Overall the tax code in this country, or more specifically the ways FI bloggers have presented the tax code of the US, seems pretty lovely. It understandably targets workers since that is a vast majority of the population and includes several complex ways that you can shelter money from taxes legally and then access it before standard retirement age. I’m still trying to make sure I understand how the tax code in this country works and how I can use it to my advantage. My favorite bloggers make it seem so simple, specifically the Mad Fientist, but when I go to IRS website my eyes still glaze over. It seems that everything has an exception and then an exception to that exception.
For these reasons I was concerned about filing my taxes this year since because of my Roth IRA mishap I have a few hundred dollars in a taxable account. Unfortunately the process was as complicated as I’d feared since the account I hold is a Target Retirement account that includes US stocks, US bonds as well as International stocks and International bonds. This mix means that I am subjected to tax on the interest from my bonds, the dividends from my stocks and any foreign taxes I’ve paid (though this usually triggers a refund). Luckily Vanguard tried to make the process easy for me by sending me a few tax forms that I would use when filing my taxes. Unfortunately the forms didn’t seem to match up exactly to the TaxAct questions and I spent about 15 minutes searching for the name and address of the stock holders within my investments. The simple fact that Vanguard forms autopopulate into TurboTax might be reason enough for me to try them at some point.
I was also confused about what were considered qualified vs. unqualified dividends and according to the IRS it just means dividends from the US and foreign corporations they consider qualified. Not helpful. I had a few dollars of unqualified dividends from some unknown foreign corporation to account for. Then the foreign tax I had paid which was somehow subtracted from my overall taxes.
In summary I was and still am confused. I’m glad TaxAct was there for me this year though I think I’m going to try it on my own next year. Also thank goodness for the internet. I had to search several questions based on the myriad of forms I ended up filing. Overall I emerged after this tax season unscathed – or so I believe. We’ll see what the IRS says.