Taxes, or the opposite of simplicity


Each year for me, tax season goes pretty much the same way: I fire up one of the big online hosted tax programs, enter in my info, take the Standard Deduction, get something approximating zero dollars back (I try to get it about even), pay my money to the hosted company, and click “E-file.”

And yet, I can’t help but wonder if there’s a better way.

I like taxes (there, I said it)

I’m not one of those people who will rail on and on about taxes. I personally think our taxes are far to low to support the society that we honestly do want. I like schools, hospitals, roads, police, fire departments, water and sewer connections…I could go on. These are things paid for by taxes. Until these aspects of our society stop hurting for money, I will continue to believe that our taxes are too low. (Instead, I think we need to work on not feeling poor.)

So let’s put aside the self-righteous and (in my opinion) misplaced “war on taxes”. We have to pay taxes, and although the whole method in which we pay our taxes is byzantine and anachronistic, this is the world we’re in, and we must navigate it as best we can.

Tax wizards and potatoes

Some people I know have a “tax person.” These people are tax wizards, and for a fee, these folks will supply you with all manner of great/crazy ideas on things you can deduct. “You can claim your potato consumption as a tax credit under the Tuber Reconciliation Act of 1964, as long as your consumption totals greater than 48 pounds deadweight or 30% of your body weight, whichever is less.” These people blow my mind. They seem like they can net you hundreds of dollars just by magically knowing about the little-known section 432a/b1(2) of the tax code that lets you claim a 50% exemption on any sound pollution you can claim from walking past late-night indie record shops. It’s crazy.

I never utilize these people, though. Well, I once went to a place when I moved states and had a complex situation, but aside from that, I do my taxes like most people install programs on their computer: Click Next Next Next Next Next Next…

Now granted, I usually have a simple situation. I don’t own a house, I don’t have offspring, I don’t have medical expenses (thank heavens), and whereas I do consume a lot of potatoes, that usually isn’t enough to make me want to itemize my deductions. I take the Standard Deduction, and be done with it.

Why? Because it’s so simple. I don’t keep receipts, I don’t have to wonder what I can “write off”, and generally my taxes take under an hour to do.

But at the same time, I’m acutely aware that I may be leaving hundreds of dollars on the table.

At the same time, I wonder how much I really care. And that troubles me that I don’t care more. For the reason why, see these dozens of posts.

80/20 principle

I value simplicity. That 80/20 principle (that you get 80% of the way somewhere with 20% of effort, and vice versa) fits my experience exactly. If there is a less complicated way of accomplishing something, I usually go for it.

This is one of the reason why I love investing so much. From everything I’ve read, the best path to success in investing isn’t with day trading and market timing, it’s with index funds and buy-and-hold-forever strategies. I can do that! (So can you!)

But in our system of taxation, there appears to be two ways of handling it: with the simple Standard-Deduction-done-in-ten-minutes way, or the save-all-your-receipts-and-count-your-potatoes method. And in that latter method you can either pay someone lots of money to figure it out (possibly offsetting the financial gain in the first place), or do it yourself.

Is it okay to not be interested?

I know that I don’t have much interest in exploring the US tax code. I could be amenable to paying someone to do this sort of thing for me, but in order for this to work, I’d need to start now (otherwise, how would I know what receipts to save and how to do those things that would maximize my return?) And how will I know if it’s worth it?

I have a memory of my dad taking over the dining room table for at least a week during tax time. In my probably faulty memory, there were tax papers covering the table the entire time. Now, this predates the days of software to help you do taxes, but what I remember is the time and complexity. I also remember that this wasn’t exactly the most fun week for my dad.

Now, if you’re on the fence about this type of decision, the time to decide how you want to handle next year’s taxes is right now. Not in January, not April 1st, and definitely not April 14th in the evening.

I am still on the fence on this. It could be interesting to try something different this year by going to a tax wizard. But the majority of me feels like my life is complex enough, and the benefits don’t seem like they will outweigh the costs. Not now at least.

But enough about me? Do you do your own taxes? How did you come to the decisions to do them (or not do them) yourself? Am I being short-sighted for not paying more attention to this aspect of my financial life?

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