Ep. 248 – Preparing To File Your 2023 Taxes in Retirement


In this Episode of the Secure Your Retirement Podcast, Radon, Murs, and Taylor discuss how to prepare to file for the 2023 taxes. The first things you should be looking at include your different sources of income and tax forms connected to that income.

Listen in to learn the importance of working with a professional tax preparer to avoid misreporting different income taxes. You will also learn why you should report your Qualified Charitable Distributions and Roth conversions to your tax preparer to avoid overpaying taxes or paying penalties.

In this episode, find out:

  • Things to think about your taxes to avoid last-minute rush come April 15th.
  • The difference between the two types of 1099 forms you should know to avoid confusion.
  • The importance of working with a professional tax preparer to avoid misreporting rental income taxes.
  • When it’s worth and not worth it to itemize your expenses for your tax preparer.
  • The importance of reporting your Qualified Charitable Distributions to reap tax benefits.
  • Why you should report your Roth conversions to your tax preparer to avoid paying penalties.
  • Understanding how your Roth IRA contributions impact your tax returns.
  • Ensure your tax preparer has your correct date of birth on file if you turn sixty-five to avoid overpaying taxes.

Tweetable Quotes:

  • “Consider all your diverse revenue streams and locate the corresponding tax form as your initial step.”– Taylor Wolverton
  • “You want to send as much documentation as you can get for both income and expenses associated with your rental property to your tax preparer this year.”– Taylor Wolverton


If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Radon Stancil: Welcome, everyone, to Secure Your Retirement. We’re certainly happy to have you with us today. Today, we are going to talk about something that everybody loves, and that is getting ready to file their taxes. Obviously, we’re in that time of year where we got to get all this stuff together. What Murs and I did is we brought on the person who helps us in all of our clients do that, and she is our very own Taylor Wolverton who helps all of our clients with tax planning, tax strategy. Thank you, Taylor, for coming on and talking to us today.
Taylor Wolverto…: Yeah, thanks for having me.
Radon Stancil: Okay. We got this idea that I’m getting ready for taxes. I don’t know about you, but somewhere around right now, my anxiety level starts to grow when I start thinking about taxes, only because I’m just thinking, “Oh, man, I got all these things I got to get together.” But I have to do a personal return and a business return, and so it’s kind of like I’m just starting to see all this stuff come in. Let me ask you this, Taylor, just to get us started: what kind of things would you recommend that people start thinking about just to get ready so that it’s not a last-minute stressful zone come April 15th?
Taylor Wolverto…: Right. Yeah. You’ll want to think about any source of income that you had in 2023, which, depending on your situation, might be only a few things or it might be a lot of things. This could be 1099s from even your savings accounts to report the interest that you earned throughout 2023. If you add a pension, you’ll have a 1099 that comes from the company that holds your pension. If you did any account distributions, like from your IRA, there’ll be a 1099-R for retirement accounts specifically. You’ll have a 1099 reporting your Social Security income. If you’re still working, of course you’ll have your W2 from your employer that gets issued. Really, just thinking through all of your different sources of income and finding the tax form connected to that income is what you’ll want to start looking for.
Murs Tariq: I want to distinguish some things, because… One, I think that’ll get overlooked is the 1099-INT, I think, is what it’s called, Taylor. That’s the one that the bank sends out.
Taylor Wolverto…: Right.
Murs Tariq: If you go back a couple years ago, no one really got those 1099-INTs. That’s reporting how much interest your cash made at the bank. Well, there was no interest to be made at the bank in the last year or two. We’ve had interest rates moving up and now you can get a money market in the 4 or 5% range. A small amount of money can make enough interest for it to be reportable, so be on the lookout, I think, for that 1099-INT because you may not have had it last year but you probably will get it this year.
The other 1099… You got the 1099 for the IRAs. It’s nice and simple to say, “Here’s how much you took out and you need to pay taxes on,” or maybe you had some taxes withheld. One that gets overlooked sometimes is a 1099 from a brokerage account, a non-qualified account, or a non IRA account. That’s not as simple as “here’s how much you took out,” it’s way more about what interest was earned in that account, what capital gains were realized in that account, any dividends and things like that. Hopefully, if you’re working with a CPA, then all you have to do is hand that off. But I just wanted to make those distinctions on those different types of 1099s that can throw some people off or confuse people as well.
Taylor Wolverto…: Yes. Because interest rates did change so much throughout 2023 or at least go up, if you started out with your savings account at Wells Fargo and then you moved it to somewhere else with a higher rate of interest, then you may have tax forms from both places. Also think about if you made any transfers throughout the year. You might have tax forms coming from multiple institutions from before and after your transfer.
Radon Stancil: All right. I’ve got a question. When it comes to… We named all these different places of income, but we do have some clients that have rentals. They’re not going to get any documentation from that. They just have to… What are they going to do there? Explain that as far as… Let’s say I got some rentals. Maybe it’s new, maybe I’ve got a house that I started doing an Airbnb with or something like that.
Taylor Wolverto…: Yeah. Ideally, if you have a rental property, you’re working with a CPA who will give you a list of information that they will need to report all of that. I would definitely recommend working with a professional tax preparer so that there aren’t any things that get missed or misreported on your tax return if you’re trying to work through that yourself through preparing your own tax return. But you’ll want some sort of documentation to show what your rental income was. That will be reported on your tax return. And then, if you have a mortgage on that property, then you’ll also want the… I think it’s the 1098 showing your mortgage interest. That can also be reported for your rental property specifically.
And then, any expenses that you had associated with your rental property for maintenance or travel to and from your rental property, any repairs, things like that associated with your rental property, you’ll just want documentation to show what expenses you put into your rental property for the year. That can all be used as deductions against your rental income to limit the amount of taxes that you do pay on the income from your rental properties. As much documentation as you can get for both the income and the expenses associated with your rental property, you’ll want to send all of that to your tax preparer for this year.
Murs Tariq: Let’s keep on going with the expenses, because the battle with filing taxes is, “Do I take the standard deduction or am I able to itemize this year?” A big key part of being able to itemize is tracking how you spend money. Taylor, can you walk us through some of the different… You went through the rental expense side, but just someone personally, the expenses that they should keep track of that’s going to help them or their CPA make that decision for them.
Taylor Wolverto…: Yeah. I’ve talked with a couple of people this year about this already. Is it even worth it to gather all of those little details if you don’t actually itemize each year? Some of those things would be your own mortgage interest on your property that you’re living in, your primary home if you still have a mortgage, and then also your property taxes on your cars, and then also your primary home or real estate taxes on your primary home. Any charitable donations that you made throughout this year, you’ll want receipts to show those dollar amounts that went to each charity if you were donating to multiple. Let’s see. What else? I’m sure I’m forgetting some other things, too
Radon Stancil: While you’re thinking of that… I’m going to let you think on that one, but I’m going to jump to another question.
Taylor Wolverto…: Yeah, go ahead.
Radon Stancil: Yeah. Because one of the things that we talked about briefly right before we started recording was this idea… Because you’ve helped a lot of clients this year with things like QCDs and those kinds of things, could you walk us through if somebody did a qualified charitable distribution, what they need to think about when it comes to that?
Taylor Wolverto…: Yes, that’s really important. Okay, one other thing. Back to the itemized expenses, the one thing I was forgetting, but I was going to say is medical expenses may or may not make a difference. There is an amount that you have to get over for medical expenses. If you have those things, it’s probably worth it just to submit documentation for your mortgage interest, medical expenses, charitable donations, property taxes, all that kind of stuff to your tax preparer. If that’s fairly consistent year to year and you’re not itemizing year to year, it’s probably not worth it. I know it is a lot of work to go and get all your receipts and donations and all those kinds of things to get all of that together, but if you’re working with a new tax preparer, I’ll probably just submit it starting out just to make sure you’re not missing out on any additional deductions that you would otherwise get from taking the itemized deduction as opposed to the standard.
But, yes, back to charitable donations specifically. Last year, I believe we did, or in 2023 at least, we did a podcast all about qualified charitable donations or distributions. You can listen to that if you’re not familiar with what that is, but quick review, these are donations that you’re making specifically from your IRA directly to the charity. You don’t get the donation amount. It does not get reported on your tax return at all, and so you’re not paying tax on that amount. For example, if you’re in the 22% tax bracket, you donate $1,000 to charity, you’re saving $220 in taxes by doing a qualified charitable distribution. You have to be over the age of 70 and a half to do it. So be aware of that. But if you do a qualified charitable distribution from your IRA, it will get reported on your tax form, your 1099-R as a normal distribution.
There is no code to say this was a QCD. There’s no asterisk, there’s no note from the custodian, there’s nothing on the tax form to show that it was a QCD, as opposed to just a normal distribution that went to your checking account instead of to the charity. If you did take advantage of a qualified charitable distribution in 2023, make sure you tell your tax preparer that that’s a QCD. Even if you took distributions from your IRA normally… Let’s say you just took $50,000 in distributions over the year and you also did a $5,000 qualified charitable distribution, your 1099-R will show that your distributions for the year was $55,000 and it will show as the taxable portion.
If your tax preparer does not know that $5,000 of your distributions went to a charity as a qualified charitable distribution, then they’ll probably just report it as all taxable and it will completely negate the whole point of doing a QCD. So, context matters. Make sure you’re supporting or you’re submitting additional documentation to show that it went to a charity rather than just to your own checking account. Yes, that definitely matters.
Murs Tariq: Yeah, that’s very important. We did several QCDs last year. Something else that we did a lot of is Roth conversions. Taylor, can you speak on Roth conversions, the documentation, as well as maybe also include Roth contributions and IRA contributions, because those are things that we need to keep track of as well.
Taylor Wolverto…: Yes. Like Roth… I’m sorry. Like QCDs, Roth conversions, there’s nothing to specify that it was actually a Roth conversion as opposed to just a normal distribution from your IRA. Sometimes it doesn’t matter whether it was a Roth conversion or a distribution. I mean, it shows up on your tax return the same way. It’s still fully taxable to you whether it went to your checking account or whether it was sent over to your Roth IRA, but sometimes you may get hit with an underpayment penalty if… For example, one of our clients did a Roth conversion in November and they also made estimated tax payments in November. Because the IRS is a pay-as-you-go system, they want you to be paying your taxes at the same time that you’re receiving income. If you do a Roth conversion in November and you make estimated tax payments in November, which is what the IRS wants you to do, you need to tell your tax preparer that you did that Roth conversion in November and you made the estimated tax payments in November.
If your tax preparer doesn’t know that it happened later in the year as opposed to just evenly throughout the year, that’s what they’ll assume, because your 1099-R, your tax form associated with the account, will show the Roth conversion. It doesn’t say when the Roth conversion happened. That’s a really important detail. You need to get that information to your Roth conversion or to you tax preparer. Tell them when you did the Roth conversion and that it was a Roth conversion as opposed to just a normal distribution.
Another thing that matters, too, is if your… For example, we did a Roth conversion for a client who is 57 last year. She is not able to take distributions from her IRA normally because she’s not over the age of 59 and a half. If you take distributions from your IRA before you’re over the age of 59 and a half, you will also pay a penalty in addition to taxes on that amount. If it’s actually a Roth conversion and not a distribution, you want to make sure your tax preparer knows that, especially if you’re under the age of 59 and a half, so you’re not also paying penalties on your Roth conversion when that is completely unnecessary. Yeah. Again, like QCDs for Roth conversions, context matters. The more detail that you get to your tax preparer on what that was, when it happened, then the better it is for them, and they don’t have to try and figure it out themselves. So
Radon Stancil: Yeah. Excellent. Can you think of anything else that you want to make sure we get out there?
Taylor Wolverto…: Yeah. Really quick, just for contributions that you’re making to your Roth IRA, those won’t impact your tax return but you will get… It’s a 5498 that will be issued from your Roth IRA if you made a contribution. That’s something to look for. Those usually don’t come out until May or so, which is why you don’t need to hold up the preparation of your tax return if you haven’t received that form yet. It won’t impact how your tax is calculated on your tax return, but just something to be aware of. If you do see that form come out later in May, that’s okay. It’s just showing your contribution.
Radon Stancil: All right. Very good. You got anything else, Murs?
Murs Tariq: No, I think that covers it. Obviously, if there are questions that people have, if you’re listening… I had a call just the other day about a client that received a 1099 and he thought it was a non-taxable type of distribution that he did, but it’s confusing when you see that 1099 and it says gross distribution amount for X amount of dollars. You could quickly look at that and start to panic, “Oh, my gosh, I have to pay taxes on this.” Well, there’s a distribution code on that 1099 as well that says this is actually done properly as a non-taxable. It’s called a 1035 exchange, but not everyone knows that. Not everyone’s supposed to know that, unless you’re just in this field or you’re really good at doing research. That’s why we are here. Taylor, she’s an enrolled agent, very much like a CPA that just focuses on personal income tax. If there are questions that come up and you want to hop on the phone with Taylor, we’d be happy to get you connected.
Taylor Wolverto…: Okay. One other thing that I thought of… Sorry.
Radon Stancil: Yeah, no, I was going to say before we close, is there anything else?
Taylor Wolverto…: There’s always one more thing. One other thing that I had a conversation with the client about last year in 2023 was that they turned 65. Once you’re over the age of 65, your standard deduction increases, which means you pay less tax than before you were 65. If your tax preparer is not double checking your date of birth, hopefully they have it on file somewhere. But if they’re not double checking that and they don’t realize you turned 65, then they may not be putting in your additional standard deduction, which is what happened to this client last year. They overpaid $500 in tax just because they turned 65 and their tax preparer didn’t realize it.
If you’re turning 65 in 2023 or in 2024, make sure your tax repair has your correct date of birth on file and make sure you’re getting the additional standard deductions so you’re not overpaying in taxes unnecessarily again.
Radon Stancil: Yeah. Excellent.
Taylor Wolverto…: There you go.
Radon Stancil: Very good. Well, thank you so much. This has been very, very helpful. As Murs said, if you do want to chat with any one of us, you can just go to the website, get our phone number there, which is (919) 787-8866, and we would be glad to schedule a call and answer any of those questions you might have. Well, thank you very much, Taylor. It’s been great. We’ll talk to everyone else next week.