Yes, those tax walls are closing in again. It’s here. That season of giving – to the government. April flowers and taxes due. We all feel the pressure. Maybe this year, we’ll get something back. We planned for it this year, we increased our withholdings, we kept all of our receipts, stored carefully in a file devoted just to that. This will be the breakthrough year.
I usually file early – in early February, just so I can get it done. During our working lives, Her Ladyship and I used the “married, but withhold at the higher single rate” option. We usually got a bit back when we filed. Yes, I know. The tax preparers and financial advisers tell you to figure out your refund and bank that amount each month so you don’t withhold too much, because you certainly don’t want to be giving the Treasury Department free use of your money all year. That requires a degree of fiscal discipline that I’ve never had, in full disclosure. 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 eventually. We did fine, until I retired. 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, and we’d be at or near ground zero. Not so. The first year, we got slammed. The retirement systems did almost but not quite what they should have. With us both receiving social security, I never gave a thought to withholding there too, and that pushed us over the top into “you owe us big time, fella.” Well, not awful – a couple thousand from our “rainy day” fund, which began to rain steadily with a gusty breeze. I took corrective action, and the following year, much better, but still owing a little – the rain turned to drizzle. I took more corrective action, I thought, but one of the retirement systems actually reduced their withholding, so again, a manageable debt but still an OOPS. I’ve gone into another round of increased withholdings, so we’re now pretty solidly in the refund column. The other big plus is that the standard deduction is larger than our accumulated deductions, so pretty straightforward. Fingers and toes crossed.
Over the years, I’ve done ours, and so far, knock on wood, no registered mail or IRS agents coming to the door with handcuffs dangling. For a number of years now, I’ve used online services and electronic filing. It’s always reassuring when I get to the end, and they tell me, “Your taxes have been filed”. Then a follow-up, “The IRS has accepted your return”. This year, for some reason, they weren’t accepted the first time, and I went into a panic. Typically, the software gives me a warm round of applause and I feel a certain glow. Done for another year. Yes, we’d done the traditional “let’s run the checks a bunch more times just to be sure, and to annoy you”. 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 employees trust fund, or overseas bank accounts. Nothing was showing up on the “checks” this year, so what happened? I went back and checked all of the figures against the forms. It all looked right. So, I hit “submit” and held my breath. This time, it went through, and the next day was accepted. Thank you, God. I have my reputation as a semi-professional on the line here. Because I also do the taxes for our daughter, which is lots of fun. She’s a graduate student on a university stipend while she’s finishing her doctoral thesis. She gets forms I’ve never knew existed. Tuition forms, interest on student loans. I had seen lists of all the different tax forms that people can receive, like investment income and savings. I was having breakfast one day with a friend, a retired accountant, and he was telling me how he tracks all of his investment accounts. Ah, that’s like a foreign language. Should we win the lottery, still a potent but so far elusive dream, then I’ll learn how. Shortly after we’re seen on an episode of “Lottery Dream Home” and picked out something with an ocean view. By that time, we’ll probably be on an early episode of “Beachfront Property Bought Before Rising Tides and Now Washed Away”. But I digress, as I often do.
I helped our dear friend, Lady Peacock, with her taxes once again this year. I take my responsibilities as her official tax preparer / referee with the IRS very seriously. And again this year, her deductible expense met neither her needs nor her expectations. By rights, the tax codes should allow her free reign over anything she deems reasonable, including medical expenses. The code writers should just let her deduct with reckless abandon. It doesn’t. Nonprescription, over-the-counter medications for example. For what she spends at the pharmacy, she should be getting stock options. Mileage to and from medical appointments is another key issue. It amazes me every year how many miles she racks up. At first, I thought she was going back and forth to the Mayo Clinic, but no, everything is local. Then, there are the charitable donations. At first glance, I thought she might be a major philanthropist. But, sadly, no. She estimated her clothing donations from her yearly wardrobe clean-out at full purchase price plus 10% for looking stunning in them. We pared that down considerably, much to her dismay and disappointment. The first year after she’d sold the Manor House and moved into Teale Cottage, a condominium, I had to deliver the tragic news that her condo association fees were not deductible. That and an explanation of what “common land” actually meant did not sit well. When I remarked that “It is what it is”, she responded that, no, “It is what I want it to be.” That legend has now been added to her coat-of-arms, along with the official “I’m NOT having a good day.”
So, what’s still deductible? If you’re old enough, you may remember a time when credit card interest was a legitimate deduction, but that was a generation ago. There were lots of those deductions that have gone the way of the rotary phone. Many business expenses too. I can’t, for example, deduct the cost of gardening. Not even the bark mulch. My houseplant collection alone should be somewhere on Schedule A, but no, for some reason it’s been overlooked by the tax writers. On the plus side, the standard deduction is now bigger than anything my facts, figures, receipts, and active imagination could dream up. However, the software still insists on “walking me through it”. We put everything in, and then it tells me that it has determined that the “standard deduction is the best way to go”. I could have told it that at the start, and saved us both time. The other thing is that it asks me, when the federal returns are done, would I like to start a state return? New Hampshire has no income tax, so there is no state return for us. I know-that’s great, right? But the software still asks me repeatedly, when I “delete” the state return, “Are you sure?” Of course, I’m sure. Don’t you just hate it when electronics talk back to you?
So, for those innocent souls that have been storing all thoughts of their tax returns in a dark corner of the brain, you still have to file them, and your time grows very short. If you use a professional preparer, good luck with that. They’ll see you sometime in May or June at the earliest. Your refund will go up in a puff of late fees and penalties. But, if you do your own, you’ll begin to feel that tingle of anxiety that comes with sorting through the W-2’s and 1099’s, property taxes and mortgage interest, wherever you tucked them away, and begin putting together the numbers into something that will pass muster and not cause peals of laughter in the break room at the IRS. Good luck, and God speed. I find that a couple of glasses of your favorite alcoholic beverage help immeasurably – I recommend a nice red wine, and no, that too is not deductible as a legitimate cost of tax preparation. But it will make you feel slightly better.
I'm Thinking...No! 