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The Boston Globe

Business

Michelle Singletary

Daily dilemmas, not D.C. dramas, can matter most

Writing a check for a struggling sibling isn’t always possible or desirable, but helping to organize the person’s finances can get results.

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Writing a check for a struggling sibling isn’t always possible or desirable, but helping to organize the person’s finances can get results.

When I recently hosted an online discussion, I wondered if I would be bombarded with questions about the automatic federal spending cuts that have dominated the news out of Washington. What I heard came from people trying to deal with the everyday personal financial issues that dominate their lives.

Here are some examples, and my answers.

Continue reading below

Q. How do my husband and I know when or if it’s time to hire someone to help with our taxes? We bought our first house this past year, have made significant donations to charity, and yet we still owe money. That has me wondering if we’ve missed something.

A. There really isn’t a rule of thumb about when to bring in a professional. But the ever-changing tax code has become so complicated that most Americans need a professional tax preparer or tax-preparation software. Close to 60 percent hire someone to prepare their returns; another 30 percent use software that can cost $50 or more.

“To inspire confidence and trust, the tax laws should be comprehensible and the computations of tax should be transparent and relatively simple, yet few taxpayers today can confidently say they understand the tax code or even that they have correctly computed their tax liabilities,” wrote Nina ­Olson, the national taxpayer advocate, in her annual report to Congress.

And the complexity allows sophisticated taxpayers to “find loopholes that enable them to reduce or eliminate their tax liabilities,” Olson said.

It’s this last point that fuels the tax-preparation business. We are all afraid we will miss a deduction. “No one wants to feel like a ‘tax chump’ — paying more while suspecting that others are taking advantage of loopholes to pay less,” Olson wrote in an earlier report.

So the fact that you are unsure what you might have left on the table is a good indication that it’s time to hire a professional or get some software.

Choose carefully. The Taxpayer Advocate Service has some helpful tips at www.taxpayeradvocate.irs.gov. Search for “Choosing a Tax Preparer.” For example, you should stay clear of preparers who guarantee refunds or base their fees on a percentage of the refund.

Q. We are downsizing our home so that one of us might be able to eventually go part time to make it easier on the family and spend more time with the kids. Right now we both are working full time. What is the best way to prepare for one of us going part time?

A. Practice makes perfect. Or at least it gets you close to doing things well. Before going cold turkey on one full-time job, practice for as long as you can by living on the one income that you will be relying upon. I would try it for at least six months or, ideally, one year. The longer you practice, the closer you get to understanding what it will be like to make ends meet.

I would also boost the emergency fund — going beyond the recommended three to six months’ worth of living expenses. Get as close to 12 months of living expenses as you can. With a one-income household, you want to make sure you have a solid emergency fund.

Q. My brother is having serious financial troubles. He doesn’t want money from me, and I don’t have any to give anyway, so that’s not the problem. It’s that he seems stuck and helpless as things spiral out of control. Luckily, he still has a decent-paying job (though the company appears to be on the brink of closing up shop). I know his budget is already pretty tight, but there may be additional room to cut. What can I suggest or do to help get him get unstuck? I know he’s responsible for his own life, but I’d hate to just sit there and watch things fall apart.

A. Start by being honest. Say that you are concerned — in a nonjudgmental way — about his financial situation. And here’s the key to moving forward with your good intentions: Ask if he wants help organizing his finances. I have a rescuer personality, too, but you can’t help someone if he doesn’t want your help.

If he accepts the help, start with his budget. Point out things you think he may be able to cut. Share your financial failings. Suggest financial tools that have helped you.

If he refuses your assistance, don’t be offended. Be ready to provide a list of resources such as the contact information from a nonprofit consumer-counseling agency. You can find one in his area by going to www.debtadvice.org.

In the end, do what you can. If your help is rebuffed or your brother stays stuck and things fall apart, just be as supportive as you can afford to be.

Michelle Singletary can be reached at singletarym@washpost.com.
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