It’s getting toward the end of the year, and in order to balance the Universe, we have Christmas and New Year’s on the one hand, and Tax Time on the other. I don’t know much more about paying taxes than you do, but here are some ideas I’ve been thinking about. You may want to consider them and do a little research for yourself.
Of course, tax returns are not due until the middle of April each year, but we start getting tax information much earlier. We get told how much money we made from our employers, banks, Social Security, and other institutions that pay us. We also get those friendly reminders and forms from Internal Revenue Service (IRS) and Missouri Dept. of revenue (MDR), usually accompanied by instructions. And, we have to remember if we have other income to declare: gambling winnings, work for cash, odd jobs, bartering gains, etc.
It can seem like a lot of work just to determine how much we really made last year, and then even more to figure how much of that the Feds and the State are entitled to receive.
We had quite a lot of new tax legislation and we’ve been told we will get to keep more of what we made. The various levels at which taxes are calculated were supposed to go down. The Standard Deduction which a lot of us take rather than list all our Itemized Deductions DOUBLED! I hope this allows us to pay less tax, but as is always the case when stacks of paper measured in inches comprise legislation, the potential for pesky little details to slip in is magnified – sometimes logarithmically.
Still, from what I can see so far, we will be better off this year than last year, depending on those pesky details yet to be revealed.
Our parents were poor. We didn’t realized that because we were lucky enough to be born at times and places where everyone else was poor as well. Our parents paid their income taxes religiously, and perhaps, in an irrational fear of the consequences of not doing so absolutely correctly, often sightly overpaid “Just to be sure.”
All our parents worked for salaries and had no other income and so their tax returns were very simple, and both of us eventually filled out those forms for our parents. When we began working, we continued filling out those forms, “doing our own taxes” and learned a little more each year, becoming comfortable and eventually passing on that “do it yourself” attitude to our kids. For the most part we were successful in that, one of the kids even paying some school expenses doing tax returns for others; some day she will be doing ours!
It can seem formidable to do your own taxes, especially if you have never had anyone to help you out, but there is a trick or two that makes doing your own taxes easier and something else that might encourage you to give it a try.
One trick is simply to look over last year’s tax return that may have been done by someone who knew what they were doing. If a relative or friend did it for you, I’ll bet they would be happy to take you through it one step at a time. Another trick is to substitute this year’s income numbers (from the forms your employer, bank, SSA, etc. sends you) for those of last year. A third trick is, once you’ve done the substitutions, ask a paid preparer to look over your work. I’ll bet they would charge next to nothing and even smile at your efforts to become self-sufficient. For most of us, it is no more difficult than that.
There are some serious benefits to doing your own taxes. The best one, in my opinion, is the feeling of competence and self-reliance you get. Another is the example you are setting for the kids handling this bit of financial responsibility ourselves and ultimately teaching them how to do it, much as we learned from our parents.
And then, there is the money. I canvassed several paid tax preparers last year. I was surprised at what some people were paying for relatively simple tax return preparation. If the cost were ten or twenty dollars, maybe it’s not worth it for a guy to do his own taxes, but as I found out, it can get to be a lot more a lot quicker.
And here’s another opinion unbuttressed by any research. I don’t think it’s the math or the other requirements that drive people to paid income tax preparers. I think its the phobia of what will happen if they get something wrong when doing taxes on their own. Well, in my experience, and that of many others I know, it is NOT dangerous! IRS and MDR are not out to get you, they are not interested in making your life miserable, they just want you to pay your fair tax.
The horror stories we hear are a tiny, tiny minority of taxpayers and almost invariably trying to make us feel sorry for someone who massively cheated on their taxes, got caught and are complaining about the punishment. IRS an MDR understand that mistakes get made by human beings and when they realize I made a good-faithed mistake and am ready to correct it, they are very accommodating. If they think I am trying to illegally evade taxes I know I should be paying, they are not, I would imagine, as friendly. Honest mistakes are no big deal.
With the new tax legislation going into effect this year and next, this might be a good time to examine the benefits of doing your own taxes against its cost when done by others. You could certainly take a look at how similar your tax returns from three years ago look when compared with two years ago, or your tax return from last year.
Wouldn’t this be a splendid, SPLENDID class to teach in our high school? And having the extra added attraction of being immediately useful to a student.
By the way, we may not want those new post-card-sized tax return forms we were promised during the last presidential campaign (and the one before that as well.) I think they may have gotten those return forms a little too simple. I saw one example called a “Simplified Income Tax Return Post Card” that had just one question and just one direction: the question: “How much did you make last year?” and the direction: “Send it in.”