1/6/26 Newsletter

Happy New Year! The Babylonians celebrated the new year with a massive festival called Akitu, but in modern times, we mostly celebrate by breaking resolutions and realizing the IRS is already eyeing our income for the year ahead.

This week’s lineup:

• 💸 Retirement means quitting your job, not quitting your taxes.

• 📆 Why missing a quarterly payment now costs 7 percent more than it used to.

• 🎲 Winnings are taxable, but losses can save you (if you follow the Golden Rule).

• 🏌️‍♂️ How John Daly lost $57M gambling but still won against the IRS.

Filing 101

💸 Retired: Your Quick First-Year Tax Guide

For 40 years, it was simple. You worked, you got a paycheck, and the taxes were magically taken out before the money ever hit your bank account.

Then, you retired.

Now, the money comes from a different place (your 401(k), an IRA, or a pension), and the rules have changed completely. You’re in charge now, and the biggest mistake a new retiree can make is assuming their tax life gets simpler. In reality, it just gets different.

Here’s what you need to know to avoid a nasty surprise in your first year of freedom.

Uncle Sam Still Wants His Cut

The first and most important thing to understand is that the IRS sees your retirement income as just that. Income.

For the most part, money you withdraw from traditional retirement accounts is considered "ordinary income." This means it's taxed at the same federal rates as the salary you earned.

• Traditional 401(k)s & IRAs: Every dollar you pull out is taxable.

• Pensions & Annuities: The payments you receive are generally fully taxable.

• Social Security: This is the tricky one. Depending on your total income, up to 85 percent of your Social Security benefits can become taxable.

The government lets you save and invest all that money for decades without paying tax on it. Now that you’re taking it out, it’s time to pay the bill.

Want to keep more of your retirement income in your pocket? Read more →

Business & Gigs

📆 The IRS Wants Its Cut Every Quarter

Most people treat the IRS like a landlord they only deal with once a year. You scramble in April, cut a check, and try to forget the government exists for the next eleven months.

If you earn a salary, this mostly works. Your employer plays financial babysitter, skimming taxes off every paycheck before you ever see the money.

But if you’re a freelancer, business owner, investor, or someone who hit a windfall, the rules change. You are now the payroll department. And if you wait until April to pay what you owe, the bill you get won’t feel like a tax. It’ll feel like interest on a loan you didn’t agree to.

The U.S. tax system is pay-as-you-go. The moment income hits your account, the IRS effectively owns a slice of it. Hold onto their share too long, and they charge rent.

The 7% Reality Check

For years, underpaying estimated taxes was almost painless. Penalty rates hovered around 3 percent. You could earn more keeping cash in savings than sending it to the Treasury.

That math is gone.

For the 2026 tax year, the underpayment interest rate is sitting around 7 percent. That’s higher than many mortgages and car loans. If you owe $20,000 and wait a year to pay it, you’re lighting roughly $1,600 on fire for no reason other than timing.

Who Actually Has to Pay Estimated Taxes?

Estimated taxes apply if any of the following are true:

• You expect to owe $1,000 or more after withholding and credits

• You earn income without automatic withholding

• You had a large one-time gain like selling property, stock, or crypto

If the IRS didn’t already skim taxes before the money hit your account, they expect you to do it yourself.

Check the 2026 deadlines you can’t afford to miss and learn the "Safe Harbor" calculation that guarantees you zero penalties. Continue Reading →

Money Moves

🎲 The Tax Reality of Winning Big

Everyone has this daydream. You’re holding a lottery ticket, the numbers match, and in your mind, you've already quit your job and bought a small, friendly island in the Caribbean.

It’s a perfect fantasy, right up until the moment you remember your silent partner in this venture: Uncle Sam. And he has come to collect his share of the winnings.

What Does the IRS Consider "Gambling"?

The IRS has a magnificently broad definition of "gambling." If you made money from any of the following, the IRS considers it taxable gambling income:

• Lottery winnings (from Powerball to scratch-offs)

• Casino games (slots, blackjack, poker, etc.)

• Horse or dog racing

• Sports betting

• Prizes from game shows (cash or the fair market value of a prize, like a car)

• Raffle or bingo winnings

If you won money or prizes through a game of chance, the IRS wants to hear about it.

How Your Winnings Are Taxed

There is no special "jackpot tax rate." Your winnings are considered taxable income, lumped in with your salary and taxed at your regular income tax rate. A big prize can easily bump you into a much higher tax bracket for the year.

For larger wins, the payer (like a casino or state lottery) will issue a Form W-2G, "Certain Gambling Winnings." If your winnings are more than $5,000, they are generally required to withhold 24% for federal taxes right off the top. This 24% is just a down payment; if your tax bracket is higher, you’ll still owe the rest come April.

Find out how to offset that tax bill by deducting your losses—and the one "Golden Rule" of gambling taxes you can never break. Read more →

Amazon Prime members: See what you could get, no strings attached

If you spend a good amount on Amazon, do not ignore this. This card could put $100s back every year and gives you the chance to earn cash back on the purchases you already make. You could get approved extremely fast and unlock a massive welcome bonus instantly. Amazon Prime members: See what you could get, no strings attached

Learn How To Apply

Wild Tax Tales

🏌️‍♂️ John Daly’s $57 Million Tax Lesson

John Daly is famous for his powerful drives and loud pants, but his wildest statistic isn't a golf score. While writing his autobiography, Daly checked his tax records and realized he hadn't lost $20 million gambling as he suspected. The real number was a staggering $55 to $57 million.

From 1991 to 2007, Daly averaged losses of $3.4 million per year. One particularly brutal night involved winning $750,000 at a tournament, driving to Vegas, and losing $1.65 million in five hours on high-stakes slots.

But amidst the financial wreckage, Daly did one thing responsibly: he kept impeccable tax records.

This saved him millions. Because the IRS treats gambling winnings as taxable income, you must report every cent. However, you can deduct losses up to the amount of your winnings—but only if you can prove them.

Daly had roughly $35 million in winnings and $90 million in losses. Thanks to his records, he could use $35 million of those losses to wash out the tax liability on his winnings. (The remaining $55 million in losses, unfortunately, offered no tax benefit).

The lesson for the rest of us is simple: Keep a log. Whether you’re a high roller or playing Friday night poker, the IRS requires proof. Track dates, locations, and amounts. Without those records, the IRS can tax your winnings and ignore your losses entirely.

Are you new here? Check out some of our older, popular reads.

• 👔 The IRS just hired its first-ever corporate CEO.

• 👻 Ghosted the IRS? Here’s how to fix it.

• 🏢 Sole Prop, LLC, or S-Corp? Pick the right one.

• 🎓 How to get the IRS to pay for college.

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