Saturday, January 28, 2006

Tax Time

It is that time of year again...time to start doing our 2005 taxes. I personally hate doing taxes because I always feel like I am getting screwed (I assume that most people get that same feeling). Here are a few random thoughts/questions that I have about taxes:
  1. Why do so many people want to get money back at tax time?
    This drives me nuts and I have more "discussions" (read arguments) about this with people than I can count. Do people understand that they are not getting money from the government here...they are just getting their own money back to them. They are getting the money that they have loaned to the government for the last year paid back to them...with no interest. The excuse that I hear most of the time is that they aren't good enough at saving all year and it will just get spent...then I hear that they are looking to buy a new 54-inch TV with the $3000 they are getting back. All I can say is, (in the Guinness commercial voice) Brilliant!

  2. Why is it free for me to send my taxes in using snail mail, but I have to pay to file them electronically?
    Isn't it fair to assume that it must be cheaper for the IRS to receive our taxes electronically. They must eventually have to put them into a computer at some point anyway...this way it is already done. If I send them in the mail, won't someone have to enter all the info in manually? Sounds more expensive to me. I just think that it is ridiculous that only people with an AGI under $50,000 can file electronically for free, see FMF's post over at Free Money Finance about how the Free Tax-Filing Availability Shrinks.

  3. Do I need to see a professional?
    Not like that...I mean a tax professional. I never know the right answer to this question. Most of the time, I do my own taxes using Turbo Tax or Tax Cut (I usually use Turbo Tax, but they had some issues a few years ago and got ripped in the reviews, so I went with Tax Cut once), but last year I did go to an accountant.

    I thought that it would be a good year to try to get some professional advice, we sold our house, some stock to get our new house, and I just wanted to see if there was anything else that I had been missing by doing our taxes myself. My wife and I generally owe money to the IRS...usually to the tune of about $1000-$2000, but last year when we went to a professional, we owed about $5000. I know that it was our fault, not his, but it still just leaves a bad taste in my mouth. We sold our first house and were living in an apartment for most of the year until we got our new house (so we didn't get to deduct out mortgage interest as usual), but we never changed our withholding to compensate. Our fault there, but he also didn't find us any deductions that we weren't getting before. This year, we are going back to Turbo Tax. What will you do? Here is an article from MSN Money on Chosing a Tax Pro that can help with the decision.

  4. When will we get some tax reform?
    The US tax system is in desperate need of reform. First off, the system is way too complicated, the MSN Money article above says that it takes about 27 hours to fill out an itemized return. That is astounding. The other big problem that you may have heard about is the dreaded alternative minimum tax or AMT. This was basically supposed to be an extra tax for rich people, but it keeps hitting more and more people in the middle-class each year. Check out this MSN Money article on 7 Tax Changes They'd Like to See for more information and then this one at Kiplingers for reasons why tax reform won't happen.

  5. Am I paying more taxes because so many people "forget" to file?
    The simple answer is yes...for the details check out this article from Money Magazine where the Tax Man Says: You Pay Too Much.

  6. Do the rich pay taxes?
    Seriously, do they get hit as hard with taxes as the middle-class or do they have so much money that they have ways of hiding it? I don't have an article for this one...it is just an opinion.
Everyone hates taxes, but we do need some way to fund our government. I just think that there has to be a better way to do that than the current system that we have in place. Here's to hoping that happens sometime soon.


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2 Comments:

Anonymous Debt Hater said...

I agree with you on the refund.
I had to explain to a bunch of young professionals I know that a tax refund if not an early Christmas gift. So many people bank on their refund to handle some financial crisis, pay for a much needed home or car repairs or pay off credit cards. I recently adjusted my allowances on my W-4 to reduce how much gets taken out for federal taxes.

2/15/2006 12:02 PM  
Blogger RS said...

Yeah, it always amazes me the way that people think of tax refunds as some sort of gift from the government. The people that I talk to about it are all well educated professionals and they still do not get it.

2/15/2006 1:49 PM  

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