Category: Taxes

A Money and Music Memoir

Back in 2021 when I was still gathering my ideas for this blog, I started a money playlist. When I was prompted to think about my relationship with money, some of the first things that came to mind were song lyrics. My parents raised me on the blues (my dad’s favorite) and hard rock (my mom’s favorite), so now my brain acts like a very specific music encyclopedia filled with all my influences and the hybrid genres of modern music.

Each song on the playlist represents a memory for me: “Addictions” by Lucy Dacus from her album “Historian” is a song about some long-ago failed relationship, with the lyrics, “Buy-low-sell-high kind of guy / Invest your time in what’s worthwhile / Was I a risk without reward or did I make you proud?” The album came out in 2018, the year after I began working at AAII. I recall listening to it on the train into the city, feeling like I was part of an inside joke—I had just become entrenched in this investing language, and it was used in a creative way I hadn’t thought of before. I started to notice other finance phrases seeping into my own writing, like “last in, first out” (an accounting approach). I was beginning to see how this thinking could be applied to all aspects of life—everything took either time or money, everything was a risk, but would it be worth it?

Of course, I had to include the classic “Taxman” by the Beatles. “Revolver” (1966) was one of my first Beatles albums growing up. My dad had the CD, and he would play it in the car for us. Later when I became independently interested, he would let me listen to it on my beloved, consistently broken Walkman. I never took the lyrics seriously until I was an adult, “Should 5% appear too small / Be thankful I don’t take it all.” Now with a financial education, I know that 5% is quite a lot, especially when it comes to fees. In fact, 1% is still too much for you to be paying anyone to manage your money. The Beatles are using satire in this song, assuming the point of view of the greedy government, but many British musicians (including the Rolling Stones, Led Zeppelin, David Bowie and Adele) have had similar complaints about taxes when they reached fame. The more you make, the more they take!

“Suga Mama” by Beyoncé might be my favorite song she’s ever done. In it, she subverts the skewed power paradigm between a man and a woman. Not only does she have enough money to be independent, but she can also take care of a whole man, buying him whatever she wants? Go off, girl. The song practically drips with feminist confidence with the lyric, “let mama do it all.” This is Beyoncé after all! She has proven herself to be capable of more than anyone thought possible, breaking down race, gender and genre barriers to be able to express herself and reclaim her past without feeling trapped in any predetermined box. She has so many great songs about money, and I wish I could include them all, but “Suga Mama” is one I keep coming back to. When I got tickets to see Beyoncé in 2023, it was the first song I started blasting to celebrate! Recently, the friend I went to see her with jokingly asked, “Where are the sugar daddies!!!!!?????” I responded: “BROKE” 😂.

The lineage of influence in music is a fruitful topic for me, so the playlist includes some cover songs along with their originals. In addition to “Credit in the Straight World,” first written by Young Marble Giants and popularized by Hole, we have “List of Demands (Reparations)” by Saul Williams, later covered by my favorite band the Kills. Williams is also a poet and all-around creative person, much like Alison Mosshart and Jamie Hince of the Kills, who have deliberately been independent musicians in a greedy industry. The song starts with the lyric, “I want my money back.” Williams says of his song about power and freedom, “I’m tired of the hustle and the make-believe hustle. I’m tired of buying into ideas that divorce me from my potential. I’m tired of having my potential explained in terms of money.” Williams expresses how easy it is for art and hard work to be exploited and lists his demands for getting free from the perpetual capitalistic churn.

I hope you enjoy the playlist! Let me know what songs come to mind when you think about money so we can grow our money music library together.

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Death & Taxes

Last year, I did my taxes for the first time since I started investing. This year, things are both simpler and more complicated, because why wouldn’t they be! I discovered that Cash App Taxes will let me file for free even though I paid some foreign tax on my investments—the one thing that made last year even more of a pain in the tax butt.

Cash App Taxes was hounding me to file my tax return even before my various banks got my forms together, but this was nothing compared to the TurboTax days when I would receive upward of three emails per week until I filed! The easiest part of this year’s taxes was that the account numbers and tax identification numbers for all my banks autofilled, which made the copy/paste process less intensive.

One of the first questions asked if any of the following applied to me:

Thankfully, I am not dead and proceeded to file my taxes!

I entered the interest income I received from each of my three savings accounts: my regular Fifth Third account and my high-yield accounts with SmartyPig and LendingClub. I noticed that my earned interest for SmartyPig was about 10% of the interest I received from LendingClub, which demonstrated how I use these accounts for different things. SmartyPig is used for short-term goals; money is flowing into and out of the account when it’s needed to fund these goals, leaving less money behind to accrue interest. My LendingClub account is for my intermediate-term goal of saving for property; since it has no reason to be tapped yet, it will continue increasing in value.

What made this year more difficult was reporting capital losses for the first time on some of the investments I sold from my portfolio in 2023. Besides the behavioral aspect of “losing,” the process required a lot of manual entry in Cash App Taxes, along with some creativity. (The instructions weren’t 100% clear, but I decided to follow what Charles Schwab provided me.) I had to enter the different lots of shares sold for some of the exchange-traded funds (ETFs) since I bought more shares at two different times in 2023.

I also had a 1099-MISC form for income I received as part of a settlement. Thankfully, this only required a few fields to be entered, so it was nothing compared to the investment part. The extra income likely counted against my tax refund amount, but that money went directly into my savings. This helped to increase the interest income I received from my high-yield savings accounts.

Though I will be receiving the smallest tax refund of my existence, I’m still getting a decent amount. I always have my tax refund deposited in my regular savings account, so I don’t feel the need to spend it. The state of Illinois is once again asking for more money than was already withheld from my paycheck because of the interest I received on my savings. But if I flip it on its head, my smaller tax refund could be a positive sign that I’m increasing my income. Shortly after I filed, my federal and state returns were accepted—so I will not be going to jail!

I’m hoping the process of filing my taxes will simplify itself over time, but I will keep you all updated on the process. If you have any tax horror stories, please share them in the comments below so we can all commiserate together!

Check out AAII’s annual Tax Guide for more.

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The Year of Financial Thinking: 2023 in Review

“Life changes fast. Life changes in the instant.”
—Joan Didion, “The Year of Magical Thinking”

It’s that time of year for everyone to compile their end-of-year list of tax and personal financial moves. AAII’s Tax Guide is now online for those who want to get a head start. My check-in is going to be a little different, with emphasis on the personal.

1. What goals did I achieve this year?

The year 2023 was not an easy one for most. I began the year reviewing my portfolio and my credit card habits, thinking I would be able to conquer the overspending of the holidays and get myself back on track. Though this didn’t happen immediately, I successfully did my taxes for the first time since I started investing. Taxes were my biggest anxiety about investing, because we all know nothing related to the government is easy. I managed to not commit tax fraud, and I no longer dread what 2024 tax season will bring. I also reached a behavioral goal of mine: looking at my brokerage account so infrequently that I saw it in positive territory more often than not.

2. What surprised me about my finances?

In 2023, I discovered that saving consistently is more important than saving the “right” amount each month. I became a little competitive with myself, so when I couldn’t put away the full amount allotted for savings in my budget, I still saved as much as I could from what I had left over. Because of this, and higher interest rates, I am significantly closer to reaching my short- and intermediate-term goals through my high-yield savings accounts than I was at the beginning of the year!

3. How did my relationship with money change this year?

Before this year, I had a lot of fear around money: running out of it, not saving enough of it, spending too much of it on rent and retiring with only enough for cheese and crackers in my later years. It took a while, but I discovered that money is malleable. When I wanted to make a large purchase but my usual means of spending weren’t available to me, I got creative and built room in my budget to take out a loan. Likewise, I lowered the goal amount I will put in savings until the loan is fully paid off. I granted myself so much freedom in this decision, and it enabled me to improve my current life while still improving my future.

4. What would make me and my money happier in the new year?

Now that I have my finances in consistent good standing, it’s time to take advantage of good ol’ compounding. By staying invested in the stock market through index exchange-traded funds (ETFs), the money my investments are making will continue to make money on top of that. Gaining more traction on my goals is my top priority for 2024, even if it means cutting back on spending in some areas. Though I am doing well on my short- and intermediate-term goals, my long-term retirement goal could really use some more attention—and money!

How was your 2023 in finances? Though it was a rough year for humanity and the majority of stocks, what are you looking forward to in 2024?

Doing My Taxes With Investments

I have long dreaded the tax situation that comes along with investing—mostly because it always seemed impossible to grasp what would be impacted. Ever since I started working, I’ve exclusively done my taxes through TurboTax for free. It was always so easy that I feared the day I began investing; I knew that simplicity would be taken from me, and I would possibly have to pay the government more money just to file my taxes!

Instead of letting the tax fear swallow me whole, I downloaded all of the necessary forms and did my taxes—exclusively for you (the government already knows every detail)! In addition to my W2, now that I have a brokerage account and three savings accounts, I have four different Form 1099s that declare the interest I made on those balances (the good kind). My Charles Schwab brokerage account form also has dividend income and foreign tax paid on a couple of the exchange-traded funds (ETFs) I own that contain some companies based in foreign countries. Since I didn’t sell any holdings in 2022, I have no capital gains to speak of.

I began my tax journey where I always do: TurboTax. With the fear of god and the government pulsing through my veins, I uploaded all of my Form 1099s separately. I had to upload my brokerage account form twice: once for interest income and once for dividend income. TurboTax fills out most of this information automatically, but I double-checked everything. Just when I thought I had reached the end, I was presented with the harrowing TurboTax upsell screen. Since I paid foreign tax on some of my investments, I needed to upgrade to the deluxe version for $39 in order to file with TurboTax.

Since I refuse to pay money to do something that is required by law, I searched around and tried some other platforms. First, I tried H&R Block, which always seems to be bragging about how much better it is than TurboTax (spoiler alert: it’s actually worse!). I didn’t get very far on H&R Block’s online tax filing platform before I had to give up. With a process as precise as filing taxes, I hoped H&R Block would mirror that precision. Instead, it was rounding all of the numbers to the nearest dollar. I uploaded my Schwab Form 1099 to capture the interest—all of $0.13—I accrued on the cash in my brokerage account. But the system kept rounding that interest down to $0, so when I tried to continue, I was told I didn’t have any interest to declare! Could you imagine me trying to explain this to the Internal Revenue Service (IRS)? I would be immediately imprisoned for tax fraud 😂.

Exasperated, I ended up on Cash App Taxes. I had to create a Cash App account first, which required me to download the Cash App mobile app on my phone. Once I created the account on my phone, it allowed me to continue on the computer with no hassle. Cash App Taxes states that it has free filing no matter what, so I had high hopes that I wouldn’t get ripped off at the end. The downside is that there’s no option to upload PDFs of all the forms, so I had to do some manual entry by copying and pasting. Cash App requires a five-digit PIN for filing, so as a first-time filer with the platform I had to enter my 2021 adjusted gross income (AGI) for the IRS to identify me. After successfully filing with Cash App Taxes, I received two emails telling me that my state and federal tax returns were accepted!

Since I expected this process to be more complicated than usual, I felt more prepared to deal with the nonsense that is filing taxes in the U.S. Have you done your taxes yet this year, or are you still putting it off? If you’ve done your taxes with investments, how did that first time go for you?