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A taxing task — 6 Comments

  1. Can you use Quicken (or some substitute)?

    Speaking for me, I carefully record my financial comings and goings in Quicken as they occur, taking special care to flag and categorize the tax-related items. Once I have done this faithfully, when tax season rolls around, things are organized and summarized and ready to roll.

    It’s still a pain in the you-know-what, but keeping track of this stuff ahead of time eases the torture quite a bit.

  2. We have what I think is a complicated tax situation with income from capital gains and rental property, plus owning farm land. We find that turbo tax works well and is far cheaper than having someone prepare our return. However, a sparse, simplified tax reform is something to include in your letter to Santa.

  3. I like Turbo tax too…in spite of the fact that Turbo Tax Tim used it to cheat on his taxes.

    Although I dread doing my Federal income tax (a holdover from when I used to do it manually), I’ve found that I can do mine from start to finish in a morning. I have a fairly complicated return because I’m a stock trader with options and commodities, have interest income on a self financed mortage and have a small Internet business.

  4. neo, I feel your pain.
    I have used both the Turbo Tax and H&R Block programs. I find both of them to be unintuitive and difficult to maneuver, especially H&R Block. These programs are aimed at people who get their income mostly from wages, dividends, and interest. My income is from pension, IRA, stock trading, and occasionally MLPs. H&R Block cannot handle the K-1s that result from MLPs.
    For the last two years I have returned to doing it the old fashioned way. I find that it’s faster and less frustrating.

    I have a system. All year long I file everything that might pertain to the tax return. During the first week in January, I assemble everything in envelopes by categories. In February, after I have received all my 1099s and K-1s, I do all calculations of the income, capital gains, taxes paid and deductions as well as the form 8606 for IRAs. In late February or early March I wrestle with the K-1s. (By far the most difficult forms I have to deal with.) Once I have all the ducks in a row on legal pad sheets, I log onto the IRS site and read any instructions that are pertinent or new and download all the forms that I need. With all that in hand, I fill out the return by hand. I just mailed my return in yesterday by Certified Mail, return receipt requested. It takes me a total of 10 – 15 hours over a period of 3 1/2 months.

    I pay estimated taxes and try very hard to not overpay without having to pay an underpayment penalty. I usually owe money but just a couple hundred dollars. I actually enjoy the discipline of doing the work. It also helps me to judge how much estimated tax to pay in the coming year. I’m satisfied that if I pay too much tax it is no one’s fault but my own.

  5. Ted Cruz says he wants to abolish the IRS as we know it. And that Gollum worm IRS Commish mocked him.

    I think what Cruz is calling for is a flat tax. A real reform would be completely abolishing the income tax and have it replaced by a national sales tax.

    But it will never happen. The pols use the tax code to generate donations, buy votes and social engineer. Just look at all the forms and their titles.

    I have one lawyer friend and a big part of his legal practice is a tiny and obscure portion of the tax code. For that reason alone he is a big contributor.

  6. Cornhead, the so-called flat tax or national sales tax has its problems. We have no state income tax in Washington State. The State’s income comes from sales, real estate, and business & labor taxes. These taxes are too easy to do stealth increases of .05% at a time. Over time these increases add up. The real estate tax is particularly onerous. During the housing crash in 2008 the assessed valuation of my house went down, but my taxes went up. I complained. The local tax assessor explained to me that assessed housing value meant nothing. What the State and County required in income was how the mil rate was determined. At least when my income goes down, I will pay less in taxes.

    I refuse to buy a new car in this state. The first time buyer pays all the taxes (most areas that is 8-8.5% – $1600 to $1700 on a $20,000 car) upfront. The used car buyer pays no taxes because the first buyer paid them all. When that sort of thing starts applying to all large ticket purchases, such as houses, commercial real estate, etc., what do you think will happen? There will be fewer people willing to buy new. The real estate market will become stagnant or decline.

    The best we can hope for is a simpler, flatter income tax with fewer loopholes that is much easier to process.

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