Saving On Taxes

This is the time of year when the newspapers, magazines and web sites are full of 'tax tips' and overlooked deductions.

Here is one you don't see--DO IT YOURSELF.  Or as in my family, have your dad do it.  I was getting a bit peeved about being the in-house tax service when I realized that doing so meant my kids were working, producing income and off the payroll.  I'm more than  glad to do their taxes. 

And you should be glad to do yours because they aren't that hard.  And if you think those guys down at H&R Block know what they are doing, think again.  They are taught to run the computer program and that is about it.  I know this for sure because I, once, for some reason took the H&R Block training program and scored a 98%.  The average grade was about 70% so I know those guys in the office aren't down there splitting atoms. 

Which is why you should do your own taxes--you probably know more about computers than the guys at H&R Block. 

So go get the program--either Turbo Tax or Tax Cut.  I use Tax Cut because it is cheap--$15 after rebates.  Just follow step 1, then step 2, step 3 and so on.  They will even tell you what paperwork to have handy which is the following-

1)  A copy of your 2005 tax return for reference purposes.

2)  w-2s from all employers.

3)  Your 1099s which come from Fidelity, Vanguard and so on showing your interest income and dividend income.

4)  Amounts you paid for state and local taxes, real estate taxes, and personal property taxes.  These amounts will be deductible if you can itemize which most of you cannot at this stage of your life.

5)  Home mortgage interest and points contained on Form 1098.

6)  Reciepts for donations to charitable contributions--cash and non cash.  These are deductible IF you itemize which, as noted earlier, most of you don't.  If you don't itemize and thus cannot deduct your contributions, you can thank Bill Clinton.

The rest will probably not apply to you at all but I'll include them just to cover all the bases.

7)  Income receipts from any rental properties or royalities.

8)  Records of unemployment compensation or Social Security income.

9)  Records of medical and dental expenses if think you can hit the 7.5% exclusion required for this deduction.

10)  Documentation of casualty and theft losses.

See, I told you the last four wouldn't count.  Probably not the  last seven because you are plain vanilla at this point--wages and taxes.  That is about it.

But you can save by not paying somebody to do your taxes.  Go to Office Depot and buy the program and fill out the forms.  Mail it or e-transfer it in.  Don't get excited about the refund--if you get a big one, change your withholding and quit making an interest free loan to the government. 

But here is the one reason why you probably won't do your own taxes--people don't want to see how much they make--gross income and then how little they take home--net income.  It is rather depressing but do it anyway.  You are still going to pay the same amount except you won't be paying H&R Block.

Final note--if you want tax deductions or tax relief, start your own business.  Working for the man does not include a lot of tax relief.

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