I enjoyed a story shared by a gentleman who as a teen loved the challenge of rolling into a gas station with barely a drop of gas left in his tank…despite the warnings of his father, “be sure to keep at least a quarter tank of gas in the car.” Thirty years later, as he passed through a very rural area of Iowa, the gas pump on his car left him stranded for a couple of days while he waited for the delivery of a new one. When he asked the mechanic what he could do to prevent this in the future, he learned that keeping at least a quarter tank of gas in a car prevented the pump from having to work so hard.
Seventeen years ago, when I first learned to prepare taxes at a VITA site, I was blessed to have two very good mentors…one was retired from the IRS and the other was retired from the department of Social Security. Each year, during the two and a half months we were together preparing returns, there were opportunities for rich discussion where they would share with me, what they would have done differently, regarding finances and investing, had they known what the know now, in retirement.
Preparing tax returns for others has been a rewarding experience and is an opportunity to share information with individuals at a “teachable moment”; when they are most ready to receive, hear and apply information that can change their lives. Obviously, as an adult, a broken gas pump creates a greater teachable moment compared to his teenage self, listening to a nagging parent. But learning a financial lesson AT THE TIME of retirement doesn’t leave much time to apply and benefit from a lessons learned.
At my free tax sites, I see individuals who make money “on the side” who are paid in cash and want to omit the income from their tax return. One immediate consequence to this action might be a loss of Earned Income Tax Credit. But what they fail to see is the long-term consequence. While it may feel good to have income that you did NOT pay taxes on, not reporting it is illegal AND affects the amount of your Social Security check in retirement which is based on your 40 highest quarters of income.
