Why You Should Really Do Your Own Taxes

1040Every year I spend $49.99 to buy the H&R Block Premium Edition software to do my own taxes. And every year someone scoffs at me for spending a couple hours of my life learning, understanding, and optimizing my finances to pay the least amount of taxes legally possible. A part-time tax preparer who’ll make $375 doing my taxes isn’t going to know more than me. A full-time tax preparer with a CPA who charges $1,000 might be worth it. But after doing my taxes for 12 years, the only way the CPA will save me more money is by cheating. There is no magic that only tax accountants can use to reduce taxes.

The best way to learn about something is to do it yourself. Remember when you were growing up and your mom taught you how to do a math problem, only for you to completely forget how to do it come test time? How about reading all those SAT test prep books and then getting a mediocre score because you didn’t take enough sample tests? Being instructed on how to do something is helpful, but getting in the weeds and solving different variations of the problem over and over again is the only way to achieve mastery. The same concept goes for understanding and minimizing your taxes.

Dealing With The Guilt-Joy Of Raising Taxes On The Rich

view-from-aboveWatch out, rich people: I’m coming for you! A preliminary run-through of my 2013 taxes has revealed that I now earn a low enough amount to no longer qualify as a prime tax hike target. And yet, as sad as this apparent reduction of my own productivity may be, I still possess a wondrous power: the ability to vote to raise taxes on others to benefit me, me, ME!

It’s quite amazing, really; first we learn that the average 401(k) balance surpasses $100,000 for over 50 million working Americans, then we find out that the national unemployment rate has dropped to 6.6%, and now this? Drinks for all, paid for by my rich blogging buddies next time we meet.

I think it’s everybody’s duty to pay taxes. A flat tax above a certain minimum income level of comfort (MILC™) for individuals and families sounds like a fair approach, right? Make 10x more than someone, pay 10x more in taxes than someone. Stuck below the MILC? Don’t worry about income taxes, we got you; just pay sales tax, and FICA tax for your own good (assuming you have a job). We all enjoy the same benefits of military protection, libraries, a functioning judicial system, the NSA, and manicured public parks; it’s only right that we should all help pay for them.

This post offers a little bit of honest introspection as to how I’ve felt going from paying no income taxes as a student, to paying a boatload of income taxes as a worker bee, to once again paying not so much at all. I now find myself assailed by an odd sense of guilt; while my own tax liability has decreased, I still have the ability to potentially vote for legislation to increase someone else’s taxes in order to benefit myself and my family. Deep in my heart I know that ganging up on any one group is wrong, even if the law allows it. But hey— if I don’t pick up the $100 bill lying on the street, someone else will!

As a reminder, the ideal (adjusted gross) income for maximum happiness is $200,000 because:

  • Regardless of how high the cost of living may be in your neck of the woods, anything over $200,000 is a target for tax hikes, period.
  • The marginal federal tax rate is 28%– a reasonable number, even if you add a state tax rate of 8% to your wages.
  • You don’t have to pay the new Net Investment Tax of 3.8% for every dollar you make over $200,000 as an individual, or $250,000 as a couple (why 1+1 = 1.25, I don’t know!).
  • You still get to max out your 401(k) and save plenty in after-tax money at $200,000.
  • You get to be a part of the middle class, which is the best class in society.
  • You can vote to raise other people’s taxes without having to pay more yourself.

Exploit Online Data To Lower Your Property Taxes

Victorian Mansion In San FranciscoEver since 2008 I’ve been fighting to lower my property taxes every year. If I didn’t fight, the SF Property Assessor’s office would undoubtedly keep raising my assessed value all throughout the financial crisis because they need to extract as much money from homeowners as possible. Renters certainly aren’t going to volunteer to pitch in if they can simply vote to raise property taxes. Too bad everything just comes around in the form of higher rents. In other words, together we must stand united against the government.

Your main mission as a homeowner is to convince the assessor’s office your property is worth as close to $0 as possible. Anybody who is proud their assessed home value is higher is being silly because the government will take advantage of you. The same goes for people who make a lot of money telling everybody exactly how much they make. Practice the mantra of Stealth Wealth and believe your primary home is a dump in order to build your net worth further.

Tax Rules For Buying A SUV Or Truck To Deduct As A Business Expense

Range Rover Sport NewAs you may have read from my Net Worth Rule For Car Buying post, I’m looking into buying the redesigned Range Rover Sport HSE to replace Moose, a 13 year old Land Rover Discovery II. The Range Rover Sport can be had for roughly $73,500 MSRP, an exorbitant amount of money for a vehicle. The last time I spent over $70,000 for a vehicle was in 2002 when I bought a $77,000 Mercedes G500. I was much poorer then, but I just got my first bonus at my second job and wanted to splurge. I told myself never again after I sold it for a nice loss a year later in order to purchase my condo. The G-Wagon didn’t fit in the garage because it was too tall!

SUVs are an anathema to eco friendly San Francisco. But I’ve long argued that if you don’t completely destroy your car before buying a new car, you are still ADDING pollution to the world. I like SUVs because they ride high so I can see what’s going on in traffic. They can go through snowstorms with ease, a necessity for when I go up to Tahoe in winter. Furthermore, I’d rather be in a larger vehicle vs. a smaller vehicle during accidents.

SUVs have become more fuel efficient thankfully. The new Range Rover Sport V6 engine produces 345 hp at 17 city / 23 highway. Just 10 years ago such an SUV would be a V8 and run around 12 city / 17 highway mpg with only 185 hp. But this is not a post to defend purchasing a large vehicle. This post’s purpose is to discuss the aspect of purchasing a vehicle for your business in order to deduct the expense!

RULES FOR SUV / TRUCK PURCHASE FOR A BUSINESS

How To Avoid An Audit Based On Discrimination By The IRS

IRS pick pockets your moneyIt should come as NO surprise to long time Financial Samurai readers that the IRS admitted to targeting conservative groups since Obama became President. The government already discriminates against those who make over a certain amount by charging higher taxes even though they already pay for the majority of all taxes. Meanwhile, the deductions and credits you get for things such as education and children get eliminated if you make over an absurdly low amount. Conducting body cavity searches to shake more tax dollars out of Republicans is business as usual.

Make no mistake that if a Republican was President, liberal groups would also be targeted by the IRS. Everybody naturally discriminates against everybody. Sometimes the discrimination is overt and evil, other times the discrimination is covertly done out of convenience until discovered as is the case with the IRS.

The bottom line is that people have a strong proclivity to take care of their own, no matter what. In this article I’d like to discuss ways in which people can significantly reduce their chances of getting audited by the most powerful organization in America.

THREE EFFECTIVE STRATEGIES TO AVOID AN IRS AUDIT