Filing Your Taxes. Yep, An F-Word

We won’t pretend like we are an expert of any kind on the whole taxes situation. As far as we’re concerned, TAXES is spelled wrong because we’re sure it’s a 4-letter word. Instead of stumbling through a blog post about how to organize your brain and your receipts in order to accurately file your taxes, we called in the big guns. Meet Carrie. She’s our awesome financially-savvy and uber-capable friend. Don’t look so shocked. We know a few smart people.

“Who is FICA and why does he get all my money?” – Friends

WHO AM I? Let’s get the “fine print” out of the way first: I am in no way a tax professional. Please VERIFY this information and how it applies to your personal situation.  I like to tell people that for day to day, have a bookkeeper – but for taxes, get a tax accountant.  Tax law is specific, and changes often so if you ever have a doubt, visit an accountant who is experienced in tax preparation and guidance for the state you live in.  All of which to say that if the IRS comes to you with questions on your return, you CANNOT say “well, Carrie told me” because I will totally deny deny deny.

For a little background on me, well, I’m an accountant.  I was born to play with money.  I was doing bookkeeping before I knew what it was to pay for my cell phone when I was 17.  Also, that was about the last time I held myself to that strict of a personal budget. When you do it all day at work, you don’t always want to do it at home (do as I say, not as I do).

I have ALWAYS enjoyed filing my taxes.  I’m not sure why.  Taxes are lame.  They are exorbitant, they are ridiculous, but they pay for things like the police, the fire department, the roads we drive on, and the welfare that other people collect.  Sorry, I editorialize.  Be forewarned.   I am also one of those people that are terrified of having a tax bill so I have additional funds withheld from each paycheck.  I hate the thought of a surprise bill in April so much that I give the government an interest free loan of my money every year.  Also, I love getting a return.  Yes, I know it was my money all along.  But for me, the peace of mind is well worth the pennies of interest that money would have earned in my checking account.

Which brings me to my point: Tax is all about money, and first come, first serve.  I have found that the quicker I get my taxes done, the faster I get my refund.  Also, I highly recommend direct deposit.

Even if you have an accountant or a tax preparation professional (like at an H&R Block storefront) – do your taxes, being informed will not only help you, but it will help them.  The more accurate everything is, the better for everyone in the long run.

Tips and Tricks:

• Know the paperwork you need for your tax form.  I use the 1040.  If you know what form(s) you use, you can assemble your paperwork.
• Assemble your paperwork
  • W-2’s, 1090’s, any statements and paperwork about dividends, interest, student loans etc
  • Receipts for anything you plan on deducting if you itemize (this is probably the most intimidating part – which is why I keep all receipts, and also the fact that I’m a paper hog who can’t shred anything but that’s beside the point)
  • Know the delivery dates for your various forms – you need to know when you need to start calling for a reprinted copy if yours never shows
  • Know some basic terms:
    • Adjusted Gross Income (AGI): your total gross income minus specific reductions.
    • Taxable income: adjusted gross income minus allowances for personal exemptions and itemized deductions
    • Gross Income: all income from any source
    • Credit (tax credit): a sum deducted from the total amount a taxpayer owes to the state/federal tax authority
      • can be refundable to the extent they exceed the relevant tax
      • can also refer to taxes paid indirectly (such as payroll withholding of income tax)
• Deduction (tax deduction): a reduction of the income subject to tax for various items, especially expenses incurred to produce income
  • Subject to limitations or conditions
  • Generally allowed for only expenses incurred that produce current benefits
• Itemized Deduction: an eligible expense that individual taxpayers can report on their federal income tax return in order to decrease taxable income
• Standard Deduction: a dollar amount that “non-itemizers” may subtract from their income and is based on filing status
• Filing Status: this defines the type of tax return form you will use. It is based on marital status and family situation and can determine what your correct amount of tax, what deductions or exemptions you qualify for that can lower your tax bill, and even if you must file a return period.
  • Single
  • Married Filing Jointly: depends on marital status of Dec 31
  • Married Filing Separately:
    • NOT the same as two people filing as single
    • Different tax brackets for unmarried taxpayers versus married tax payers
    • Head of Household: must be unmarried and pay more than half the cost of maintaining a home for oneself and another relative that can be claimed as the dependent
    • Qualifying widow(er) with dependent Child
• Dependent:
  • Qualifying Child: must be child, step-child, adopted/foster child, brother or sister or a descendant (ie: grandchild or nephew) of one of those
    • must have the same residence as you for more than half the year
    • under age 19 at end of year, or under age 24 and be a full-time student for at least 5 months of the year or any age and totally and permanently disabled
    • the person did not provide more than half of their own support during the year
    • Qualifying Relative: cannot be a qualifying child of another taxpayer
      • Earns less than the personal exemption amount
      • You provide more than half of their total support during the year
      • You are related in certain ways
      • If married, the dependent cannot file a joint return with spouse
      • Must be citizen/resident alien of US, Canada or Mexico
      • Know your resources
        • Irs.gov (duh – plus a great search function to find publications on various forms etc)
        • Where’s My Refund?
        • Taxes.about.com
        • Money.msn.com/tax-tips

• E-file! Everyone can e-file, and everyone can e-file Individual tax returns for free. Go to irs.gov/Filing and check out the options. Even if you have to use the online fillable forms, you are filing FOR FREE.  Don’t forget that you can also have your tax professional e-file your return.  Advantages straight from the horse’s mouth IRS are, “your refund in half the time, or if you owe, more payment options.”
• Have a good argument – be able to explain yourself.  This one is courtesy of one of my professors.  Disclaimer: Don’t take bonehead deductions.  No matter how much money my puppy has cost me in the last 4 months, his furry butt is NOT a qualified dependent.  But, if you have a situation where there is a gray area, (such as I faced recently when trying to calculate exactly what I could deduct related to my house due to a confusing form printed by my bank) only take the deduction if you have a well-thought out, logical reason (and documentation to support you) to take it.  A lot of the time, if you can present a good “case,” you will be able to keep the deduction.

Just don’t be a smartass.  Filing a tax return is NOT voluntary, payment of a tax is NOT voluntary, you CANNOT refuse to pay income taxes on religious or moral grounds on the basis of the First Amendment, etc.  Don’t take tax advice from Wesley Snipes. Ever hear how many celebrities are in tax trouble?

Have your ducks in a row, file early, file accurately, and remember that if you do make a mistake, you can always file an amended tax return for up to three years.  Definitely have a tax professional/accountant help with an amended return.

And remember, the sooner you file your return, the sooner you either: 1) rip off the band-aid of knowing how much you owe, or 2) the sooner you get your refund!

Sources:

• Irs.gov
• Wikipedia.com
• Taxes.about.com
• Money.msn.com/tax-tips
• Life 😉

Yeah, totally. We could have written all that. Okay, no. Thanks for your info, Carrie. Now we need to do our effing taxes.