Four Tax Tips I Tell My Children--When They’ll Listen
Tax tips | Family finances | Investments | Financial records | June 18, 2025
This Week's Quote: "None but ourselves can free our minds."
- Bob Marley
I feel lucky to have a job writing about taxes for The Wall Street Journal. But I have another, even more important job: being a Mom. It’s work that never ends, even with my children grown and on their own.
During tax-filing season, my two jobs intersect. “Have you filed your taxes? Got any questions?” I ask my daughters.
My concern is about more than this year’s return. As parents, we often have goals for our children: We want them to get a good education, learn to swim and ride a bike, and become good workers, partners, friends and savers.
Beyond these “musts,” many of us try to share our particular expertise with them. The mother of one of my childhood friends was an artist, and she passed her skills and passion on to her four children. Or perhaps we try to share practical knowledge—how to build shelves, cook tasty meals or buy a car.
But what’s a mother to do when her expertise involves the U.S. tax code? Yes, as Benjamin Franklin pointed out, taxes are one of life’s two certainties, and they touch every facet of our lives. Tax knowledge is highly useful.
The problem is that to the young, taxes are the reverse of glamorous. I recall a trip to the grocery store when my children were in grade school. They cared not a whit when I pointed out an absurdity of New York taxes, which was that large marshmallows incurred sales tax because they were considered candy, while small marshmallows were tax-free because they were food.
When they were in high school and I mentioned a wacky Tax Court case in hopes of kindling their interest, their eyes glazed over and “mother deafness” ensued.
But if kids can be stubborn, so can parents. Taxes are a key part of grown-up life, and they’re worth discussing, although I’m careful to avoid politics unless they ask. Instead, I focus on what I call “rock-bottom tax tips”—basics I think can save young people time and trouble.
In our family, these maxims seem to have stuck, so here they are.
Don’t miss tax deadlines
In life, you may get away with delaying a term paper, a dentist’s appointment, or a thank-you note. This doesn’t work with tax deadlines.
Uncle Sam wants your taxes, and he wants them on time. Interest is due on underpayments, and the current rate is a stiff 7% annually.
Next comes a cascade of penalties. Two common ones are for failure to file and failure to pay. Congress set them up so they hit hardest in the first months after someone doesn’t file or pay.
The bottom line: A bill for unpaid taxes can mount rapidly. While not as dangerous as drunken driving or addiction to cocaine, tax problems can be hard to unwind. The Internal Revenue Service is the most powerful creditor in the U.S. and has effective ways of collecting its due—including taking some of your wages or money from your bank account. These charges get out of hand for lots of Americans, which is why there are so many ads for companies promising to help negotiate IRS debt.
What if you face a tax bill you can’t pay? Don’t ignore it. File anyway and check your options on the IRS website. The agency offers payment plans, but it might be better to borrow the money from a bank or a relative because paying in full stops the clock on IRS penalties.
Don’t let the tax tail wag the dog
Like many hoary sayings, this one has a lot of truth. Tax knowledge is useful for everyone, and learning about taxes is a great way for people with an obsessive streak to use it productively.
But don’t get overly focused on tax details. Steve Jobs and Bill Gates weren’t thinking about taxes as they pursued their visions of personal computers. Your financial life has many elements, and growing and maintaining your wealth involves smart choices that aren’t about taxes.
Pay attention to investment taxes
If you have any energy for taxes, deploy it to learn their effect on your investments—including retirement savings. Taxes are often the largest hit to rate of return, which is the basic measure of investment success. No wonder Wall Street types pay so much attention to them.
Details matter: Holding shares for 366 rather than 365 days could mean the difference between a 15% and a 24% rate on capital gains, for example.
During the pandemic, rapid traders new to investing learned this lesson the hard way when taxes ate large chunks of their profits.
Retirement savers should focus on the tax features of various strategies. Younger ones often should opt to save in Roth IRAs and Roth 401(k)s, because their tax rates are likely lower than they will be later. For savers in peak earning years, the reverse is often true, and they can maximize returns by putting dollars into traditional IRAs and traditional 401(k)s.
If nothing else, consider taxes before making a big money move. Is there something funky about the taxes on a hot investment offering juicy returns?
There have been in the past, as with master limited partnerships. Sellers should consider the tax effects of different approaches, such as divesting in pieces rather than all at once. Professional advice could pay off here.
Keep good records
Many tax cases have been lost because taxpayers couldn’t prove they did what they said they did. Keeping good records is basic tax hygiene, like brushing your teeth, whether they are for business expenses, charitable gifts, home repairs or something else.
This rule extends to IRS correspondence. If using the U.S. Postal Service, always send by certified mail and keep the sticker. It can solve a world of problems.
Credit goes to Laura Saunders, Wall Street Journal on March 21, 2025.
Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.
This Week’s Author, Belinda Stickle