This post is part of the TaxACT #DIYtaxes blog tour which shares stories and tips about doing your own taxes and how it makes you smarter about the overall health of your finances. Do your own taxes today at TaxACT. You got this.
My taxes weren’t always this complicated. It used to be a pretty W-2. The most complicated parts were the few write-offs like the excise tax in MA. Over the years, I’ve added a wife and the requisite 2.5 children (a dog counts as half, right?)
The wife is in the military, which lead to us moving away and turning each of our existing condos we owned into income properties (they were too far underwater to sell). And this blogging “thing” took off to being its own full-time business. Suddenly we’ve got military exceptions, rental property, business and child care write-offs.
As complicated as it is, it could be a lot worse.
Back in the dot-com boom, I used to actively trade internet stocks. Sounds glorious, doesn’t it? Well my account had about $8000 in it, which means if I worked out a 1% gain on the day (which is huge on an annual basis), I would make a grand total of $80. I’d pay a good part of that gain in commissions to Datek who had my brokerage account. It wasn’t a super-smart plan and I did it mostly for fun. I wasn’t expecting to get rich.
Then tax-time came around. That’s when the tax software I used told me about the “wash rule.” Essentially, when you are buying and selling the same stock, you can’t claim a loss unless 30 days go by. (This is a purposeful gross simplification. There are many great resources that are far better suited at explaining it than I am.) Fortunately, tax time rolled around before I had done too much trading that would have been effected by the rule.
There’s something powerful in getting down and dirty with your taxes. It forces you understand the reality of how you did financially the previous year. Here’s just one example. I often keep a running tab of how much money I make on my internet businesses each month. It isn’t until tax time that I dig into the expenses. I find domain names that I never used. They seemed like a great idea at the time. I also found a hosting service that I no longer use. Why am I paying a monthly fee for it? (Note: As I’m writing that sentence, I’m canceling the service.)
I suppose I could hand a bunch of paperwork and statements to someone else and have it done for me. If I did, I would avoid looking at these expenses for years.
Friends and family sometimes consider me the “money expert.” With that, comes questions like, “Do you do your own taxes?” I think what they mean to ask is, “Should I do my own taxes?” Most people don’t have rental properties and small businesses with military exceptions. I probably fall in the 3-5% range of people who have “weird taxes.” I always recommend my friends and family do their own taxes.
The last few years, I have had a tax advisor. She’s a friend of the family and very good at what she does. I also get a good price (not sure if I get a family discount or not). Combine that with my tax situation and there are enough factors to push me to use her services. Before she even looks at a single piece of paper, I’ve done hours of work analyzing expenses, pouring over receipts, and getting dirty with the numbers.
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