Who's Afraid of Taxes? Not You!

All across America people are collecting forms, sorting receipts, and assembling documents — all in an effort to deal with the dreaded tax man. For many, the whole prospect of filing taxes is a frightening experience, but it doesn’t have to be that way. Yahoo Finance lists seven common tax terrors and how you can deal with each of them. Their list includes:

1. Afraid I can’t do my taxes myself. The remedy: Don’t be afraid to ask for help.
2. Afraid I’ll overlook a tax break. The remedy: Accept that tax filing is going to take some homework.
3. Afraid I’ll make a mistake that will cost me money. The remedy: Slow down.
4. Afraid that my tax adviser is incompetent or a crook. The remedy: Everybody makes mistakes, even tax professionals.
5. Afraid I’ll get audited. The remedy: Make sure you can show an IRS examiner why you filed as you did.
6. Afraid to e-file because my personal info could be lost or stolen. The remedy: Make sure your computer is secure.
7. Afraid to file because I can’t pay. The remedy: File!

Some people solve these problems by hiring a tax professional, others use tax software to ease the pain, and many forge ahead on determination and plow through their fears (and the stacks of paperwork) simply to “get it over with.”

How about you? Any tax fears out there? If so, what’s your method for dealing with the scary tax man?

7 Tax Terrors and How to Overcome Them [Yahoo Finance]

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  1. Fry says:

    I just simply do my own, as well as my siblings, a couple friends, and a couple of co-workers. Though from what I can tell, our Canadian tax returns are much simpler from your American ones. No hidden tax breaks and what not.

  2. Xerloq says:

    My fear is getting the W4 right so the G-Man doesn’t earn interest on my withholdings for a year. I can’t wait until I have real tax fears.

  3. Corydon says:

    OK, I’ll admit that I’m guilty of number 3. I’ve used the 1040EZ form with the standard deduction for years.

    On the other hand, my finances really aren’t all that complicated. I don’t own a home (yet), have investments that pay a significant amount of interest (except in tax-deferred accounts like my 401k and IRA).

    So is there really any reason to avoid the 1040EZ?

  4. The Great Aussie Evil says:

    With only $15 a week, I don’t really care about income tax.

  5. noquarter says:

    @Corydon: I think student loans force you to use the 1040A.

    It’s always good to look through the instructions for the full one to see if anything in there benefits you (for instance, there were a bunch of Katrina-related breaks last year) but you can just file the EZ if there aren’t.

  6. LVP says:

    8. Hire an accountant.

  7. noquarter says:

    @Corydon: And when I said “you,” I meant you generally, not you specifically, since you specifically didn’t mention student loans. But lots of people have them.

    Something to note in regard to tip #5 is that it’s not illegal to fill out your tax forms incorrectly as long as you can prove that you thought you were right at the time. If they audit you and you did it wrong, you just have to pay the difference. And maybe interest – but I’m not sure about that.

  8. emona says:

    I borked up my W-4 to the tune of $800 in 2005 and I’m still paying for it and paranoid as hell that I have my deductions wrong. I triple check, then go back around the end of the year and check again. Nasty business.

  9. smitty1123 says:

    Real question: Who has done their taxes, gotten their refund and already spent it?

    I have. Anyone else?

  10. Corydon says:

    @noquarter: Thanks for the tip…I’ll check that out. I’d forgotten to mention that I do have about 17k in student loans. No-one ever called me on using the 1040EZ in the past, but I only started paying them back about 18 months ago (graduated then had a couple deferments while looking for work).

  11. wezelboy says:

    Here’s what I did last year:

    I went online to turbo tax and went through the whole process but before actually filing I just wrote down the refund/payment numbers without paying. Then I did my taxes by hand and made sure the numbers jived with what TT came up with.

    It was FREE, and relatively painless. You have to wait a little longer for your refund, but that’s okay with me.

  12. Rectilinear Propagation says:

    Afraid that my tax adviser is incompetent or a crook. The remedy: Everybody makes mistakes, even tax professionals.

    I think calling them “mistakes” is being kind considering the actions they described before getting to the remedy.

  13. hinkmania says:

    I already received my state and even my federal refund, as of this morning.

  14. I liked the software. Wife thinks it’s too complicated so she outsources to her cousin, a tax professional.

    PS- what does it mean, when we as a country, have a tax code so complicated that there is a large industry of tax professionals. There are people to prepare your tax forms. There are people to help you plan tax avoidance. There are people to help you settle your tax debt for pennies on the dollar (PS: This is unpatriotic… Roni Deutch and her ilk should be executed for treason). I’m not advocating a flat tax, but clearly, we need a simpler tax code, if only to streamline the economy.

  15. BlondeGrlz says:

    @smitty1123: I got mine today, but it’s not spent. It will be when I take a vacation in April though.

  16. noquarter says:

    @PotKettleBlack: …but clearly, we need a simpler tax code, if only to streamline the economy

    Or better math education. There are a lot of details, but it’s really not that hard.

  17. maddypilar says:

    I filed online last week and I got my IRS refund yesterday.

  18. mac-phisto says:

    i’ve been using http://www.taxactonline.com since 2005. if you can navigate a webpage, you can file your taxes. free for most filers. i pay $10 b/c it loads in last year’s info automatically (w00t) & you get advice from j.k. lasser (big deal).

    they charge for state filing, but my state provides a free file on their website, so i just do it there.

    this year’s total tax time: ~20 minutes.

  19. forever_knight says:

    @smitty1123: got State refund this morning. I e-Filed Monday evening. waiting on Federal…

  20. mac-phisto says:

    @noquarter: yeah, it’s not even the math that’s difficult. it’s called “reading comprehension”. they used to teach that…

  21. Optimus says:

    I just wish there was a way to fill out your PDF tax form and e-file it directly with the IRS. I always do my taxes manually, checking that I have not missed any possible deductions line-by-line, mainly because I want to know what’s going on with our disreputable tax code. However, if I want to e-file, I have to pay somebody else, and usually I even have to use their software regardless of the fact that my taxes are already complete.

  22. Snakeophelia says:

    TurboTax had a bug in it a while back. My stepfather does the taxes for everyone in our family using this program, and when the IRS caught an error in his return, he mailed them a snapshot of the TurboTax screens to prove that it was the software’s mistake. No penalty for that, which was nice.

  23. ribex says:

    Getting that refund is a great motivator for me to get my taxes done early. Not only did I e-file federal, I finally got a chance to e-file my state return! Sure saves the hassle of having to locate a photocopier in an ancient city library or something, and it didn’t cost me a single penny.

    Also, a word of warning: please, please, if you can, use more than one program, whether online or software, to double check calculations, etc. I used to use TaxCut software but found an unfixable error last year which apparently is still borked. I ended up using TurboTax online (both 2006 and 2007 filings) which did not have this error. I realize this is a burden for those who have more complicated returns than my own, but if it saves you money, isn’t it worth it?

  24. jscott73 says:

    I think everyone should do their taxes by hand for at least a few years so you have an idea of what is going on, after that there is no reason not to use some sort of software/website. By that time too you should know what to put in your tax folder throughout the year so the process can be even faster. I have a wife, two kids and two rental properties and my total tax time this year was two hours with Turbo Tax.

  25. AD8BC says:

    Last year I was pi$$ed off by my taxes — until then I had never owed in my life and always got about a $200 refund. Last year I owed $2100. I had gotten a large relocation package from my employer and they gave me a large lump sum for miscellaneous moving expenses and “grossed it up” — paid more taxes on it for me so I would end up close to the same amount… then I found out company policy was to only take into account the employee income (not spousal or investment income) with the standard deduction… so had it only been me, I would have been OK…. but that large lump sum put my wife’s income into the next tax bracket.

    So I paid it… and then, in lieu of making quarterly estimated payments for 2007, I just had another $45 taken out per paycheck. I am expecting a big refund this year…

  26. theblackdog says:

    @smitty1123: I admit I did, my refund is going to make a big dent in my credit card debt :-D

  27. mac-phisto says:

    @AD8BC: i ran into an issue where i owed about $500 in taxes a few years back. instead of paying, i took a credit card check & opened a traditional IRA with $1500 or so. that reduced my AGI enough that i didn’t have to pay the tax man.

    i did end up paying about $30 in interest, but that’s nominal compared to an extra $500 to the tax man.

    so there’s a tip for you if you ever run into the problem in the future (assuming you don’t already contribute the max allowable to an IRA).

  28. AD8BC says:

    @mac-phisto: I thought about that… but I had already maxed out the Roth for that year… I didn’t see it coming.

    Good thought though.

    It didn’t hurt too bad though. My wife and I were smart, we took that big lump sum and used very little of it on the move. It was to cover miscellaneous things like retitleing and getting new tags on the cars, turning on/off utilities, etc. It was mainly given to us to use in case we had to rent termporary furnished apartments, store things with the moving company, or to help in case we bought the new house without selling the old one. We did none of those, but I was luckier than most because I was allowed to move later than my co-workers did because I was working in another state on a project so there was really no reason to move until the project was finished or I sold the house. So when the tax bill came, I just paid it.

  29. Empire says:

    @Corydon: You get to deduct the interest you pay on those student loans. It might be worthwhile to re-file, you might get some more money back, although I am not a tax professional etc.

    @Snakeophelia:,@ribex: If you end up in trouble after using TurboTax due to a bug, calculation error, or their failure to keep the software up-to-date, they will refund you any interest, penalties, etc. you end up having to pay. Details are in the EULA. They also offer audit assistance, which I got for free, although I don’t know if it’s free in every package.

  30. Buran says:

    @smitty1123: It’s in my account, some is in a queue for home insurance premium, some will go out tonight, and some will just sit til I find a use for it.

  31. synergy says:

    Maybe it’s because we’re so poor, but I never understand the fretting and alleged mountains of paperwork. Basically we have the forms from work, forms with what I paid in loan interest and tuition, and the form from the IRS. That’s it.

    It helps Texas doesn’t require state tax filing, though.

  32. disavow says:

    @noquarter: Something like 2% of United States GDP is devoted to tax compliance. Clearly math is not the issue.

    @mac-phisto: According to Cato, in 2003 the U.S. tax library was nearly 55,000 pages long. Reading comprehension?

  33. mac-phisto says:

    @disavow: yes, but your average taxpayer only needs to read about 0.009% of that. when things get complicated, hire a professional, but if you’re filing a 1040ez, or a 1040 w/ schedules A&B & you’re going to a tax pro, you’re wasting your money.

    & if your definition of “tax pro” is h&r block, consider attending one of the “new hiree” training programs before you shell out $100 to them.

  34. RhondaO says:

    I am a single mother of 1, I own my home. I make about $20,000.00 per year. I am getting married, he makes about $30,000.00 per year and has 1 child. Right now we both get refunds, I’m afraid that if we get married we won’t get good refunds or any at all. Any help on what I should do?