Getting Started on Taxes
I know this isn’t the typical tax season, but it is for me. For the past several years, I have gotten an automatic extension so that I don’t have to file until October 15th. Since I will be leaving the country toward the end of September, I have a self imposed deadline to get all the information to the accountant before I leave, which means that I will be working to get all the information and data together in the evenings this week.
I already have most of the information gathered from the rental real estate. Now I have to get some stuff together related to the usual 1040 stuff. I would say I am about halfway done and will be hitting it quite hard tonight.
I don’t necessarily like to procrastinate, but it did become a necessity a few years back and I haven’t been able to fully recover yet, but that issue should get resolved this year.
I certainly don’t enjoy having to spend so much time putting all the information together in a format that is easy for my accountant to work with, but the effort is definitely worth it.
Communication and Knowledge is Important
Even though I have an accountant fill out all the forms and prepare my taxes, I learned several years back that it is important to know the tax code (as best as it can be known by any individual) and to communicate your situation effectively. It is also important to have a rough idea of what you might owe and why.
After getting my taxes back one year, I was surprised to see that I owed more that what I thought I should given my circumstances. It turns out that the accountant had forgotten about a special circumstance that entitled my wife and I to more deductions than was actually figured into the numbers. We ended up sending in an amended return.
Also, we had one year where we were hit with a failure to file penalty which was absolutely not true. We had an extension which had been filed appropriately. A simple call to the accountant resolved this issue, but had I not paid close attention, the outcome may not have been pleasant. Again, knowing what I should owe has helped with some of these human errors.
Fortunately, my situation hasn’t changed much over the past several years, so it is easy to know what to expect. Also, I try to read a lot about taxes and know what is changing from year to year. I am concerned about the potential impact of the fiscal cliff as a result of changes in the tax code and on government spending and have been trying to pay off debt knowing that we might be entering another recession.
I doubt many of you have been focused on taxes this month, but what are your thoughts on the fiscal cliff. Doing anything to prepare?