Bricktowntom is committed to exceeding your expectations by providing a positive, enjoyable experience while visiting my site. Thank you for considering Bricktowntom's Market Place. I appreciate the trust you have placed in me!!
Why I Love Doing Our Taxes

Why I Love Doing Our Taxes

Why I love doing our taxes

I know, I know. You’re probably thinking – Joe has gone too far this time. However, this isn’t as uncommon as you’d think. According to a Pew Research survey, about a third of Americans like or even love doing their taxes. Most of these people said they like doing taxes because they like getting a refund. That makes sense, money is always a good incentive. As for me, I haven’t always enjoyed doing my taxes. It is an ever-changing process, but this year I finally learned to love doing my taxes. Let’s see how I started out ambivalent about taxes and eventually embraced it.

*Originally written in 2016. Updated 2022…

Early 20s Taxes

When I first started working, I didn’t care much about taxes. My taxes were extremely simple back then. I had just one W-2 to go through and that was it. I even manually filled out the 1040 form myself a couple of times. Usually, I’d get a few hundred dollars back because the tax withholding was a little high. It didn’t take much time and I didn’t have any strong feelings about doing taxes. Sure, I didn’t like taxes because it felt like I was paying too much. I didn’t have any deductions and I was paying the full load. There wasn’t much I could do in my early 20s, though.

Taxes in my 30s

By the time I was in my mid-30s, our taxes had become much more complicated. I was married and we had more income streams and deductions. Just collecting all paperwork was tedious. (I put Mrs. RB40 in charge of this. She’s much better at organizing than I am.) Our yearly tax files were full of paperwork such as these:

  • Mrs. RB40’s W2
  • Stock sales and dividend income
  • Interest from banks
  • P2P lending income
  • Business income
  • Rental properties income, expense, mortgage, property tax, and depreciation.
  • The home mortgage interest deduction
  • Property tax
  • Local taxes – art tax, city tax, and transportation tax.
  • Child care expenses
  • RB40Jr’s 529 college saving plan
  • Charitable donation receipts
  • My i401k contribution
  • Our Roth IRA contributions
  • And more….

Things were getting more complicated every year and I dreaded doing taxes. Fortunately, tax software has come a long way and it was mostly just a matter of filling in the right numbers at the right spot. Doing taxes still took a lot of time because I wanted to make sure everything was filled out correctly. Mrs. RB40 would go over the forms after I printed them out, but I don’t think she caught anything. Her eyes would glaze over and she’d space out completely when confronted with tax forms. The tax forms are just too complicated for people to read now. It’s much easier to go through the tax software.

Taxes in my 40s

Recently, doing taxes got a bit more and less complicated for me. In 2021, we took the standard deduction because of the SALT cap. This simplified the deduction part of the taxes.

However, taxes also got more complicated. These days, I have several K-1 forms to go through. They are full of mysterious numbers and letter codes. Also, at least a few usually arrive later than the tax filing deadline. That’s why I file for an extension every year now. That’s particularly helpful this year (2022). I was in Thailand for 3 months and didn’t have time to do taxes.

Love Doing Taxes

Recently, I had an epiphany and decided to embrace doing my taxes. I finally realized the power of doing our own taxes. I could input different scenarios and see how this would impact our taxes. Taxes is one of the biggest expenses you’ll have every year and there are tremendous advantages to understanding the tax codes. Here are just a few things I’ve learned.

  • We didn’t have to pay any tax on our dividend income in 2015.
  • We could increase our dividend income by $30,000 and still won’t have to pay any federal income tax on them.
  • I could sell some of our stocks and buy it back the same day. This would trigger the long-term capital gain tax, but our rate would be 0%. This is because we’re in the 15% tax bracket. Resetting the basis is a great way to lower taxes in the future.
  • When Mrs. RB40 quits her job, we could convert my traditional IRA to Roth IRA and won’t have to pay tax (up to about $36,000 per year.) This is fantastic because it means I won’t have to pay tax on my tax-deferred account.

I would have never known there are so many ways to minimize taxes if I didn’t do our taxes myself. Yes, a tax accountant is great, but they are extremely busy this time of the year. They can’t spend a lot of time figuring out how to optimize your taxes. They have generic advice that applies to a lot of people, but our situation is not very common. Also, I enjoy trying different scenarios in the tax software to see how our taxes would change.

*Update – The tax codes changed quite a bit since 2015, but this concept still applies. I could try inputting different numbers and see how they impact the taxes. The tax software is very helpful.

Taxes are due soon

So that’s how I went from being ambivalent to disliking and then eventually loving doing our taxes. 2015 was a particularly good year for us. I think we’re paying about the same amount of taxes as when I was in my early 20s and single. That’s pretty crazy because we are so much better off financially. Anyway, I think it is good to do your taxes because understanding the tax codes will help you minimize taxes in the future.

Lastly, tax is due Monday, April 18th 2022 so you have one more weekend left. Or just file an extension like I did. Good luck!

Image by John-Morgan


The post Why I Love Doing Our Taxes appeared first on Retire by 40.

Source: Retire By 40

Republished by Blog Post Promoter