Why you should file your own taxes
Once a
year, I sit down with a calculator and file my taxes completely by
hand. Although I admit that for many people, hiring an accountant
is a wise move during tax season, I get a lot out of being
self-sufficient. Before you run down to the local tax preparer's
office, you might want to consider whether you wouldn't be better off
filing your own taxes.
Now, I admit that the
primary reason I prepare my own taxes is because I'm cheap and don't
like hiring people to do things I can do just as well by myself.
My secondary reason is even less universal --- I really enjoy simple
arithmetic and get a kick out of word problems. And I am entirely
aware that the IRS is vastly more likely to audit me since I run a
small business and file my own taxes --- as a result, I never dodge
around the rules and always document everything (good habits to get
into anyway.)
Even if you don't
consider math a fun way to pass a March afternoon, though, you will
likely benefit from filing your own taxes at least once. As I
browsed through the 1040 instructions and the IRS website, I've
discovered aspects of my business that I can write off which I hadn't
even considered relevant. For example, since my home is my
primary place of business and I use about a tenth of it for business
purposes, I can write off a tenth of my utilities and property
taxes. Not bad, eh?
On the other hand,
filing my own taxes also makes me more aware of common truisms that
don't quite make sense. I've seen people buy expensive items for
the reason that "I can write them off on my taxes!" I don't think
these people are entirely clear on the fact that writing something off
on your taxes doesn't mean you get it for free. When you write
off that $10,000 truck, you're basically giving yourself a 16% to 30%
discount on the purchase price (depending on your tax bracket.) If
you wouldn't have bought the truck if you saw it on sale for $7,000 or
$8,000, then you didn't get a good deal.
What if you'd like to
learn more about business-related writeoffs but aren't confident enough
about your math skills to file your taxes completely on your own?
In that case, I recommend preparing your return to the best of your
ability then bring it to an accountant to check over. You might
discover that you can save hundreds or thousands of dollars in the
process.
Want more tips about
running a small business that will pay the bills without taking over
your life? Check out our microbusiness ebook.
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Isn't it funny how people will spend hours doing cryptic crosswords and sudoku puzzles that have no point, yet run screaming at the thought of keeping their own books or doing their own tax returns?
What worked for me was marrying an accountant :-).
"Marry an accountant" is the best simple living tip I've heard this week.
It is awfully nice to complement your spouse's good traits (and to compliment them too!) Mark is good at bringing in money, but is a terrible accountant. That's where I come in --- I'm good at making it all add up at the end of the month and making sure it doesn't slip through our fingers.