Do you see what I did there? In the title? A pun and alliteration. The pun being that we are now in the midst of football season and I said “tackling.” Ha. Before we know it tax time will be here again. Now is actually a good time to begin getting everything in order and begin the tackling process. So what you do is bend your knees, lean over and spring forward in a diving motion towards all your tax files and documents and receipts compiled thus far. No don’t do that it’ll make a mess that you will have to clean up. On a side note, this football season is already shaping to be a crazy one. And we are only in week two. To figuratively tackle your taxes, avoid these common tax mistakes.
1. Thinking the DIY approach is for you. I’m not knocking it entirely. Yes, some people are capable of doing their own taxes. Solutions such as turbo tax and that thing that H&R Block offers has become an option to many people dubbing slogans like “You’d be amazed what your capable of.” It’s funny how right they are. You’d be amazed at the mess you are capable of creating for yourself.The logic is save yourself a few bucks on a tax prep fee every year. But you put at risk thousands of bucks stemming from an IRS tax nightmare. Granted, many can’t fully respect a tax nightmare until we experience one first hand. These tax nightmares can be brought on by very simple and honest mistakes. Mistakes are so easy to make when it comes to taxes. The tax code page count: 73,954. The way I see it, that’s 73,954 pages of opportunities for Uncle Sam to come after you. One small tax mistake can snowball when the IRS decides to investigate other years. Do you need more evidence? Most of the CPAs on our team don’t like to do their own taxes. Why you ask? Because it becomes a biased, emotion invested process of which over exaggeration can likely occur due to human nature. So here at L&A we like to consider ourselves a nightmare prevention team. On top of nightmare prevention, chances are you are not aware of every deduction and credit your entitled to because it changes almost daily.
2. Shopping for the biggest possible refund. “I want a big refund.” “If you don’t get me a big refund, I’m going somewhere else.” Ok well I have a few questions for the big refund seekers. Do you like going for rides on your Harley Davidson on Saturday afternoons? Did you like watching your son’s soccer game and maybe the big goal? Did you like having a home cooked meal with your family last night? These things require freedom. And your freedom can be taken from you by doing something silly like this. That’s right. JAIL! Everyone thinks it can’t happen to them but it happens. Maybe it’s not that extreme. But if caught, the IRS can hit you with not just the amount of money originally deducted, refunded or credited, but also interest and penalties amounting into the thousands, tens of thousands, and hundred of thousands of dollars. We at L&A have seen it first hand. We help people who find themselves in a tax nightmare. It’s not pretty. Grown men brought to tears because their situation has become hopeless. Many people we can help. But sometimes…well… it’s ugly. Being too aggressive with deductions and refund shopping can lead to a return that is “warm to the touch.” It may even become “radioactive” as we like to say.
3. Hiring a stale, boring geek of a CPA. The process of doing your taxes should not be all fancy jargon and confusing citations of tax code. It is not your job to understand the complexities of tax. That’s why you hired a professional. A CPA should be an advisor. A consultant. A help. The CPA you hire to do your taxes should speak your language. He or she should understand you and your family. This person should be one that you trust enough to respect their expertise and not have to ask many questions. You should feel protected. You should feel appreciated. Often we have to remind ourselves our time is so finite and limited because our team at L&A wants to talk to our clients for long periods of time about restaurants, weekend adventures, current events and kids in college. You should know that your CPA has your best interest at heart. He or she should provide you with smart tax planning and preparation to help you meet financial goals and plan for retirement. Hiring a CPA that doesn’t understand you and your scenario could be the biggest tax mistake you can make.
4. Shopping for the lowest tax prep fee. Ask yourself a question. Why is someone offering the same service significantly cheaper than his competition. I always ponder these things. If something is too cheap I begin to worry about the cause. Many times a cheap tax prep fee means a cheap preparer. In other words, you almost always get what you pay for. Yeah maybe you save 100-150 bucks on the fee. But you probably lost out on countless credits, deductions and smart strategy which could cost you hundreds if not thousands. These garage/basement preparers often do taxes as a side project and often lack the knowledge necessary to keep you out of trouble and achieve the best possible results. In many cases you might just be better off doing it yourself. But then refer back to point numero uno.
So this is how you tackle your taxes and avoid the common pitfalls. While I could have included another point about the big corporate tax preparers and their extreme levels of client dissatisfaction, I won’t go there. I’ll just let them do there dance while we do ours. They can do the Macarena and we will Tango. Until next time. d2 signing off.