The price we pay for civilization...

Week Thirteen:Do My Taxes

"The hardest thing in the world to understand is the income tax" - Albert Einstein

I consider myself to be reasonably knowledgeable when it comes to personal finance. I’m no J.P. Morgan but I’m economically aware to the point that I keep a balanced checkbook, I have both an IRA and a 401k and I usually make sound personal economic decisions. I’m not an impulse buyer, I pack my lunch for work everyday and I’ve even limited my Tim Horton’s intake to once or twice a week. However, despite my level of fiscal responsibility, once any technical aspects of economics are brought up my brain quickly wanders to NFL free agency, what I’m having for dinner or any other random thought that floats through.

I’ve always wanted to have a greater knowledge of the principles and functions of economics because it seems pretty useful. In fact, I often think if I had to start over again I’d major in economics or finance during college instead of education. I realize life currently isn’t so great for all the bankers in the world but my education degree isn’t very useful right now either. At least I’d have a better idea of what to do with my money and how to make it grow (maybe).

Therefore, preparing my own taxes this year is a step towards a more advanced understanding of the economic system. I figure this can only be a good thing. I’m not setting out to be a world renowned economist but I should be knowledgeable enough to research and execute larger economic decisions in my life from mortgages to investments to eventually helping my children finance their educations (I could have really used that kind of guidance). So hopefully this will be the first step on a learning journey to the fascinating world of finance.

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When I first started working I was around seventeen years old and my mother volunteered to do my taxes. This continued each year through high school and college since I was only working part time and it was relatively easy. (This isn’t a knock against my mother. She did an excellent job but she’s no accountant.) However, after finishing college my finances became a little more complicated as I was substitute teaching at several different schools while maintaining my part-time position at the car dealership for weekends and summers.

In addition to having multiple sources of income every year, I was also able to deduct educator expenses, student loans and various other random expenditures. Hence, I required a more experienced person to manipulate and calculate all those fun little figures into the most beneficial way possible. Thankfully though, Jackie’s mother works for a bank and is therefore rather adept at crunching numbers. Once again, I had an easy (and free) option for processing my taxes.

To illustrate how complicated my finances were during this period I’ll tell you about 2007. I was a substitute teacher in two different districts, was employed by three different schools, received unemployment for a couple of months and I eventually got hired at my current job (in no particular order). That means I had SEVEN different W-2 forms mailed to me at the end of 2007 and that doesn’t include an IRA rollover and all those other little complications previously mentioned. Not fun.

However, this year was a different story. I only had one source of income, being of course my current job, and no other finances or investment distribution to muddle things up. Therefore, when I thought of combining my desire for economic knowledge with an experience for 52to30, I realized this was a perfect opportunity to do my own taxes for the first time. I’d be exposed to the fundamentals of the process with minimal obstacles outside of its standard level of confusion. So after I received all the necessary information I just had to find the time and motivation to actually sit down and start the process.

I decided to begin with my federal taxes, so with my W-2, 1040 Form (with instructions) and a considerable amount of optimistic confidence, I set out on my adventure. At first I though I would read the instruction booklet from the beginning but quickly realized this was both unnecessary and confusing. So rather than intimidate myself out of the process I decided to jump right in and start filling out the 1040 form – the rough draft version, of course. Once I got started, the instructions were actually very helpful as each line on the form is explained in varying levels of detail. A few of the more vaguely worded entries required further research but, like I was taking a test, I filled in what I knew then came back for the tough parts.

After a few minutes I felt like I was jamming right along but soon realized I had been lulled into a false sense of ease. This process takes you from step to step in such a roundabout way, I felt like a juggler not knowing if I was grabbing at the bowling pin or the chainsaw. There were so many things being thrown in the air, if I lost focus for a second they would all come crashing down and I’d have to start all over again. (Side note: I really hated the Logic portion of tenth grade math but I’ve since realized its purpose. It’s like brain exercise. “If P and Q then R” suddenly seems pretty useful. Sorry Mrs. Johnston.)

So after a few missteps that had me swearing and gritting my teeth out of frustration, I eventually reached the second page of the 1040 form, which seems a little easier or at least less intimidating. Down the homestretch, the most difficult parts were figuring out if I’m eligible for the Alternative Tax Credit (I’m not) and whether I can claim my 401k contributions (I can’t). So after a few final computations I finally wound up with my refund amount. Unfortunately, it wasn’t quite what I was hoping for but at least I was in the positive. I’ll take what I can get at this point.

After this exhaustive process I decided to put off my state taxes until the next day. When the time came to do these, however, I felt much more confident since I had already handled my federal taxes successfully. Also, for some reason, state taxes always seem like they’re easier to process than federal. Maybe because they’re usually done second and you’re already warmed up, who knows.

But whatever the reason, it totally played itself out in this scenario. I whipped through those state taxes no problem. There were a few minor hiccups but since I already knew all of the confused wording and where to find the necessary information I finished them in half the time and about a quarter of the frustration. That was until the very end when I saw what I was left with. In the grand tradition of the wonderful state of New York, I actually have to pay them - quite a bit, too. Damn taxes!

Therefore, since I was thoroughly disappointed with the outcome of both my state and federal taxes (as well as in my own self-interest) I will be getting a second opinion. I’m going to have Jackie’s mother double check my work and hopefully find some errors or deductions I missed to give me a more favorable result. I’m sorry if I’m disappointing anyone out there if you think I’m no longer doing this myself but quite honestly, the last thing I want to do is leave money on the table. As they say in the hood, “I’ma get mine.” Wish me luck.

POP CULTURE UPDATE

Listening to: Sirius 22 – First Wave (I love 80s new wave way too much)
Reading: Redemption Song: The Ballad of Joe Strummer
Recently Watched: 30 Rock (The best show on TV. Just hilarious.)