Tax Time Tidbit #1: Do Them Yourself!

by David Bakke

taxes2Although this series may be a little late for most, I wanted to summarize a chapter for you that is included in my book “Don’t Be A Mule…”  I devoted an entire chapter to the subject of taxes because after I finally decided to somewhat educate myself on the subject; I realized what a pivotal role that filing your taxes can play.

Among other things (which I will get to in future posts) the biggest piece of advice that I can give to you regarding taxes is to do them yourself.  For those of you that simply take your W-2’s into some walk-in place and walk out with a check a few days later, let me give you a newsflash—You are wasting large amounts of money.

Most of my co-workers choose this route, and honestly, my heart goes out to them.  It goes out to them for the money that they are wasting.  This money is yours, believe it or not.  Why would you not want 100% of it?  Also, who knows your finances better than you?  Some stranger you go see once a year who knows nothing about you?  Or you, the person that has been in your shoes for the last year.  Honestly, I can’t even imagine entrusting someone else with this task.

Besides a few rare exceptions, for example, small business owners or other people who simply have personal finances that are too difficult to keep up with on their own, it is my firm belief that everyone should file their on taxes.  As I stated, you know your situation better than anyone else and you will certainly look out for yourself better than anyone else.

I filed my taxes myself for the first 20 or so years of my working life.  At that point in time, it was simply a matter of filling out the EZ form and mailing it in.  Well, after I purchased my first home, the thought of doing my own taxes scared the hell out of me!  I thought there was no way I could figure it out on my own.  I panicked and contacted the first accountant that I could.  That man spent no more than ten minutes with me, spit out my return faster than you could say “boo”, and happily sent me a bill for $300.  It was then that I vowed to never pay to do my taxes again.

But, you will need to do a little planning and forethought and institute some sort of organizational system in your life.  Again, a little bit of time and effort on the front end of this and this will take up no more of your free time than anything else.

Let me briefly summarize what I think you’ll need:

First, a filing system.  You need to get yourself a cheap filing cabinet, or a few accordion files, because there are certain thing you’ll need to keep up with over the course of the year.  I would start off with all credit card statements, and receipts for any of the following: medical expenses that you are not reimbursed for, all charitable contributions, all job related expenses, all investment information, and anything else you can think of that you might need at the end of the year.

Second, some amount of organization.  Do you know when you should start thinking about your tax return for next year?  Right now?  Three months from now?  The end of the year?  Wrong, wrong and wrong.  You should have already started tot think about it!  As a matter of fact, on January 1st you should have.  Keeping in mind potential credits and deductions throughout the year and saving corresponding paperwork goes a long way to maximizing your return and completing it a less stressful process.

Guess what?  That’s about it.  Besides choosing which method to use to file them, that’s it. I cannot even begin to put a price tag on how much more I’ve received by doing my taxes on my own.  And this additional income comes from two sources: from maximixing my return and from not paying anyone to do it for me.

You’ll be seeing more posts on this topic shortly.  As always, your comments and feedback are appreciated.

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