Tax & Insurance Issues

It’s 1973 and there are two men. One earns about $7,600 and ends up paying about $1,000 in taxes. The other man earns about $200,000 and owes no income taxes. Want to take a wild guess as to which of those two men was me? The second man was Richard Nixon, the then (but not for much longer) president of the United States. Now, I never saw his actual tax return so I can’t guarantee that he paid no taxes, but I do know this is what was reported, because that is what started me on my true life’s work. By 1980 I started preparing other peoples taxes, and now my firm does about 700 returns a year. So I can say with authority that people pay thousands and thousands of dollars in taxes that they wouldn’t actually owe if they did their taxes correctly.
There was a married couple who did their own taxes using one of the popular software products. After they were done, the husband said he thought something was not right. So he asked his wife to have a professional review it. She took it to one of the big national franchise offices, supposedly one of the elite offices because it was one of the few that is actually open year round. That person looked over the return and said he thought it looked right. She reported this to her husband, but he still felt something was wrong so he asked her to get another opinion. The wife then saw a CPA, apparently not one who specializes in taxes. The CPA reviewed the return and thought it was ok. Fortunately, the husband trusted his gut feeling and told the wife that if she would get one more opinion he would quit and accept the answer. That’s when they found me.
In less than 5 minutes I asked her why there was no depreciation on their rental property. She told me the software asked the question, “Can someone else claim the depreciation?” She answered yes (because of a weird set of circumstances) and so the software didn’t allow the deduction. Unfortunately, the software didn’t ask the obvious follow-up question of whether or not someone else actually did take the deduction. I have no idea how the national franchise firm missed it, outside of the fact that in general they overcharge and underperform. The CPA also missed the mistake, and I can only assume he specialized in some other form of accounting. The bottom line is the couple was missing a several thousand dollar deduction, which was worth more than $1,000 in taxes that they would have paid unnecessarily. It’s hard to stay financially intact when you pay thousands of dollars too much in taxes.
Find yourself someone who specializes in personal taxes and you will find they are worth way more than their fee, and they usually cost less than those who merely think they know what they are doing. A good tax professional should also be someone who will offer you advice on how to lower your tax bill overall. At Vejrostek Tax and Financial we offer classes and advice to show people such things as how to capture capital gains tax-free (a special law that has been in effect for several years now but probably won’t last much longer). We also show people how and when they can convert traditional IRAs to Roth IRAs tax-free as well as other timely issues. You can find some of this information on my other web site, and all of it will be in my latest book when it comes out sometime in 2015.
If you would like to be notified about class and seminar schedules, please let us know through our Contact Us page or look on our Events page.
Not having insurance can cost you your entire nest egg, however having the wrong kind of insurance can still cost you a large part of your nest egg and never give you any real benefit in return. Because the only way you can learn about insurance is from sales people, it’s going to take little more effort on your part to learn what is best for your situation. Therefore, your first and most important task is to find an insurance agent who has your best interests at heart. The easiest way to start that process is with one easy question. No matter what type of insurance you are after — whether it is life, health, long term care, or casualty — always begin with the question, “What is the best type of life insurance for me?” You should ask that question no matter what type of insurance you are seeking, because the answer will tell you a lot about the sales person. If they do not respond with a series of questions, instead of extolling a certain type of insurance, then most likely they do not have your best interest in mind. When it comes to life insurance there are several types; there is no universal right answer. Therefore, the sales person should first attempt to find out more about what you actually need, and they can only do that by asking you about your wants, needs, and goals.
The ACA (Affordable Care Act) has fixed a couple of the major problems with the health care industry, but of course it still has problems that need to be fixed. Let’s take a quick look at how the ACA will or can help many of us stay financially intact. Up until recently (it still might be true), 60% of all bankruptcies were caused by medical bills. It used to be that the insurance companies could simply pick and choose who they would and would not insure. As “for profit” companies, of course they chose to insure only those people who most likely would not lead to claims. Although that was great for the companies’ bottom lines, it was hurting our overall economy and in reality costing all of us a lot of money.
I go much deeper into this topic in my new book, but let’s just cover one aspect of health insurance that will help the most in helping us stay financially intact. That would be the ability to go as often as possible with a higher deductible plan. For instance, a 50 year old male right now could buy a $2,000 deductible plan for about $409 per month or he could buy a $1,000 deductible plan for $492 per month. Since the national average tells us that we only meet our deductible approximately once out of every 7 to 10 years, this 50 year old man would be paying about $81 per month (for a total of $972) to have the lower deductible. But if he met his deductible only once in 7 years, he would have paid $5,832 (6 x $972) for basically no benefit. So in this way, having a good agent who will take the time to show you similar calculations and explain the differences can certainly help you stay financially intact.
More discussions about life insurance can be found in both our other web site,, and of course in the upcoming book. If you want to be notified when the book becomes available, please use the Contact Us page.