Are You Listening? File Your Damn Taxes
The deadline for filing your taxes for 2017 is April 18th. You’re ready for it, right?
Tax season is a good example of the world punishing you for your procrastination. You put it off, and you pay for it. You can learn from this: filing your taxes happens every year at the same time, so you can train yourself to make the right moves to get it off your plate and onto bigger things.
Here’s the chunks you need to break it down into:
Make A Habit Of Good Record Keeping
If you’re an employee for somebody else, most of this works is done for you.
You employer mails your W-4 to you when it’s ready. You hang onto any receipts (things you had to buy for work, charitable donations, etc). Report all forms of income (investments, gambling winnings, profit from selling your house, etc…). If you went to school, look into the tuition deduction v.s. the education credit.
If you think it’s got something to do with the money you earn in the year, hang onto it. Put everything together in the same place so you can grab it and go when it’s time to file. Error on the side of recording too much – it’s easier to take out extra stuff than to hunt down missing items later.
If you’re not sure, the cheap way is to ask somebody or search the web. The faster and more effective way is to pay for the services of a professional.
Paying For It
Companies like H&R Block have made fortunes around people not wanting to do their own taxes. If you’re taxes are simple and you don’t mind paying the money to save yourself the time – go for it. Online tax software these days are next-level. You’ve got to punch the numbers in yourself, but you can do it without leaving the house. The price is decent too.
Either option takes all the “I’m not good at math” out of it. Software does all the math – and either option can electronically file your return with the IRS. If you’re going to get money back, filing online gets you that money faster.
If your returns are more complex – find an accountant.
If you run a business, or work part of the year outside the country, or have any number of other unique situations come up, a CPA has all the knowledge and skills to process your tax return without it coming back to haunt you.
Going to a CPA is the best option. It costs a little more, but you’re paying for an expert to follow your situation and give you the best service. If you’ve got a question, email them and they’ll give you a specific answer to your specific situation. If you’re not sure what kind of records you’ll need, CPAs deal with that every day.
File Ontime, Everytime
Unless you like paying late fees.
You can get extensions to the deadline in some situations. But if you’re 60 days behind, they can hit you with a fine of up to $135. On top of that, if you end up owing money, they can slap on a 5% penalty for every month it’s late. There are caps put on how much they can charge you, but it’s still money out of your pocket that you didn’t have to pay.
If you know you’re going to owe money, you should still file on time. You can side step extra penalties and can work with the IRS to come up with a workable payment plan.
It’s no big secret. The due-date comes every year. Stay organized, and get it done.
Don’t Try To Beat The Taxman
You could argue that it’s part of your civic duty to pay taxes and help fund the infrastructure around you that you’re using every day. Whether your politics are on the left or the right, there’s something to this. It’s kinda nice to have firefighters that will show up to pull your ass out of a burning building. Imagine how much THAT service would cost you if you had to pay for it out of pocket?
You can do things to reduce your taxes, but really there’s no good way to completely eliminate them.
The expression that’s used is a ‘Tax Shelter’. They’re anything that reduces your tax liability.
Tax Shelters from the IRS’s view are things like retirement accounts. These are completely legitimate and you should be using them. Where things go off the rails is when private companies dream up some way to use a loophole that reduces participant’s tax liability much further.
In the 100+ years income tax has existed, many people have tried to figure a clever way around them. It goes in a cycle. The tax code was simple, and somebody finds a loophole. Tax code gets bigger to close the loophole, and somebody finds a different loophole. This goes on and on and now the tax code is giant.
The loophole companies are usually more of a hassle in the long run. They end in audits, lawsuits, and a bunch of other headaches. Even if it worked last year or two years ago, that doesn’t mean that the IRS won’t turn things around and come calling for that money down the road. The IRS has a track record of pulling out the lawyers to pick a fight.
Tax Shelters are okay. Tax Evasion is not – Wesley Snipes spent years in jail because of it.
Undoubtedly the ultra-rich still have some tricks up their sleeves. But for the rest of us, it’s much better to do rudimentary tax planning and spending the rest of your time either working on earning more money, or enjoying your recreation time more. Win the game by living a life more worth living.