Once again, we’re entering that exciting season when tax returns are filed and we’re either eager or filled with dread at what they’ll tell us. It’s a yearly odyssey. Remember that slight edge that everyone felt back in January when the tax forms and information started to roll in? I think I’m covered, but maybe not. Taxpayers are divided into two categories – those that typically are getting a refund, so the savings account will get a bump or that new refrigerator seems possible – please issue that refund before the Presidents Day Sale, and those that will owe money, and thus will be standing on tiptoes on the cliff of the April filing deadline.
During the time that Herself and I were working, we requested the “married, but withhold at the higher single rate” option. That way, we usually got a nice bit of change back at filing time. I know, I know. The specialists tell you to figure out your refund and bank that amount each month so you don’t “overhold”, essentially giving the Treasury Department your money for a year. That requires a degree of fiscal discipline that, quite frankly, I’ve never possessed. So, we’d let the IRS keep our money in their coffers until January or February of the next year. I’m ok with that, as long as I get it back later.
Retirement is a whole new dynamic. I assumed that the state retirement systems – we deal with two – would figure it all out and take what they needed in a prudent and responsible manner. Not so. The first year, we got slammed. The retirement systems did almost but not quite what they should have, and social security pushed us over the top into the “you owe” category. I took corrective action the next year, still owing but much less. I took more corrective action, I thought, but one of the retirement systems actually reduced their withholding, for a reason they couldn’t explain satisfactorily, so we still owed a little. Now, we’re withholding from social security and that’s done the trick. So, fingers and toes crossed.
One of the big things about the tax system is deductions. I’d keep track of these meticulously and have everything ready when it came time to file. Property taxes, income taxes because I worked for years in a state that had them, unlike New Hampshire, where we live free or die, and put all of our taxation eggs in the property tax basket. I’d tally up our medical expenses, our job-related deductions, membership dues and fees. I’d keep track of our charitable deductions, and felt guilty at the end of the year at what a paltry amount we were giving. But now, seeing Donald Trump’s returns, I don’t feel quite so bad about charitable giving. I’ll let The Ford Foundation and the Carnegie Corporation cover us again this year.
There are a couple of years when I went to a tax preparing service for assistance. The first was the year we bought our first house. Then later, I needed help with inheritances and those tax implications. For the most part, though, I’ve done ours, and so far, knock on wood, the Feds have not appeared at our door. For a number of years now, I’ve used online services and electronic filing. It’s always reassuring when I get back from the service, “your taxes have been filed”, with a subsequent email, “the IRS has accepted your return”. I’m not sure what would happen if they didn’t, because the software is overly cautious. They give me a warm round of applause by telling me I’m “almost done”, followed by “let’s run the checks again just to be sure”. The first time through, there is a box I missed or one I checked off because I had no idea what it meant. Something to do with the railroad former employee trust fund. My time at the railroad was brief, so we’ll take that out.
In the springtime, I judge some music festivals, which used to be considered “miscellaneous income”. Now, it throws the whole system into spasms. Am I “self-employed”, and thus subject to a new array of forms, qualifications, and taxes? I understand that we have Uber and Lyft drivers to thank for these new additions to our tax filing joy. Last year, my miscellaneous earnings were just over the “forget about it” threshold, and I believe I ended up having to upgrade the software package and pay “self-employment” tax that amounted to roughly 110% of what I actually earned. This year, I may just tell the festival organizers to keep the money and give me a nice gift card.
So, what’s still deductible? Some of my readers may be old enough to remember when credit card interest was a legitimate deduction. Three martini lunches and vacations in Barbados were “costs of doing business”. No more. In fact, the three-martini lunch expense isn’t even listed on Schedule A. On the plus side, the standard deduction is now bigger than anything my facts, figures, and fertile imagination could dream up. I laugh in the face of mortgage interest. However, the software still insists on “walking me through it”. We put everything in, and then it tells me that it “thinks the standard deduction is the best way to go”. I could have told you that at the start and saved us both time.
The last couple of years, I’ve helped our dear friend, Lady Peacock, with her taxes. I should mention that I insist on complete anonymity when it comes to her taxes and any interactions with the IRS, and say multiple prayers that they won’t be able to trace her returns back to my computer. Here are some of the discussions we’ve had:
- Monthly condominium association fees are not deductible like mortgage interest. It may not seem fair, but it is what it is.
- No, your daily Starbucks does not qualify as a Qualified Weight Loss Program because you skipped lunch. And no, can you deduct the cost of your emergency snacks on the back seat of your car.
- When Goodwill gave you a blank form, they didn’t intend for you to fill in full retail plus tip for great taste for your clothing donations. Again, no, the cost of your Crepe Maker doesn’t qualify for the Entertainment Credit, nor does the cost of your trip to Ireland qualify as an Educational Expense since you’re retired.
- “You drove how many miles to and from the doctor’s office”, I ask in stunned disbelief? I forget that she meets more with her doctors than does the Joint Chiefs of Staff. And it’s more than my total mileage for last two years.
For those of you that have been cruising along thinking that you have months before dealing with the tax cycle, guess what – we’re now in February, and in the words of the Ghost of Christmas Present, “Our time grows short.” If you do your own, you’ll begin to feel that tingle of anxiety that comes as the final W-2’s and 1099’ roll in, assembling the numbers and preparing to do battle with the dark forces of taxation. Good luck and God Bless. A couple of glasses of a good cabernet should help, but no, that’s not deductible as a legitimate tax prep cost.
I'm Thinking...No! 