way or differently in 2017.  What’s your choice?

Ka-ching

Shell Tain, The Untangler

If you’d a bit of extra support untangling this liquidity thing, give me  a call at  503-258-1630 or check out my website at www.shelltain.com.

The Tax Scrabble

It’s tax time, again!  We are all caught up in the scrabble and scramble of taxes.  Sorting and assembling all those papers and numbers for our tax preparers.  It’s a time when your actual relationship with money becomes apparent. If you want to see it, that is.

We have all sorts of ways of responding to this ‘opportunity’.

Some people still practice the “put all the receipts in a shopping bag” method, much to the chagrin of their tax person!  That’s the extreme end of the spectrum.  It’s the total Ostrich scrabblestrategy.  The message is “I’m not looking, not at all!”  And, if that’s what you do, then it is going on all year long between you and money.  Not just at tax time.  In terms of the Scrabble game, you get no points because you don’t even look at the tiles.

Most of us do, however, do some sorting and compiling.  The question here then becomes are you actually noticing what is going on as you do that?  How much did you make last year?  Did you track all the deductible expenses so you could actually take advantage of them?  It’s our individual task to get the numbers to the tax preparer.

Taxes are an obligation, and we want our money obligations to be as low as is reasonable.  When it comes to taxes, that means taking full advantage of all the allowable deductions.  Sometimes it seems silly in the moment.  What does the mileage on this trip to a business meeting matter?  It matters in terms of money (57.5 cents per mile for 2015) and in terms of your relationship with money.  Are you paying attention, are you honoring what you are doing with this stuff you have worked so hard to get?  Are you paying attention?  Are you keeping the obligation part as low as is reasonable, so that you have more to fund the fun stuff?  That’s what it’s really about, isn’t it?

In our Scrabble analogy, if we aren’t taking advantage of all the deductions it would be like not replenishing our tiles before the next hand.

Can you go too far in this?  Can it become an obsession?   Well, yes, of course it can.  Anything can, even Scrabble.  🙂  It’s up to you to know when you have fallen into the other extreme.  Do you try to control every aspect or your money?  Or maybe you try to control how your partner spends?  It’s all very telling.  We just have to be willing to see what money is telling us.  If you just couldn’t tear yourself away from the Scrabble board you’d know you were in trouble.  What would that signal look like for you around money?

I’ve got one more new clue in the Tax Scrabble game.  It’s to review your return.  In our Scrabble analogy, it’s like looking for misspelled words.  No, you can’t figure out the actual taxes. What you can do instead is make sure the right numbers were used.  Okay, I know, I’m a recovering accountant.  I actually do this.  I look at the return and make sure the numbers jive back to the W2, 1099’s, and whatever else I know.  And, unfortunately, the truth is that I have often found mistakes.  The irony is that finding these mistakes has always saved me money.  This is a step no one wants to do, and yet it is very important.  Your tax preparer may support you in an audit, but they won’t be paying the additional tax, penalty or interest.  You will.

What does winning this game look like to me?  It looks like owing or getting back less than $1,000.  That means I’ve been using my money effectively, not letting the IRS hold it for me.  It means really being clear on what the earnings and deductions are.  Taking advantage of all that is allowed.  Honoring my money, and being clear on what I’m choosing to do with it, and paying attention to what it’s telling me.

Tax time is a great time to do that.  What you learn from last year, can still be applied to this year.  Who knows, you may land on a Triple Word Score if you are paying attention!

Ka-ching

Shell