The Bad
It has so far taken my about two hours every night for the last four nights to try to slog through all of my taxes. Ultimately, I’ve got to file a 1040 along with schedule B, C, and D and associated forms. I’m still not quite done. I’m very nervous about making some sort of mistake and triple-checking everything is quite cumbersome. (For example, do you know what precise percentage of your phone plan went towards business use in 2015? I do now.) If you don’t have a straightforward tax situation this takes a bunch of time. I can almost understand a refusal to sell investments on a basis that you then have to deal with them on your taxes!
The Good
All told I will probably save about $100 this year. Since having an accountant doing your taxes isn’t tax deductible this is like earning an extra $120 pre-tax for my tax bracket. As a second bonus I’m sure learning a great deal of the ins-and-outs of the tax code. It turns out, that for all the flak the IRS gets about being confusing is that it really just isn’t that bad. You just need to actually read the rules. Any literate person with the ability to work a pocket calculator can manage to do it. Additionally, the rules, once you understand them are actually pretty reasonable. (I almost feel as though I’m going to have my libertarian card revoked writing this, but fortunately we’re far too busy arguing about who gets to build the roads to police memberships.)
The Ugly
Two hours times four nights goes into 120 dollars how many times? Yeah, I’m doing this for $15 per hour (pre-tax equivalent earnings) and I’m still not done. Those aren’t good numbers, and did I mention that I haven’t even started on my state taxes yet? Whoops. Fortunately, I could just file an extension.
This is a cool little detail. If you need more time to file your federal tax return you can request an extension which will give you an extra six months to file your federal return. You need to fill out form 4868. It does not give you extra time to pay your taxes. Even though you might not know exactly how much you have to pay, you’d better get at least the right amount to the IRS before April 18th, 2016. Since most people expect a refund, you’ll probably not need to worry too much about that. I, however, always try to cut it as close as I can so that the IRS and I are even on by the last tax date.
Overall
Filing your own taxes is a pain. It’s probably something you should learn how to do correctly at least once in your life. While I’m not getting appropriately compensated for it, at least I know what goes into it in the future. At least in the future I’ll know what a fair price to pay for the service is!
Adam Woods is a physicist. His research interests include building software to run and build geomagnetic models. Adam got interested in personal finance in the great recession when it became obvious an interest was necessary.
After harassing his friends and family (and a short intervention) he took to the web where he blogs about finance, investment, politics, and economics.
Adam is currently located in Boulder, Colorado where he can generally be found hiking, biking, or running a D&D campaign. He can also be contacted at adamwoods137@gmail.com.
Good reminder to get my taxes filed! I am a TurboTax guy myself, but things got complicated when I moved form one state into another state – basically TurboTax just couldn’t handle it so I spent $500 on a really good CPA… who got it wrong. Other than those issues I am happy doing it on my own – and by happy I mean I prefer not to spend the money paying someone else to do it… nobody is ever happy doing their taxes 🙂
That sounds quite complicated! We just finished our (Dutch) taxes today, we did it ourselves for the first time in years. I agree that it’s good to learn how to do it yourself once, it will take a lot of time but it will also save you a lot of money in the long run.
I did my own taxes for years until I started a little side business and my taxes got a lot more complicated. Anyone who isn’t running a business should be able to do it without too much difficulty, even with itemized deductions. I do like that the computer does the math for me. I started with TaxAct’s free program that somehow got upgraded to the next-lowest segment, which is around $20. Usually I just go to my state’s website and file the state through there free, but this year I couldn’t get the numbers to match up with my TaxAct numbers, so I just bagged it and paid the $10 or something to file through TaxAct.
I was amazed when one of the girls I worked with at the circus did her own taxes. We’d get tax forms from about 30 states a year. I thought she was insane. But it definitely made me appreciate all the years of easy taxes.
I did my taxes for several years when they were easier. Then I came across the VITA program and had them do them until my taxes got too complex. For the last seven years, between investments, three side hustles and several 1099’s, I decided I wanted a registered agent in my corner. That way, on the off chance I get audited– don’t think I will, I’m very conservative in my filings– I will have someone at the audit who can represent me.
I wanted to make a plug for the VITA program. (I am no way affiliated with them except as a customer, I am not being compensated for my opinion) The Volunteer Income Tax Assistance (VITA) program in my area is great!! I discovered it while still in college. Basically, you can take your simple tax papers to the program, someone will sit down with you and go through them, fill out your returns-federal and state, then they will take them over to a real CPA who reviews them, then have you sign them and they electronically file for you. Done. All for FREE. Usually in an hour or less. You can usually schedule an appointment ahead of time to cut down on any wait time. And doing the taxes well before April 15th helps, too. If the CPA sees any problems they will discuss them with you. Why would they do this? Many of the people sitting with you and doing the initial filling out of the paperwork are students getting their accounting degrees. They volunteer for the program in order to get experience. When they graduate most of them can say they not only have the education and certification but two or three tax seasons of experience because of this program. The CPAs volunteer to help the community and the students coming through the program. Often they will recruit the brightest students to work with them after graduation. The VITA program is a real win-win-win program all around. The one in my local area also implemented good protocols to protect your personal data- I would check this in your area if you decide to try the service. They also usually have a cap on the income you can make and use the service, also if your taxes are truly complex they will advise you to go to your own CPA or register agent, as they don’t have the time to spend on your taxes. So if you have simpler taxes, earn a median or less income and would like to support your community and get your taxes done for free and reviewed by a CPA; I strongly recommend you google your city name and “VITA”