Death and Taxes
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I think we've all heard the famous Benjamin Franklin quote, or at least the latter part of it where he said: "Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes."
I'm beginning to think there won't be anything certain about taxes until my death.
Every year, I go into the tax season thinking that it should be relatively simple since nothing has changed but soon realize that nothing is the same because things have changed. While it doesn't necessarily make it harder to do the taxes, it does make it harder to compare this year with the previous year to make sure that something isn't off.
I guess with the flooring project being completed, I decided to start on my taxes a bit earlier this year than normal. My parents had fraudulent taxes filed on their behalf once and had lots of ramifications so I try to get my filed as early as I can. To combat this fraud, experts say the first one to file, you or the fraudster, is the most quick and painless option. But when I plugged in all my numbers, I noticed the amount of tax owed was significantly different than last year. Because February was still a week away at that point, and February 1 is the first day I could file taxes anyway, I shelved the project.
I did start comparing W-2's from this year to previous years. This stems back from a couple years ago when we noticed that things didn't look correct. My wife met with her HR and sure enough, they were significantly underpaying her and had for two years! They of course paid her money do which drastically altered our taxes last year. Thus for the previous three years, it makes things difficult to compare.
This tax year (actually last year), my wife's company was spun off under new ownership (same overall company) so that means two W-2's to compare to previous ones.
Eventually, Iowa updated their tax form through TurboTax (the software I use) and the taxes owed looked a lot better but not quite the same, nor did it ask me for some of the paperwork I always input into the software. More research was done and then I found that my state had passed some legislation last year altering our tax code making it a bit more simple. The short version is that instead of being able to file your tax status independent of your federal taxes as either single, married filing jointly or married filing separately, we now automatically have to file the same status as our federal taxes. It has taken me years to figure out that filing "married filing separately" is the best route for our family and now that isn't an option. As a result, our taxes have essentially gone up since we no longer have options to reduce our taxable earning that we used to have. That explained the difference I was seeing.
Finally, two weeks later, my wife and I finally determined that in all likelihood, she is being paid what she earned, something we vigilantly check these days. I am still waiting one form that won't come in the mail for another week and then I can at last file taxes and be done with the problem.
All told, I have probably spent only four hours of my time doing taxes this year and learned a lot of new things for future years. Definitely worth it compared to the $250 I paid to have H&R Block do my taxes last some ten years ago. She took my money, spent 30 minutes typing my data into her software and collected my check. It was at that point I said I could do the same thing for a lot less and have been doing my own taxes with TurboTax every year since.
But I have a feeling, the only time I will be able to enter my tax information, file them with federal and state within 30 minutes and be reasonably sure they are correct will be the year after I'm dead.
I have always done our taxes and the tax software makes it much easier these days. However, I always feel like I'm missing something and it does seem to take longer than it should.
ReplyDeleteWhen I made the switch to software, I compared it to the ones H&R Block had done to verify that I had stuff filed on all the same lines. I even did one by hand one to verify things. But I still get that FOMO feeling too on occasion. I temper that by telling myself that at worst case, I might have missed some deductions over the years that maybe adds up to a few hundred dollars in missed tax savings. Compared to the $5000 H&R Block would have charged me over the same time frame (assuming they haven't raised their rates that entire time), I've come out well ahead of the game.
DeleteEd - We use TurboTax and have for years, both because I worry about miscalculating on things like capital gains and because it allows us to the get the state version so we can file the taxes for my in-laws. I have used a CPA way in the years when I was doing real estate and though it was really convenient, it was probably overkill.
ReplyDeleteMy tune might be difference if I had a CPA who exuded confidence and knowledge. But whenever I asked a question to the one I had, they usually had to search on the internet, ask a colleague or tell me they would call me later with an answer. At the time, my income was all on a W-2 form and extremely easy I thought for the $250 price tag.
DeleteI used a friend accountant for the first time last year. I must contact him again to check his rates. Last year he did it for free for a compensatory reason.
ReplyDeleteI remember H&R Block being very reasonable the first few years, but just like my cable bill, every year the price went up and I seemed to get less confidence in their ability to do things correctly. Eventually the scales tipped.
DeleteJohn is having trouble with Turbo Tax as he tries to file his late mother's taxes. I have an accountant do mine; with my rental, it's too complicated. I used to do my own when I was younger though. I get a tax ID number every year now to avoid anyone filing fraudulently.
ReplyDeleteI'm not sure I would be up to filing taxes for an estate. I think I would probably seek professional advice on that.
DeleteI was talking with Debby who also has rentals and they hire their taxes out as well. I can imagine those complicate things very fast with depreciation schedules and business deductions.
I think doing taxes is always somewhat stressful. It's always a relief to have them out of the way and okayed by the government.
ReplyDeleteI have pondered why that is though? We are conditioned to take them so seriously when the chances of someone like us getting audited is practically zero. Perhaps because those of us who worry count every dollar?
DeleteWe have always used a CPA to file our taxes. She does my personal tax returns and also a corporate one. It is true that I could probably do it myself with TurboTax (like our kids) but there is a peace of mind that comes with a professional doing it and going to bat for me if needed. And, it is a write-offable expense.
ReplyDeleteFor many, it makes sense to have someone else do them.
DeleteWhen I'm dead, I'm not worrying about taxes. I use a CPA, but here it's much cheaper than in Savannah, which makes it worthwhile. But there's a lot of complications with a handful of 1099s in addition to W2s and trying to get it all right, I'll let someone else do the work.
ReplyDeleteI spent an evening with my priest and we got to talking about taxes and the clergy. It was an eye opening experience. It wasn't anywhere as simple as I thought it might be.
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