I went into Locums practice in 1991 after I got out of the Navy. I’d always been an electronics geek and had built a few computers. In those days it was Z8o chips and then Commodore, and hacks on the motherboard to make the peripherals work. It was a command line interface where you used arcane commands like: COPY D0,”FILE 1″ TO D1,”FILE 2″ to copy a file from disk drive 0 to disk drive 1. Primitive, slow but computing none the less. When we went on the road I realized we needed something better. I needed to log my finances, pay my taxes, create a savings plan. So Gates and CO had purchased a “DOS” product from some guy and set about porting that O/S over to the new IBM PC x86 architecture. I bought a cheap laptop (probably $2000 in those days) out of Computer Shopper likely of Japanese origin . It was a 386 SX16 with 2mb of memory and a 10mb hard drive and a 12″ black and white panel. I put DOS on it and bought a program called MS works which had a word processor and a spreadsheet and a way to navigate the file system without COPY D0,”FILE 1″ TO D1,”FILE 2″. I also bough a disk based tax software called Andrew Tobias TaxCut from MECA software. They also had Managing your Money which was a generic business and aggregating package, a cross between a database and a spreadsheet, all DOS based. TaxCut had a couple dozen IRS forms included and you could log the data into a database which carried forward to next years version. In 1991 TaxCut on a floppy was $90, next year you paid another 90$ to get the latest updates and tax tables, nice subscription kind of business model. The two programs allowed me to easily track expenses, writeoffs, income, net worth which I could use that data which was reliable, and I could to then write my own “what if” spreadsheets using that data in MS Word’s spreadsheet program.
TaxCut eventually was sold to Kiplinger’s and later was acquired and expanded upon by HR Block as their premier software product. Every year I dutifully bought a copy and used it to do my taxes. It dramatically increased my productivity and had error sensing built in with checking against mistakes that could cause IRS to scratch their chins. The program also knows stuff I don’t know and else wise gave me clues where to look for that knowledge. This year I downloaded my 2018 addition to check my Roth conversions. I had to do a little hack on the inputs and do some calculations by hand to make those hack adjustments. When I went to the 8606 form that calculates the % of my IRA money that is taxable and the part that’s already been taxed, I had a nice surprise. I had more already taxed money by about twice than I thought I did. My program remembered and counted some SEP’s I had not counted. The result is I can either pay less taxes or convert a greater amount for the same taxes. Oh woe is me! I’m likely just going to stick with my previous plan and pay less taxes because my goal is to not convert my bonds. By not converting my bonds to Roth and leaving them to RMD my AA will slowly become more aggressive over time as I age which I consider desirable, and it reduces the probability of ever accessing the Roth unless disaster strikes. I can also use RMD to buy hamburgers, and homey likes his burgers.
I do have a clear understanding of what my this year tax picture will be, how much to prepay and how to avoid any penalties even though I’m a 1099-R virgin. The 1099-R has literally 2 dozen+ scenarios and 2 dozen+ modifiers from which to choose and the choice determines how the program acts. Choose wrong and things go GIGO (garbage in garbage out). When all the forms like the 1099-R come through I can erase the hacks and do it live with Bone Fide data. I’m going to pay a little extra since I’m going to do the second tranche of Roth conversion in Jan and I will use the excess therefore have some of my taxes paid early, a good thing to have done if the IRS comes knocking. My estimate over the course of conversion and TIRA RMD is the post tax contribution portion will save me about $50K in taxes until the basis steps up at my death. Thank you TaxCut!! If I would have switched as I was tempted to do many times likely I never would have caught my mistake. Best $90 I ever spent.