09 April 2010

T-6 days to the Ides of April...

AKA tax day. Are your taxes done?

One of the values the SCDad instilled was "Never pay someone to do a job you can do yourself". He always worked on his own cars, built his own deck, mowed his own lawn (or assigned an offspring unit to the task) and did his own taxes. The reasoning follows that if you hire someone to do the task, you pay them with your own post-tax dollars and their rates will include a portion that serves just to keep their office open, sometimes called "the nut". So it's much cheaper to just do it yourself.

It's interesting to talk to people about taxes. One friend opined "Paying someone else to do your taxes is giving-in to the government. You're saying "you win... taxes are too complicated for me to understand"". Another offered "if you're not getting audited regularly, you're not trying hard enough". Yet another weighed in with "We work some 2000 hours a year to earn our pay. The government wants you to pay a significant fraction of that, roughly 4-700 hours worth to them. Don't you think it's worth investing a few hours to minimize that fraction?"

I've always done my own. I used to build a spreadsheet representing the form 1040. The first one was a bear but from there it was just tweaking last years. Creating the spreadsheet forced me to research and understand the tax return line-by-line. Kind of like programming in assembly language. The end result is fast and efficient but the process is slow and cumbersome. There is a reason few programs are written in assembly today.

Many years ago I looked at the time investment to create the spreadsheet (~10 hours + error prone) and the cost of a tax preparation program ($25). $2.50/hr isn't much of a return on my time so that and the reducing the error factor tilted the needle in favor of buying a program.

TurboTax was and probably still is the premier product. I've been using their tax prep product for the last decade or so. It a tradeoff...I trust their spreadsheet/program is correct so I don't invest the time to understand the forms. So long assembly, hello high level languages! There have been some recent tweaks to the code that I didn't catch but TurboTax did! For instance... we do not qualify to itemize our taxes.. but TT bumped the standard deduction a kilobick to cover the property taxes. In the old days I'd have (hopefully) caught the nuance but TT did it naturally.

Some don't even want to dirty their fingers with trifling matters like taxes. "Just give it to a CPA!" Now I do not wish to paint CPAs with a broad brush but I'm not sure this is a good answer. A good friend is a CPA. I envy her for hanging her shingle out and working for herself. (I don't envy her losing her biggest client and scrambling to crack the nut). But even she has noted taxes are a small part of her business. Also a co-worker had a CPA doing his taxes and they (sex indeterminate) didn't understand the stock reporting with the dayjob(tm). The bottom line to him was a $50k overpayment over a 10 year span, only three years of which they could refile on. Now data is not the plural of anecdote, but I think most CPAs would agree they are accountants, bean counters to use the derogatory term, not tax people. OTOH, Tax people are tax people only. That's all they do and good ones know the tax code far better than CPA's.

In retirement, never one to lol around on his laurels, the SCDad now owns a tax business. He turned the expertise gained over the years into a business. Yet another lesson to learn! (Turn an asset into a business).

If I asked, I'm sure the SCDad would do the SandCastle returns gratis. But I want to stay connected to the tax process rather than "just drop off the forms and pick up the return". Understanding.. ney, having a clue, of the tax implications affects buy/sell decisions going forward. Doing my own return is the best way I know of to keep in touch with the implications.

Bottom line, for technically oriented people, tax programs are a pretty good bet. List price works out to about a third to 40% of what the big guys might charge. If you want a personal touch and a bit of a discount from what the big guys charge, drop me a line and I'll share the SCDad's info. By design their rates are a bit under the big name tax places... you know, the part that goes to pay for advertising! And you don't need to be local... Everything can be done electronically (email/fax/fone).

The only beef I have with the 'lectronic Tax revolution is the fee to file. It costs .gov more for me to file a paper return, so it's to their benefit that I file electronically. And yet If I want to get my refund is under 2 weeks instead of 8, I have to pay someone else to file my return. Why is that? On what planet does this make sense? Why can't I file my return directly? Why do I have to go through a third party?

The SCDad briefly worked for HRBlock before hanging out the shingle. He's mentioned their program concluded with three numbers. One was how to get the maximum refund next year. The second offered how to accurately pay next year, and finally how to optimally owe the max without penalty.

The idea there seems to be people have no saving discipline which means a big tax return is the biggest chunk of money they might see every year. Others see a tax refund as an interest free loan to dot-gov. Personally I'd be tickled pink if I could get the numbers within $100 at the end of the year. I try every year without success. But that's me. If I get there, You'll see me dancing in the streets.

Bottom line, with taxes looming, tax programs are good for the technically minded. For the personal touch and cheaper than HRB, drop me a line for the SCDad's contact info. They can and do work with remote clients literally halfway around the world.

(Disclaimer... the SCDad's tax business has not paid nor solicited this message. Nor has TurboTax or H&R Block. I offer my opinions because taxes are one of the two sure things in this world) I won't post the contact info[Rob9258038013]but if you need some help, drop me a line at sandcastlescrolls@msn.com and I'll return the contact info. )

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