The IRS tax filing deadline is coming up quickly on Tuesday 4/18/2017. It normally falls on 4/15. We got lucky this year because 4/15 is a Saturday and Monday is Emancipation Day - a holiday observed in Washington, DC. So if you still haven't done your taxes yet, you've got a couple more days. I want to take a few minutes to share with you why I file my own taxes.
Let's address the primary reason why you would pay someone else to file your taxes. There's only ONE - avoid headaches. The complexity of the US tax code is daunting and unlike most developed nations, Uncle Sam dumps the responsibility of figuring out the correct amount of taxes to pay on the taxpayer. While that's a great deal for the IRS - it only costs them $0.35 to collect $100 in tax revenue - it sucks for us. So I completely understand the 60% of taxpayers who prefer professional help to ensure a smooth and pain-free tax filing experience. And with 70% of US taxpayers getting a refund, you can probably afford that professional help.
With that out of the way, here are the reasons why I choose to file my own taxes:
- It's (relatively) easy - For most of my working life, my income situation has been fairly straightforward. I got hired by a company, worked my hours, and a paycheck gets sent to my mailbox or direct deposited into my bank account every 2 weeks. Every January, a W-2 form came in the mail with all of the information I need to fill out my personal tax returns. And I believe that is the case for majority of residents and fellows in training.
- Tax Software is full featured and costs as little as $0 - I've been using Turbotax for as long as I can remember. For most of those years, I made so little money that I qualified for Turbotax Freedom Edition. But even as my income situation became more complicated over time with investment, blog and freelancing income, I've found that I could always find a Turbotax version that handled all of my tax needs. Best of all, I usually can get the software on the cheap via a sale. And Turbotax isn't the only game in town, other frequently mentioned names include H&R Block, TaxAct, and the newcomer Credit Karma who offers free tax filing for pretty much everyone.
- Learning Opportunity - There are few professions that require as much continued education as medicine. It may feel burdensome at times but the reality is that learning the updated science and management recommendations make us better doctors. The same can be said of taxes. The more you learn about it, the better you will be able to legally minimize your tax burden and achieve financial independence that much quicker. Honestly, every time I discover another deduction or credit that I can benefit from, it's like finding an Easter Egg. The latest find for me was the fact that if you itemize deductions, you can deduct either the state income tax or the sales tax paid on your federal returns. For someone who lives in Florida - a state without income tax - it seems like a no-brainer to take advantage of the sales tax deduction.
- I am my biggest cheerleader - Let's face it, no matter how much an accountant cost, you are the one truly invested in your own benefit. In the case of taxes, that benefit is to pay the minimum amount legally allowed. While professional help can be great, and there are plenty of "maximum refund" guarantees out there, an accountant's incentive to save you tax dollars is only as much as what you are willing to pay.
- Fight the "bonus mentality" - Be honest, do you look forward to your tax refund check every spring? Now slap yourself out of it! Every dollar you get back on that check is a dollar that you loaned to the federal government for FREE. The bonus mentality is easy to understand when you contract out the hard work of calculating your taxes to a professional. But it's different when you do the math yourself. Every year I get a refund, the first thing I do is go increase my withholdings on my W-4 form and hope I don't get one next year.
So these are the reasons I choose to file my own taxes. My income situation is much more complex today than just the W-2 form that arrives every spring. It is no longer an "easy" process and I find myself taking hours instead of minutes to finish the process. But I still enjoy the process and find it worthwhile. What do you think? Do you file your own taxes?
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