Happy Librandotsav _/\_
Librandus have seen a huge influx of Soros money in the last few months; hence I thought that knowing the basics of money laundering would help them in their righteous path of Gazwa-e-Reddit.
Money laundering refers to the conversion of illegally earned money into legal money. Therefore, money laundering is a way to hide illegally received money.
The motive is such that even law enforcement cannot trace the main source of wealth.
The black money is invested into capital or other ventures and it returns back to the money holder as white money.

Steps of Money Laundering:

Placement
Layering
Integration

Placement:

At this point, the money launderer transfers the proceeds of crime to a legitimate financial institution. This is often in the form of cash deposits. This step carries the greatest risk in the laundering process. Clearly, money launderers need to be innovative to deposit large sums of money.
Large cash deposits in bank accounts arouse suspicion. Many money launderers prefer to split transactions so that they appear legitimate.

Layering:

In this phase, the money changes forms so that it becomes difficult to trace. The money is used to do various financial transactions such as depositing it in banks and then withdrawing it, or moving it through various bank accounts. Sometimes the money is moved through different accounts in different countries and even the currency is changed. This is the most difficult and complex part of the money laundering process.

Integration:

Here, the previously black money re-enters the person’s financial records as white money. Sometimes the launderers initiate cross border transfers of money to the account of a local business. These transfers are disguised as investments.
A few ways of doing it is purchasing a million dollar company owned by a launderer, or perhaps investing in a startup. The possibilities are effectively endless.

An example of money laundering would be buying a jacked or fixed lottery ticket. Suppose that a lottery has a prize of 20cr Rupees. Then you buy the ticket for say 21cr Rupees and you won a prize of 20cr. Now that prize money can be taxed. Lottery winnings are taxable in India under the Finance Act of 1986 and Income Tax Act at a flat 30% rate. There is an extra percentage surcharge for winnings over a set amount and a further 3% 'Cess' charged for improving education and health care. But for the sake of convenience, let’s assume that the tax rate is just 30%. After paying a tax of 6cr, you are left with 14cr which is now legitimate and can be used for buying a luxury car or a house etc. The initial loss of 1cr Rupees was the cost of service.

Let’s take another example, that of a shell company. It is the most popular way of money laundering. Fake companies or “shell” companies act like real world companies except there is no production taking place in such companies. But the money launderer shows significant transactions in the balance sheets of these Shell companies. He borrows money and takes loans on behalf of these companies, gets tax exemption, does not file tax returns, and because of all these fake activities, he collects a lot of black money. Fake records are created so that they can be shown to law enforcement during an investigation.

Another small scale method of money laundering is using a peer. It can be anyone, be it your best friend, or your servant or your unemployed partner. What they would do is that they take your money and slowly starts depositing it in their own bank account. Say that they put 60K rs per month in their bank account and show it as money earned by tutoring children. The person accumulates that wealth over a period of time and then eventually when you need the money; they can send the money via a gift deed. There are a few advantages of using a gift deed. A gift once made cannot be revoked, and if the deed is made by a relative, then it is exempt from tax in the hands of the donee. Or the person can buy property and gift it in return of love and affection. Or if they are trust worthy, they can loan the money to you under a loan agreement such that the money owed is forgiven upon death.

There are many techniques to change the color of the money. These techniques help launderers to disguise the source of illegal money. Here are some more examples:
• Bulk cash smuggling involves literally smuggling cash into another country for deposit into offshore banks or other type of financial institutions that honor client secrecy.
• Structuring is a method of breaking down larger cash deposit into smaller amounts. Smurfing is a variation of structuring. Launderers purchase the bankers draft or money orders from the same money to avoid detection or suspicion.
• Trade based laundering involves under or overvalued invoices. But these invoices disguise the movement of goods and money under the pretext of trade.
• Cash intensive businesses are the businesses which generate huge amount of cash from operations. Money Laundering occurs when a legitimate business dealing with large amounts of cash uses its accounts to deposit money obtained through illegal means. Businesses claim these proceeds as legitimate income.
• Bank capture refers to the use of a bank owned by money launderers to move funds through the bank without fear of investigation.
• Real estate laundering occurs when someone purchases real estate with money obtained illegally, then sells the property. This makes it seem as if the profits are legitimate.
This post was sponsored by George Soros.

ILPT Request: Loophole

Let's say, as a work of fiction: I am aware of a super small 501(c)3 that gives out charitable game tickets as part of a fundraising promotion. The nonprofit gives $2 tickets as part of a thank you gift to donors that opt to receive a gift. The donations are tax deductible. The tickets pay about $1.80 per ticket, and the winnings are paid by the state. You could win like $500 on a single ticket, but it is rare. The published payout average is $0.90 of every $1. On the website, you can make donations in increments, starting at $100, but you can also enter your own value with a minimum of $100. You can donate as often as you like. The gift includes sets of tickets where the number of tickets you receive is roughly 45% of the donation dollar value (Donate $100, Receive roughly 45 tickets [45 x $2 = $90]). So, on average, when you donate $100, you will receive $81 ($90 x ~$0.90/$1 = ~$81) from the state using the odds. Since the number of games can be pretty high, the consistency of the final sum can also be pretty high. Again, the ticket winnings payer is always the state. The tickets cannot be mailed out of state.
Since the payout is always less than the buy in, that alone doesn't amount to much, but on the non-profit website, when you go to the page to receive the gift, you can enter a totally different name and mailing address. It seems like it could be a good loophole for someone. The winnings would not have extra withholding like on a W2 G either. The winnings are just considered "Other Income" on a 1040, still taxed, but just as income. I am not a CPA, attorney, etc. so I could be wrong. Simply put: I think it could be a way to reduce taxable income for an entity, and then direct a gift worth roughly 81% of that taxable income reduction with the state as the payer.
The most egregious example of abuse I can think of: A c corp donates to the nonprofit. The c corp directs a bunch of these tickets toward its directors. Directors cash the tickets. The c corp avoids some tax via the donation and the directors still get money, but from the state. Probably not a great look for them though!
When I check around the lottery site, I gathered that what the nonprofit is doing is legit, at least as far as they are concerned. I really doubt this nonprofit is aware of this potential loophole. One issue is that you have to go into one of a handful of locations to redeem the tickets, but they are used to people coming in to redeem prizes from the state's machine for large amounts. It seems like the process is automated, or at least pretty efficient, between the point of opting to receive a gift and actually receiving the gift by mail. Also, the site seems like it's a few years old, and could be a part of a leftover promotion? Not sure.
What do you think?
I have only been aware of it for maybe a year or so. I have done some research, but this is still just my interpretation of the situation. I tried to keep the above concise... I will just throw out more details here as I think of them. It is taking too long to work all the detail into the description.
I have seen this process work, as intended and as the alternative described above, a few times. The amounts were small and at an individual level, so the tax avoidance matter isn't tested. I am still not sure if it is legit or what is going on completely behind the scenes.
The tickets are small, so getting a lot of them isn't burdensome
Technically, the tickets do not need to be used to play since they come with a coupon which is actually used to validate the batch for payment. You can play the tickets for fun or for verification purposes though. It seems like a secure system after that though. The cashier just takes the coupon and gives you the cash. No receipt or other slip is given along with the cash. I think this is why it works because technically it is not selling a ticket. In effect, they are just giving you a coupon for payment and some worthless paper. But again, there are only a handful of locations that accept these tickets.
You do not receive exactly 45% (or 90%) as far as the number of tickets, but it is always close within a few tickets. It seems like it could be tied to the nearest hundred, but who knows?
There is nothing handwritten on the thank you gift, and it seems like it is coming from a third party vendor or app. The tickets are sold by the state, so presumably the nonprofit or third party buys the tickets from the state, puts them in a package with the payout coupon, and mails them to the designated recipient. That recipient would then have to go to a certain place to redeem that coupon.

Crazy / Non-Obvious Life Advice

I have always found most life advice either too boring or too conservative. What are some plausibly good ideas that people have probably not already thought of? I am included stuff from 'real crazy' to 'a little offbeat'. If anything I most interested in hearing ideas that seem 'too crazy'. Here are some ideas of various spiciness:

Finance:

1) Borrow money -> bet on red. If you lose declare bankruptcy. - This one seems possibly +EV for people with low current net worth.
2) Get married to avoid college debt since it drops expected family contribution to zero - just a 10/10 idea?
3) Wall Street bets as a defense against insider trading claims. - If you suddenly bet a lot on options when you have information, you will probably get caught insider trading. But if you have a history of crazy options trading you can say the bet that paid off was just a hunch too.
4) Invest a large amount of your net worth in plausibly AI entangled companies - I shifted most of my investments into this portfolio after gpt-3. Singularity is maybe near. Sorry EMH.
5) Greencard lottery every time even if you don't plan to move to the USA - The value of a green card is high. Depending on your country and situation you might have a 0.2-2%+ chance to get the green card. If you win the lottery reassess your options.
6) Facilitate moving money to advantaged donors - The benefits of donating to charity vary a huge amount based on who donates the money. You can double your money if you get an employer match. The tax benefits of donating vary quite a bit. You get no benefit as an American if you take the standard deduction. Tax advantages also vary a lot by county. In France tax credits are calculated at 66 percent of the value of the donation, and an individual’s total tax credits for one year may not exceed 20 percent of their taxable income. There are even more crazy ideas where you try to buy 'lottery tickets' options and only donate the ones that go up. Here is a google collab where you can play around with the numbers.

Other:

1) Make decisions with double-blind 2nd price auctions - The Beeminder couple does this. Description.
2) Grad School as a way to get 2+ years of slack while you work on a different project - I wish I had done this tbh. Here is Andrew Critch's writeup.
3) Selective Radical Honesty - Being radically honest in general seems like a mistake. Very few people can make it work. But it is practical to practice radical honesty with at least some of your closest relations. By this, I mean that you will freely explain your world models and actual feelings without much of any editing. I will say you should probably hold back some of your mental models. If you share all the ways you evaluate people you risk being Goodharted. I am extremely open and honest with my primary partner and some of my friends.
4) Van / Slackmobile life - If you are skilled you can build a rather livable slackmobile for 10K. Doing it with 20-30K is easier but still affordable for many people. The quality of life in a modified box truck is surprisingly high. Here are some details on building a slackmobile including a full budget.
I will update the list on my blog if I find more interesting ideas.
ht: Noah Kreuter, Brian Liu, ChaAstria, Robert Sharpobject

test

Estimated Taxes - California Annualized Income Tax Method Planning Spreadsheet
Link to Federal Estimated Tax Spreadsheet Post
Spreadsheet Link: https://docs.google.com/spreadsheets/d/1-hy__gKFFoJEWFxOBH_44ApYlFQJdARHJwR1ujT7ReA/edit?usp=sharing
Please COPY the spreadsheet.
After making my Federal estimated tax spreadsheet to spit out the estimated payments I'd need to make, I set work on the California state tax one. To my surprise California's calculations are totally different. Federal taxes requires four equal 25% payments, while California requires the first payment to be 30%, the second payment to be 40%, the third payment is 100% optional ($0 is required), and the fourth payment is 30%.
I've parsed out Form FTB-5805 line by line in my spreadsheet and have tested it extensively, using California's Annualized Income Installment Method Schedule.

Instructions

Make a copy for each new year from the template.
Put in your tax brackets. I have the single tax brackets, if you're married, you'll have some work to do to put in the married tax brackets. Put your YTD date income for each "quarter", the first 3 months of income, the first 5 months of income, the first 8 months of income, then finally in December your total income. You'll do this 15 days before the estimated taxes are due at each quarter and put your ACTUAL income received.
Save this spreadsheet and refer to it at tax return time. You'll have to enter the same numbers you estimated in your tax program of choice for the annualized income method.
You'll probably want to save this spreadsheet for 7 years with your tax return in case you're ever audited to show that you did the worksheet. My spreadsheet puts every number into the worksheet for you.
Enjoy saving money of having to hire a CPA year round to do the busy work by hand and tell you how much estimated taxes you owe.
Cheers!

Limitations

AMT. I have no friggen clue how California AMT works. I was surprised to learn that California has AMT for their state taxes going through the form. I can't find any documentation for individual tax payer AMT rates, only that corporate rates are 6.65%. It looks like it just possibly disallows deductions for individual tax payers. For all intents and purposes it seems like you're unlikely to owe AMT until you're above $1 million annual income, at that point you probably should hire a CPA.
If you figure your AMT adjustment correctly my spreadsheet will use that number. You'll have to enter it in Cell F65 on each quarter spreadsheet to be used. In my testing of the spreadsheet's income/etc it seems like AMT didn't pop up at all in TaxAct up to $1m AGI.
AGI > 1,000,000. California has strict rules that you must pay 90% of your CURRENT YEAR total tax due if your AGI ends up being above one million. So if you're lucky and win a $250,000 lottery ticket in the first quarter, well using the annualized method it multiplies that by 4, and expects your annualized income to be $1 million for the year, and it spits out a $28,888 first quarter safe harbor tax payment. If your total income is only $250k for the year then your total tax will be $19,945 and $28,888 will be a over payment.
In an abundance of caution, my spreadsheet will spit out the safe harbor number based on the California Annualized AGI for that quarter, which for this example is $28,888.
If you didn't pay that $28,888 and say in Q4 had a surprise taxable $750,000 of income come in, you'll be hit with a ton of penalties still with the annualized method. California does not mess around, you'll be hit with 3% on that $28,888 if you didn't pay it, plus 6% APR interest until it's paid calculated by the day. In my testing TaxAct spit out around $2,000 in penalties for not paying that $28,888 on the first CA estimated tax payment on a 2019 return. If you paid that $28,888 then $0 penalties.
It's on your own risk if you want to pay a lower amount than the annualized safe harbor amount. If you KNOW you'll be under $1m for the year then you'll be fine. My advice is to just pay the safe harbor amount the spreadsheet says even if you're a bit over-withheld.
Also, in my test case, if you have $200k come in Q1 or so, under the $1m AGI annualized threshold, then go over $1m in Q4, despite what California's forms tell you to pay estimated taxes on, I'm still looking at $800-$1k of penalties in Tax Act. My suggestion is to pay over the safe harbor minimum if it's likely you could have surprise income in Q4 that pushes you over $1m.
Finally, if you realize all your income in Q4 and pay the minimums my spreadsheet spits out, you're getting hit with really small penalties like $20 on $100k. I'd suggest to just pay at least 90%, if not 100% as you'd have to eventually.

Disclaimers

I'm not a CPA. I've only tested this for my expected situation of SSDI(which is state tax free :D), ordinary income, dividends, qualified dividends, short term capital gains, and long term capital gains(sadly these are taxed up to 13% in California :(). I've tested this with CA 2019 tax brackets and a 2019 CA Tax Act Return. California is generating a $0 penalty in my cases.
I also tested $1m+ AGI test cases extensively and my spreadsheet spits out $0 penalties, but still - I'm not a CPA.

How this spreadsheet applies to FIRE

We're more likely to retire early, and our income is based off our portfolios, and we may have uneven income in a year (say withdrawing $40k extra from stocks in June to fix a roof.) FIREing doesn't give us much withholding opportunities either - so we're either paying estimated taxes or doing 60-day rollovers of 100% withholding IRA withdrawals. Another poster a few days ago was asking how to estimate such taxes and so I decided to post this today! :)
Even if you're employed you still may want to make estimated payments if you have huge wins in the stock market, etc.

Could someone ELI5 the Lotería de Navidad for me? I don't understand how the tickets/prizes are divided.

Do You Have to Pay Taxes on Slot Machine Winnings?

We all love to read stories about big wins and imagine ourselves in the shoes of those winners. But, have you ever thought about what happens at that very moment after successfully beating the slot machine? Usually, the slot machine locks up and, in most cases, you hear the music and see the flashing lights on top of the machine. But one of the first questions every player asks is whether they have to pay taxes on casino winnings? Well, you’re about to find out!

Taxes on Slot Machine Winnings in USA

In the USA, when a lucky player hits a jackpot, there’s the option of receiving the winnings in cash or check. In case it’s a large sum, it’s usually paid by check. However, the IRS only obliges the casinos to report winnings that are larger than $1,200.
Of course, all winners are obliged to show a proper identification— a valid ID or passport. When the casino checks for your identification they also look at your age to make sure you are officially and legally old enough to play. As the minimum legal age for gambling varies from state to state, be sure to check it out before you decide to play.

Do I Have to Report All Winnings?

All gambling winnings received from slot machines are subject to federal taxes, and both cash and non-cash winnings (like a car or a vacation) are fully taxable. Apart from slot machines, the same applies to winnings from lottery, bingo, keno, poker or other games of chance. So, if the amount won on a slot machine is higher than $1200, the casino is required to report it. In other words, all your gambling winnings have to be reported on your tax return as "other income" on Schedule 1 (Form 1040), line 8.

Slot Machine Winnings in W-2G Form

In case it happens to you and you snag that big win (which we hope one day you will), it’s useful to know that casino or other payer must give you a W-2G Form, listing your name, address and Social Security number. So, if the winnings are reported through a W-2G Form, federal taxes will be withheld at a rate of 25%.
If, however, you didn’t provide your Social Security number (or your Tax Identification Number), in that case the withholding will be 28%. Either way, a copy of your Form W-2G should be issued, showing the amount you won alongside the amount of tax withheld. One copy needs to go to the IRS, as well.
Aside from slot winnings, Form W-2G is issued to winners of the following types of gambling activities like:

bingo (for players who win $1,200 or more),
keno (for at least $1,500 worth wins)
poker tournament players (for the $5,000 win or more).
a horse track (if the winnings are 300x your bet)

However, not all gambling winnings are subject to IRS Form W2-G. For instance, W2-G forms are not required for winnings from table games like blackjack, baccarat, and roulette, whatever the amount. You’d still have to report your winnings to the IRS, it’s just you won’t need to do it through W-2G Form.

Are My Slot Losses Deductible?

The good news is that you can deduct your slot losses (line 28 of Schedule A, Form 1040), while the bad news is gambling losses are deductible only up to the amount of your wins. In other words, you can use your losses to compensate for your winnings. So, let’s say you won $200 on one bet, but you lost $400 on one or a few others, you can only deduct the first $200 of losses. Meaning if you didn’t win anything for a year, you won’t be able to deduct any of your gambling losses.
In order to prove your losses, you need to keep good records and have suitable documents. So, whenever you lose, keep those losing tickets, cancelled checks and credit slips. Your documentation must include the amount you won or lost, a date and time, type of wager, type of your gambling activity, name of each casino/address of each casino you visited and the location of their gambling business. You may as well list the people who were with you.

Do State and Local Taxes Apply Separately?

Yes, you are required to pay your state or local taxes on your gambling winnings. In case you travel to another state, and snag some huge winning combo there, that other state would want to tax your winnings too. But don’t worry, you won't be taxed twice, as the state where you reside needs to give you a tax credit for the taxes you pay to that other state.
Keep in mind though that some states like Connecticut, Massachusetts, and Ohio don't allow gambling losses.

Online Slot Taxes

Whether you usually spin the reels of your favourite casino games in land-based casinos in the US, overseas casinos, or online casinos, all income for the citizens of the US is taxable. As a US citizen, you are required to send Form W2G for all winnings from a slot machine (not reduced by the wager) that equals to or is more than $1,200.

Taxes on Slot Machine Winnings in UK

As a resident of the United Kingdom, your gambling winnings won’t be taxed. Unlike the USA mentioned above, you’ll be allowed to keep whatever it is that you have won and earned in Britain, even in case you are a poker pro. Then again, you won’t be able to deduct any losses you might collect.
It doesn’t really matter if you win £5 or £5 million playing online slots, your winnings will be tax-free as long as you reside anywhere in the UK, be that in England, Wales, Northern Ireland or Scotland.

Taxes on Slot Machine Winnings in Canada

If you are a recreational player who lives in Canada, we have good news for you. When it comes to gambling, you don't have to pay taxes as your winnings are totally tax free. According to laws in Canada, gambling activities don’t fall under the category of constant source of income, therefore your winnings will not be taxed.
Canadians don't even pay taxes on their lottery winnings. The only exception here are professional gamblers who make a living from betting and are, therefore, obliged to pay taxes. Keep in mind though, this is the current situation - laws in Canada change frequently, which may also include tax laws.

Taxes on Slot Machine Winnings in Australia

In case you reside in Australia and like to visit casinos from time to time, you’ll be happy to find out that your winnings in Australia will not taxed and here are 3 core reasons for that:

Gambling is not treated a profession (it's treated as a hobby)
The government doesn’t see profits from gambling activities as income, but as a result of good luck
The Australian government taxes casino operators and lottery organisers instead.

Of course, taxation varies from state to state.

Taxes on Slot Machine Winnings in New Zealand

Unlike in Australia, where even professional players can claim they are recreational, in New Zealand slot machine winnings (and any other winnings from casino games) are considered taxable income, in case the player has little income from other resources.
But, apart from professional gambling, it is very unusual for winnings to be taxed in New Zealand. Most often, gambling is considered recreational and not income, so players can enjoy their gameplay as they do not have to pay taxes on their winnings.

JNMom wants my return.

Pretty self explanatory title, that's the tl;dr...
My SIL (brother's wife) came to our house recently and explained that they had trouble with their taxes. She didn't report some things they really should have and set up her paychecks as exempt from withholding when they definitely were not exempt, so they owe a sizeable amount to the government. That's a whole other bucket of fish and I honestly expect them to ask family members to bail them out, but the reason I bring it up is because my (occasionally naive) SO told her "Oh, you should have Crimson look over your return! She does ours every year, and we're getting (THIS MUCH) money back this year!" *sigh*
I'm by no means rich, but, among other things, more than half of my income last year was not taxable and I paid taxes anyway, so I got all of that back and then some.
SO that happened, and then later that same night, my mom sends me a text about how much she misses me. After having not spoken to me in more than a month. She calls me the very next morning and guess what she wants to talk about? Taxes. Funny how that works. (What sound does a flying monkey make?)
Now they'd been using this old 2000 convertible Porsche to try to manipulate and control us over the last year. They let us borrow it when my car was in the shop and would say things like "Oh well, we would have just GIVEN y'all the car, but I wasn't comfortable knowing (SO) would be driving it because apparently they don't like me anymore."
Trying to buy our love/guilt trip us into forgiving past grievances...
Thing is, my SO did fall in love with the car. :/
All I heard for the like, the entirety of 2019 was that they COULD sell it for $20K, but they would sell it to me for $10K to "keep it in the family," but after all of that bullshit, I'd rather pay the extra to not have them lord it over me for however long we would keep the damn car for.
So inevitably she asks how much we will be getting back in taxes, and I tell her I'm not comfortable discussing that. Her first "guess" is spot on, but I didn't confirm it.
So she brings up the car again, and I tell her the same thing I've been telling her, which is "Ma, if you can sell it for $20K, go sell it for $20K. Frankly, you'd be stupid NOT to. We can buy a different car. I honestly don't want a vehicle that's 20 years old."
You'd've thought I stabbed her, and OH how low the mileage on it is and OH did I mention it's convertible. (It's also a two seater and we have kids.)

"Ma, for $10,000, a car ought to come with a decent radio system and Magic Wands built into the seats for happy endings."

"Well, I just think you've wasted our time, because you TOLD us you were going to buy our car with your taxes."

"I never said that. YOU said we SHOULD do that and I said we'd think about it. First you said you would have just given it to us. Then you said $5K, then you said $15K, you settled on $10K and that's too rich for my blood."

"No it isn't! SIL told me how much you're getting back!"

And there it is.
This is why I don't like talking about money with family. God forbid I ever win the lottery, I'd have to change my name and flee the country.

Bonus round:

"Why did you lie about how much your return is?"

"Because I KNEW that SIL told you, and by lying I got you to admit it."

Good news: In case you were wondering - lottery, PCH sweepstakes and casino winnings will NOT count towards the income limit of your discharged federal student loans while within the 3-year monitoring period.

Note to SSI Members

Good news: If you're still under the 3-year monitoring period of your disability-discharged federal student loans, your lottery / PCH sweepstakes / casino winnings will NOT count towards the $17,240 yearly income limit.

How to calculate taxes paid on raffle earnings?

Accidental Overcontribution (Hypothetical)

Hello! I have a question. I have always been curious about how something like this would be handled. It's one of those problems that is like, a non-problem, but I could imagine it being one, and it could happen in a few ways.
Let's say my wife and I are really judicious about our investments. We put money into our retirement accounts regularly and whatnot. So let's imagine that we put $500/month into a Roth IRA (max is $6,000 under my name, we'll ignore her for a sec), since we're married the max income to be able to contribute, I can't remember exactly but it's something like $195,000/year. So let's say it's now October, we have contributed $5,000 to this account YTD, all perfectly legal, but:
1) We happen to win a lottery price of $500,000. I've already contributed $5,000 to the IRA. What do I do?
2) I have variable income. My wife right now works part time, but what if my wife over the next few years gets a career job, I make some big sale and we end up just over the limits and end up accidentally retroactively overcontributing?
There's also investment income to consider, of course gains inside a 401(k), HSA or Roth IRA don't count as income unless withdrawn but she and I do have taxable investment accounts right now.
We're doing everything we can to increase our income every year, of course depending on how successful we are there's a risk in my mind that we could end up accidentally overcontributing to something without knowing it, in some sort of windfall scenario.
Couldn't this also happen with an inheritance? You make your max Roth IRA & HSA deposits for the year, but then, say, your parents die and leave you money, if that gets counted as income now all of a sudden those contributions were illegal.
I can't really find much online that clarifies this, if anyone knows it would be helpful. I have a reputation as an overthinker, and this comes up in my head a lot.

Neurodiversity & Participation in the Decision-Making Process

Do you think Lottery Winners should pay Tax on their winnings? why or why not

If I were to win the lottery for $200 million, how much money would I actually get?

Should lottery winnings be taxable?

If you won the lottery, would you (unethically) qualify for all sorts of government assistance since you have $0 income?

Taxable winnings...

My 60+ Year Vanguard VTSAX/VBTLX FI Plan and A Detailed Estimate of U.S. Federal Taxes for 2018 by the Numbers. $1,300,000 Principal. Safe Withdrawal of $35,000 in Annual Inflation-Adjusted Net Income.

This will be really long, but I put a lot of work into learning about the FI side of FIRE and putting it down plainly. It was interesting how everything worked, so I hope it might also help others as an example of how things might play out in their future situations.
That said, I'm just some guy researching stuff on the internet before I reach FI myself and I could be wrong somewhere, so the main purpose for my post was to ask for any input or advice you might have! Please leave a comment if you see something wrong with my example plan, I'd really appreciate it!
This was something I did as practice, so my actual numbers will vary somewhat, but that shouldn't matter for the purposes of my example. I did put all the criteria I could think of that apply to me though. I will, of course, be hiring a financial consultant for sessions as needed going forward, but I plan on keeping my portfolio fairly simple and lazy so that I can do the majority of the work. It also helps to be able to walk into a consultation with a decent amount of headway on the subject, so here I am.
Anyways, on to the example:
Details:
I'm 26 and plan to remain in a LCOL area for the foreseeable future. I'll be solely using a non tax-advantaged, personal brokerage account with Vanguard. I have no money saved in IRAs or 401k yet, but I do have my Vanguard account already established. That said, I've never taken the next step into actually investing and plan to wait until my first consult before moving forward.
My FI timeframe is much longer than 30 years, so I've adjusted most variables conservatively. For example, I estimate inflation at 3% and I've adjusted my SWR down from the widely suggested 4% to 2.7% which seems safer for the longer time frame and should give me decent growth over inflation in the good years. Any real danger is in the first decade or so, I've been told. If your money doubles in 10 or 15 years and you're still able to live on that same initial withdrawal rate, then it makes sense that you're pretty well protected from volatility.
On the flipside, if I were to invest right before the next recession, as is the fear of any new investor, I would be okay. I could still have a decent stipend and I can also get a job if need be or set up and rely on a fund separate from investments. I don't plan on sitting around doing nothing all the time either, but for the purposes of this example, I assume no earned income.
The Numbers: My own situation differs slightly, but for brevity sake, assume I win the lottery and I have $1.3 million to invest 70/30 in Vanguard Total Stock Admiral (VTSAX) and Vanguard Total Bond Admiral (VBTLX) all at once, right now, and then wait a year and 1 day before selling any shares.
I get most of my numbers going forward from the two links above, however no one can predict the future, so realize that these are estimated averages.
VTSAX and VBTLX are both no load. https://investor.vanguard.com/mutual-funds/no-load-funds
VTSAX Expense Ratio is .04%
VBTLX Expense Ratio is .05%
$910,000 in VTSAX with 10 year average annual total return of ~9.9% = $90,090
$390,000 in VBTLX with 10 year average annual total return of ~3.5% = $13,650
Total 10 year average annual return of 70/30 allocation is 7.98% or $103,740 of my principal.
I only need 2.7% SWR + 3% inflation + combined Expense Ratio which I estimate is around .042%. So 5.742% real returns. Anything more is growth.
So how do I get that 2.7% into my bank account? My plan involves using the quarterly dividends from VTSAX and the monthly distributions from VBTLX for the majority of my income, and then selling shares to make up the difference and keep my allocations close to 70/30.
Well, I'm not entirely sure about how qualified and unqualified dividends work on stock funds, so I'd appreciate advice if the math coming up soon is wrong, but Vanguard says VTSAX has 94.78% qualified dividends, 0% qualified short term gains here. All distributions from bond funds are unqualified.
VTSAX has an average annual yield of ~1.65%
910000 * .0165 = $15,015
Of that, 94.78% are qualified dividends
15015 * .9478 = $14,231.22 qualified, $783.78 unqualified
VBTLX has an average annual yield of ~2.6%
390000 * .026 = $10,140 unqualified
Total qualified dividend income: $14,231.22
Total ordinary income: $10,923.78
Gross Income: $25,155
So to hit my SWR of 2.7% I would need to sell enough shares to cover the difference between my distribution income and my SWR which is $9,845 in LTCG. As a worst case scenario, I'm going to assume a 0% cost basis, because it would be very difficult for me to estimate that and it'll change before I actually do any of this anyway. If my math checks out so far, it doesn't actually matter. Higher cost basis will reduce capital gains tax liability further.
Normally, I'd be taxed 10% on ordinary income of $10,923.78, but as I understand it, the standard deduction of $12,000 wipes out ordinary income first and then $1,076.22 of capital income leaving $23,000 as taxable income, all of it at capital rates and well under the $37,950 upper limit of the 0% capital gains bracket.
Gross Income: $35,000
Total Ordinary Income: $10,923.78
Total Capital Income: $24,076.22
Standard Deduction from Ordinary Income: -$10,923.78
Standard Deduction from Capital Income: -$-1,076.22
Taxable Income: $23,000 at Capital Rates
Leaving my federal tax rate effectively 0% in this situation! This seems insane and I feel like I must have missed something.
Afterthoughts:
Bear in mind some states do have their own rules for capital gains and may just treat everything as ordinary income, in which case I would pay some taxes to the state in this example.
In this situation I could work and earn up to $5500 in a year and contribute that to an IRA tax free as an adjustment to gross income.
Questions:

Is all of this correct? If so, it seems too good to be true. Did I assume something I shouldn't have or miss something?
Can I lump qualified dividends with LTCG for tax purposes as I did or are they separate things? Are dividends qualified even in the first year of holding the asset?
Do I even need to seek out a more general financial consultant in my case? Or should I just be looking for a tax specialized consultant instead? I feel pretty comfortable with the actual investing side of things and digging into the numbers once things get going. I'm also learning more and more about the tax side already, but still feel uncomfortable in that area.

I appreciate anyone taking the time to read this. I know it was long, but I don't really feel comfortable discussing any of this with anyone I know personally and I want to iron out the general details of my plan before I sit down to my first consult.
If you see something completely wrong and would like to tell me, I'd like to thank you in advance for any advice you might offer! I hope this opens up some healthy discussion. Have a good day!
EDIT: I do want to mention that I know I'm not taking taxable accounts into, well, account. The thing is, for my situation, I don't currently HAVE anything in tax sheltered accounts. I do plan on contributing $5,500 earned income to a Roth IRA every year going forward and I understand the benefits to doing so.

Questions about Roth IRA vs 529 vs taxable. For FIRE and college savings. And I made a chart

lottery winnings taxable income video

So if the lottery winnings are considered to be a part of your income. For example, if your workplace has a drawing and you win a cash prize, you must report your winnings as income, making them taxable. Similarly, if you sell lottery tickets and earn a commission for selling winning tickets, you must report your winnings as income. Like other income in the United States, the IRS taxes lottery winnings. Lottery winnings are considered ordinary taxable income for both federal and state tax purposes. Winnings are taxed the same as wages or salaries are, and the total amount the winner receives must be reported on their tax return each year. Before the winner receives any of the money, however, the IRS automatically takes 24% of the winnings. Do you get taxed on lottery winnings in ... “If you put money in the bank and earn interest then that is a taxable amount. ... Australians pay capital gains tax as part of their income tax. If you have lottery winnings of between $600.00 and $5,000, you will receive a W-2G form but not have any money withheld for taxes. This will count as income for the year so be sure to save enough money to pay the extra income tax. Many states such as Arkansas, Oregon and Kentucky tax lottery winnings. Your gambling winnings are generally subject to a flat 24% tax. However, for the following sources listed below, gambling winnings over $5,000 will be subject to income tax withholding: Any sweepstakes, lottery, or wagering pool (this can include payments made to the winner (s) of poker tournaments). If you won a large prize, typically over $5,000, look carefully at your W-2G form. Odds are the lottery withheld 28 percent of your winnings as prepaid income tax. So, if your marginal tax rate is 28 percent or less, your withholding will likely cover your taxes, and you will not need to pay any extra on April 15. Because lottery winnings are considered gambling winnings, which are definitely considered taxable income, the IRS will want its cut. For lottery winnings, that means one of two things. You’ll either pay taxes on all the winnings in the year you receive the money — for winnings paid out as a lump-sum payment. Gambling and lottery winnings income may be determined by taking total winnings and subtracting the total costs of wagers. Costs The cost of wagers during a tax year including amounts paid for lottery tickets, bingo games or cards, raffle tickets, slot machines card allotments, etc. may be deducted from total winnings received during the same tax year. Lottery winnings are considered ordinary taxable income for both federal and state tax purposes. That means your winnings are taxed the same as your wages or salary. And you must report the entire amount you receive each year on your tax return. Gambling winnings are fully taxable and you must report the income on your tax return. Gambling income includes but isn't limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips. Gambling Winnings

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