Author Topic: "Doing your taxes"  (Read 3549 times)

0 Members and 1 Guest are viewing this topic.

PastryGoddess

  • Super Hero!
  • ****
  • Posts: 5052
    • My Image Portfolio and Store
Re: "Doing your taxes"
« Reply #15 on: May 31, 2014, 11:25:16 AM »
Most people in the US don't use an accountant.  Like others have said, there is tax return software that will do all of the calculations for you.  My state also has e-filing for free.  So I used to use TurboTax for federal taxes and then e-file in my state for free. 

Since I started my own business, I send an envelope full of receipts to my accountant every month. We meet in January to make sure there won't be too many surprises on my tax returns.  My accountant files both my state and federal taxes for me and also sends in my estimated quarterly taxes as well. 

nutraxfornerves

  • Hero Member
  • ***
  • Posts: 2027
Re: "Doing your taxes"
« Reply #16 on: May 31, 2014, 11:50:01 AM »
If all, or almost all, of your income comes from a salary, you have few other investments, you have a mortgage on one home, and few tax things like donations to charity, then it's not too difficult to prepare your own taxes.

When there is a need to understand the seriously complex tax laws, then an accountant can save you a lot of grief.  For example: You are self-employed, you are part of a business partnership, you do a lot of unreimbursed business travel, you have a lot of stocks and other investments (both profit and loss reporting is necessary), you are a farmer, you have rental property,  you get income from a source outside the US, you have huge medical bills that year, you suffered a huge loss in a natural disaster, you are both getting a pension and still working.

If you aren't in the US, you may be wondering what some of that has to do with income tax--just think of it as illustrating the complexity of tax laws.

There are tax preparation services that are less expensive than using a fully qualified accountant, which work for people who just don't want to do their ow taxes or whose taxes are moderately  complicated. On the other hand, if you are Bill Gates or Warren Buffett, you probably have a team of accountants and tax attorneys who do nothing but work on your returns.

Nutrax
The plural of anecdote is not data

Dindrane

  • Super Hero!
  • ****
  • Posts: 15433
Re: "Doing your taxes"
« Reply #17 on: May 31, 2014, 12:55:36 PM »
As others have said, "doing your taxes" doesn't necessarily have anything to do with paying your taxes. It's more like balancing a checkbook.

I have almost the simplest tax situation that you can have in the US, so I have always used the free tax preparation software that some places make available to file federal taxes. However, even I end up with slight complexities in my taxes each year because I do have an interest-bearing account (and thus significant, though not substantial, interest income), and my husband has been a graduate student for many years. His income has been intermittent, and we have sometimes had to pay his tuition (which is generally a deductible expense).

This year, for the first time, I finally paid the same tax preparation software to file my state income taxes, too, even though the return is not all that hard to fill out. It's hard enough that I usually have to do it 2 or 3 times before I can get the numbers right, and I decided that spending $30 to have somebody else just do it for me was more than worth the time I would save not having to do it myself. At least in my state, income taxes are rendered slightly more complicated by the fact that I have to determine what my federal tax liability is (which isn't necessarily the same as the federal taxes I owed or paid), because I can deduct that from my taxable income for state income tax purposes. I usually do that calculation wrong at least 5 or 6 times every year, because the instructions aren't very good.

My parents are probably reasonably typical for a middle class household, but have been using an accountant to file their taxes for as long as I can remember. They did used to have rental income (though they don't anymore), and they have always had significant investments (to save for my and my siblings' college educations and to save for their own retirement), so I think that rendered their taxes sufficiently complicated that they didn't want to do them themselves. I am pretty sure it's not a lack of ability, in the end, but a difference in approach. In other words, paying an accountant saves them fighting about how they should be doing their taxes for months each year, so it's worth it to them.

I can understand that completely, even though I hadn't ever paid anyone to do any part of my taxes before this year. But even though my husband is very capable (he filed his own taxes for years before we got married, and his were crazy complicated because he was a foreign national here on a student visa), we have very different approaches to how we do things like this. So I file our taxes basically without his involvement (he hands me the forms and I tell him a sort of summary when I'm finished), largely because I mind it less than he would and it's one of my contributions towards our household. But when filing our taxes gets to be too difficult or too time consuming for me to be willing to do it on my own, that's when I'll either start paying for software that can handle the added complexity, or just flat-out hiring an accountant. This is not an area where my husband would be able to help me (or I would be able to help him), because we'd just end up fighting about it.


Luci

  • Super Hero!
  • ****
  • Posts: 6091
Re: "Doing your taxes"
« Reply #18 on: May 31, 2014, 01:00:05 PM »
US: The firm that handles our investments figures out the buys, sells, dividends, what are tax-free, and what are not, so all I have to do is download the information from the web site and all that is plugged into the forms by the software, so it is really no more difficult than when we had simple interest, a mortgage, and deductions for charity. I was worried that we would have to hire it done, but it is working just fine! $35 as opposed to $300 and it seems to be done right.

Cz. Burrito

  • Hero Member
  • ***
  • Posts: 3547
Re: "Doing your taxes"
« Reply #19 on: May 31, 2014, 02:56:40 PM »
Do ordinary people (those with a job that deduct taxes, a mortgage, retirement account and basic stuff) need an accountant to prepare their tax returns?

Here in Brazil, if you are required to do a tax return (people with income below a certain threshold,  over a certain age and a few other situations aren't required), you use our IRS's software to plug in the numbers for income, dependents and deductions, as well as property that has to be declared (such as houses, investments, etc). It shows you how much taxes you have to pay under each way of filing (simple or detailed) and if you have tax returns to receive. You can then print out a copy for your records, save backups and send the return either online or in a bank with a pendrive.

The only people I know who use an accountant are either business owners, where it is legally required that an account go over the books, or someone with very complex investments. Oh, and doctors and other medical providers, since they have to itemize their income and it is a huge pain.

I used a professor tax preparer one year, but otherwise have always done mine manually by myself using a calculator, tax tables, and paper forms.  I only just started submitting my tax forms electronically last year.  My parents also do theirs themselves.

Outdoor Girl

  • Super Hero!
  • ****
  • Posts: 14225
Re: "Doing your taxes"
« Reply #20 on: May 31, 2014, 03:21:28 PM »
Here in Ontario, your taxes are normally taken off of your pay, according to information you give your employer, based on marital status and so on.  If you know that your employer has made the deductions correctly, you don't actually have to file, if you don't feel like it.

But it really isn't in your best interests because there are all sorts of things that will give you deductions where you end up getting money back because your payroll deduction doesn't take these other things into account.  Contributions to a retirement savings plan or making charitable donations, for example.  I always file because I always get money back.

So I file a tax return every year.  Mine's pretty simple so I just use tax software on my computer, which also allows me to netfile so I get my return faster.  I don't submit everything unless they ask to see it, called an audit.  They have simple audits where they just ask you to submit the receipts that support a particular deduction.  I claimed moving expenses when I moved to my new job, for example, and because it was unusual, they asked for the receipts.  And I goofed when I filed.  They actually owed me *more* money.  So I doubt they'll audit me again for a while - I haven't been audited since and I've been here 10 years now.  Prior to having a computer, I'd do them by hand on paper, with a calculator.

If they have suspicions that you are cheating on your taxes, they are allowed to audit you for up to 6 years worth of receipts.  So I keep 6 years of records, plus the current year, and shred earlier than that once my taxes are done for the year.  Which reminds me - I haven't shredded anything yet.
I have CDO.  It is like OCD but with the letters in alphabetical order, as they should be.
Ontario

TootsNYC

  • A Pillar of the Forum
  • *****
  • Posts: 31394
Re: "Doing your taxes"
« Reply #21 on: May 31, 2014, 05:53:41 PM »
Do ordinary people (those with a job that deduct taxes, a mortgage, retirement account and basic stuff) need an accountant to prepare their tax returns?

Here in Brazil, if you are required to do a tax return (people with income below a certain threshold,  over a certain age and a few other situations aren't required), you use our IRS's software to plug in the numbers for income, dependents and deductions, as well as property that has to be declared (such as houses, investments, etc). It shows you how much taxes you have to pay under each way of filing (simple or detailed) and if you have tax returns to receive. You can then print out a copy for your records, save backups and send the return either online or in a bank with a pendrive.

The only people I know who use an accountant are either business owners, where it is legally required that an account go over the books, or someone with very complex investments. Oh, and doctors and other medical providers, since they have to itemize their income and it is a huge pain.

In the U.S.:
   No, you don't need an accountant if your income structure is simple. There was, for many years (I'm assuming still is) an E-Z form of some kind. It was very easy--but you must file.
  If your taxes are a bit more complicated, you can either learn the info yourself, or you can buy software.

In the U.S., taxes are withheld from paychecks, but it's an estimate based on numbers you supply or request. That's part of why you must file--to lock in the final amount.

Mergatroyd

  • Member
  • **
  • Posts: 922
Re: "Doing your taxes"
« Reply #22 on: May 31, 2014, 06:46:59 PM »
Here in Ontario, your taxes are normally taken off of your pay, according to information you give your employer, based on marital status and so on.  If you know that your employer has made the deductions correctly, you don't actually have to file, if you don't feel like it.

But it really isn't in your best interests because there are all sorts of things that will give you deductions where you end up getting money back because your payroll deduction doesn't take these other things into account.  Contributions to a retirement savings plan or making charitable donations, for example.  I always file because I always get money back.

So I file a tax return every year.  Mine's pretty simple so I just use tax software on my computer, which also allows me to netfile so I get my return faster.  I don't submit everything unless they ask to see it, called an audit.  They have simple audits where they just ask you to submit the receipts that support a particular deduction.  I claimed moving expenses when I moved to my new job, for example, and because it was unusual, they asked for the receipts.  And I goofed when I filed.  They actually owed me *more* money.  So I doubt they'll audit me again for a while - I haven't been audited since and I've been here 10 years now.  Prior to having a computer, I'd do them by hand on paper, with a calculator.

If they have suspicions that you are cheating on your taxes, they are allowed to audit you for up to 6 years worth of receipts.  So I keep 6 years of records, plus the current year, and shred earlier than that once my taxes are done for the year.  Which reminds me - I haven't shredded anything yet.

Also in Canada here.
I believe there is an income cutoff, like if you make under 20,000$ a year you don't need to file income taxes. Most employers take off too much tax in our experiences (myself and DH), and because you can claim things like prescriptions, kids, kid sports/arts, school fees etc, we've always gotten money back from the government. If you don't file, you don't get that money. This year due to our moving expenses our return was almost five digits. We do know some people whose employers do not take off enough taxes though, and they have had to top up that amount by paying. If you don't file, and you owe, you can actually end up doing jail time.
We get ours done by an accountant. We could do it ourselves but if we missed something (like calculated vacations kms wrong, or accidentally claimed prescription costs already covered by the union, or filed the wrong number of away from home lunches that DH is entitled to, we'd be in trouble. We're also in the northern living bracket, which is another deduction, though not as high of one as it was in our former residence. Plus, we had a child under six- write off harpers 100, and then two under 18.. Just a headache. My attention span isn't that long! Lol)

iridaceae

  • Boring in real life as well
  • Hero Member
  • ***
  • Posts: 3914
Re: "Doing your taxes"
« Reply #23 on: May 31, 2014, 07:04:52 PM »
I'm in the US and I just use whatever lowcost tax software there is as I am simple tax-wise. No kids,  mortgage,  out of state anything etc.

Back in the good old days of paper everything I forgot to write a number in on the US Form.  I got a nice letter from the IRS asking me why I had not filled out line 13b or whatever it was.  So I wrote back by hand - precomputer age and no typewriter- on Marvin the Martian stationery that I had goofed up because I was a procrastinating idiot who had waited too long to do my taxes and so I had hurried through them and obviously had made a mistake.  I got my return with no further issues.

ladyknight1

  • Super Hero!
  • ****
  • Posts: 8107
  • Operating the logic hammer since 1987.
Re: "Doing your taxes"
« Reply #24 on: May 31, 2014, 09:52:30 PM »
I use an online tax return website that I pay $10 for per year. I've never had any issues and I don't have to mail anything, it includes electronic filing.

Even my DS, who worked for the first time in 2013, filed his tax return in March. I just pointed him to the same site I use, and he had to print one page to sign and mail in.

JoW

  • Member
  • **
  • Posts: 944
Re: "Doing your taxes"
« Reply #25 on: May 31, 2014, 10:33:40 PM »
You aren't required to use an accountant, but sometimes it makes sense.  The first time I used an accountant was for 2000, the year DH died.  My taxes were complicated that year.  I continue to use him because he has found tax savings I would have missed. 

Slartibartfast

  • Super Hero!
  • ****
  • Posts: 11839
    • Nerdy Necklaces - my Etsy shop!
Re: "Doing your taxes"
« Reply #26 on: May 31, 2014, 11:16:32 PM »
Do ordinary people (those with a job that deduct taxes, a mortgage, retirement account and basic stuff) need an accountant to prepare their tax returns?

This is the US tax form for individuals.  It's two pages, but each line references possible different other forms.

This is the instruction booklet.  It's 207 pages.

I do ours with a pen and a calculator - but I do go through the instruction booklet (and the booklets for several of the sub-forms) every year, just to be sure.  It's not *hard* to do your own taxes, but it can be time-consuming.

Actually, to be more accurate:

- the parts which involve you giving the government money are pretty simple.

- the parts which involve the government giving YOU money - rebates, reducing what you owe, deductions, etc. - can be mind-bendingly complex, depending on what you're doing.  Several involve going step-by-step through separate worksheets to plug numbers into complex formulas (you pay X on the first A% but then .5X on the next B% but only if your income is under $$$; if it's over that you pay .7X instead, except on Tuesdays . . . you get the idea.)

It can be confusing to figure out which sections of the tax code apply to you, even if you've got a relatively "normal" financial life.  (Mortgage interest is deductible from your federal taxes, for example, but not if you're taking a standard deduction anyway.  Health expenses are deductible but only if they make up over a certain percentage of your income.  You can knock money off your tax bill if you have kids, but how much depends on how much money you make, and there are extra caveats for if you've got kids in daycare, if you make less than $50K a year, if the kids live with you four days a week instead of seven, etc.)

If you're like me, you may decide the chance of being audited and having something majorly wrong is less than the financial cost of having someone prepare taxes for you (which can be several hundred dollars even for a basic filing).  If you don't like numbers, though, or you earn a lot of money and a lot of the weird loopholes apply to you, a tax preparer is a wise investment.

gollymolly2

  • Hero Member
  • ***
  • Posts: 2686
Re: "Doing your taxes"
« Reply #27 on: May 31, 2014, 11:51:15 PM »
Most of the online programs now are good at prompting you for lots of potential deductions and exemptions.

It took me about ten minutes to do my taxes this year. I use the same program every year, so it stores info like my name, employer, banking account info. I typed in my income, withholdings, charitable givings, and got my refunds directly deposited in my bank account a week or two later.

It may sound difficult but it can be pretty easy process if you don't have a very complicated income structure.

CakeBeret

  • Hero Member
  • ***
  • Posts: 4263
Re: "Doing your taxes"
« Reply #28 on: June 01, 2014, 01:30:42 AM »
Do ordinary people (those with a job that deduct taxes, a mortgage, retirement account and basic stuff) need an accountant to prepare their tax returns?

Not necessarily 'need', but many people feel more comfortable using a professional tax preparer.

Due to the complexity of the U.S. income tax system, it would be entirely possible to accidentally claim a tax credit that you don't qualify for, or over- or under-state something mistakenly, and then face an audit and have to pay money + interest and penalties. Also, most states also have their own income tax, so you actually have to prepare two separate tax returns: one for the federal government and one for your state. Some people may have to submit three or more separate returns: if you live in one state and earn income in another, you will have to submit a tax return for each state as well as the federal government. If you live in State A and work in State B, and then move to State C and work in state D, you would have to submit four separate state tax returns plus the federal one.

There are thousands of possible credits and deductions. A professional tax preparer should be familiar with most of them and be able to tell you which ones you do qualify for. The regulations regarding who qualifies for which deduction can be confusing, so it's helpful to have an expert who is familiar with them. For example, some deductions are based on members of your household; working adults, dependent children, disabled children, disabled independent adults, and disabled dependent adults all factor differently into the equation. Children with shared custody complicate things further.

I actually work in taxation, but a different type of taxes, so my knowledge doesn't translate whatsoever to income taxes. Sort of like asking an estate lawyer to defend someone on trial for murder. I choose to use a professional tax preparer. We use someone from an independent firm, and it costs around $100. She reviews our documents, figures out which credits and deductions we qualify for, and prepares and submits the returns. It takes about an hour of my time, versus the 4-5+ hours it would take me to do them myself. Tax preparation software would have cost around $135, so more than I paid my preparer.
"From a procrastination standpoint, today has been wildly successful."

shhh its me

  • Super Hero!
  • ****
  • Posts: 7045
Re: "Doing your taxes"
« Reply #29 on: June 01, 2014, 01:48:59 AM »
Do ordinary people (those with a job that deduct taxes, a mortgage, retirement account and basic stuff) need an accountant to prepare their tax returns?

This is the US tax form for individuals.  It's two pages, but each line references possible different other forms.

This is the instruction booklet.  It's 207 pages.

I do ours with a pen and a calculator - but I do go through the instruction booklet (and the booklets for several of the sub-forms) every year, just to be sure.  It's not *hard* to do your own taxes, but it can be time-consuming.

Actually, to be more accurate:

- the parts which involve you giving the government money are pretty simple.

- the parts which involve the government giving YOU money - rebates, reducing what you owe, deductions, etc. - can be mind-bendingly complex, depending on what you're doing.  Several involve going step-by-step through separate worksheets to plug numbers into complex formulas (you pay X on the first A% but then .5X on the next B% but only if your income is under $$$; if it's over that you pay .7X instead, except on Tuesdays . . . you get the idea.)

It can be confusing to figure out which sections of the tax code apply to you, even if you've got a relatively "normal" financial life.  (Mortgage interest is deductible from your federal taxes, for example, but not if you're taking a standard deduction anyway.  Health expenses are deductible but only if they make up over a certain percentage of your income.  You can knock money off your tax bill if you have kids, but how much depends on how much money you make, and there are extra caveats for if you've got kids in daycare, if you make less than $50K a year, if the kids live with you four days a week instead of seven, etc.)

If you're like me, you may decide the chance of being audited and having something majorly wrong is less than the financial cost of having someone prepare taxes for you (which can be several hundred dollars even for a basic filing).  If you don't like numbers, though, or you earn a lot of money and a lot of the weird loopholes apply to you, a tax preparer is a wise investment.

Here's a list of the forms.....
https://www.freefilefillableforms.com/#/fd/forms.availability

A lot of these are for very specific circumstances but you may find yourself added the totals from several of these forms just to supply one line of info on the actual return.