Taxes.

[rivka]

I did our taxes this afternoon. I'm usually a first-week-of-April kind of girl,[1] but this year I'm anticipating that I'll be a trifle busy having a baby in the first week of April. So today was the day.

Federal law requires the IRS to publish estimates of how much time it will take you to fill out each of their forms. We file the 1040A, the short form for people who make less than $100,000 of taxable income and don't itemize their deductions. (It probably won't be worth our while to itemize until we buy a house.) The IRS estimated that tax preparation would take me:

1 hour, 10 minutes for recordkeeping
3 hours, 28 minutes to learn about the form
5 hours, 13 minutes to prepare the form
34 minutes to copy the form, assemble our W-2s[2] and other attachments, and mail it to the IRS

...for a grand total of 10 hours and 25 minutes, not including any of the optional schedules.

Tax preparation actually took me:

5 minutes to pick up tax forms at the library, because I forgot the IRS had sent them by mail
10 minutes to find and open all of our W-2s and 1099s[3]
5 minutes fruitlessly searching for curiousangel's calculator
5 minutes making a tasty tax preparation snack
25 minutes preparing the form in pencil
5 minutes copying the form over in ink after curiousangel checked my math
10 minutes (estimated) to copy, assemble, and mail the form on Monday morning

...for a grand total of 1 hour and 5 minutes, again not including any optional schedules.

Who are these people who take ten times the amount of time I do, to fill out a form that consists of the front and back sides of a single sheet of 8.5x11 paper? Am I missing something? Do all the other Americans on my friends list take ten hours to do their taxes? Or is the IRS smoking crack?

In other news, I decided to re-figure our taxes to see how much less they would be if the Li'l Critter had been born before December 31st. I was feeling like an unbelievable geek - who refigures their taxes recreationally? - until, in the process, I caught an error I'd made on our state and local tax form, which curiousangel had also missed when he checked my work. We owe $187 less than I thought we did! And there was much rejoicing.

It turns out that having a baby during 2004 would've saved us about $1300 on our federal, state, and local taxes (not counting any tax credits for childcare, because I still don't know what we'll be paying for it). Funny - after some of the things I've read on various childfree sites about the vast, bloated, unfair tax subsidies given to parents, I would've thought it would be a lot more.[5] I wonder if I should go to one of those sites and complain?


Explanatory footnotes for non-U.S. readers:
[1] Taxes are due on April 15.
[2] Official statements from anyone who paid you wages, declaring how much you earned and how much was withheld for various taxes.
[3] Official statements of interest earnings, plus official statements of unemployment benefits.[4]
[4] Yeah, unemployment benefits are taxable. Don't you think that's weird? I think that's weird.

General explanatory footnotes:
[5] Yes, I know that $1300 is a decent sum of money. But it's a small percentage of the total tax we paid, and seems like a pretty meager adjustment for the fact that our income will be supporting three people rather than two.[6] Comparatively, for example, you'd get a much bigger tax break for supporting a non-employed spouse.
[6] No, we're not having a baby for the tax advantage. Yes, we're aware that it was our own choice to reproduce, and that it was hardly going to be a lucrative choice. I'm just sayin'.

Comments

[lyrical1.livejournal.com]

Local taxes....
Do I have to file to the city too? Plan on doing taxes next weekend, I'd hate to miss a part.

[rivka.livejournal.com]

You pay your local taxes on the Maryland form. It's pretty much impossible to miss - there's a point at which you're instructed to look up a multiplier in a table, based on where you live, and multiply your adjusted state taxable income by it.

It adds up to a big chunk of money - not too much less than our state taxes, in our case.

[tsjafo.livejournal.com]

It generally takes me much longer than the IRS guidelines, but then, I'm not nearly as smart as you are. I find the forms and rules very confusing.

[dafna]

Wow, people really complain about tax subsidies for parents? That's, uh, well ... really dumb. What about the tax subsidies for home owners, which are far bigger and far less deserved? And I say that as a childless home owner.

Will you get more child-having benefit if you itemize? But yeah, I fondly remember my pre-itemization days and the 1040A and EZ forms as being speedy ones. Now it's 1040, a gazillion schedules and even with TurboTax it takes the better part of a few hours.

[wild-irises.livejournal.com]

The people who take all the time to fill out the form might be somewhat related to the people who don't understand why your HIV survey group has immutable qualifications for participants ....

[therealjae.livejournal.com]

Wow, people really complain about tax subsidies for parents?

Yep. Personally, I think it's all about fascism in a childfree disguise, but maybe that's just me.

That said, I myself am not crazy about the practice in many countries of paying all parents a per-child flat sum of money without taking income into account at all. Surely a family with an income of $200,000/yr. and one child doesn't really need the extra eighty bucks a month, do they?

What about the tax subsidies for home owners, which are far bigger and far less deserved?

Yeah, they don't have them in Canada, and while as a homeowner I miss them, I do think the Canadian way makes more sense.

-J

[dafna]

I agree that all tax subsidies should be income-tied. I think the education credit is cool, for ex., and am OK w/ the fact that I make too much money to qualify for it.

Tax policy is just weird, though. Unemployment tax, for ex.? Is only paid on the first $7,000 of one's salary. Still haven't figured out what that's about.

[kcobweb.livejournal.com]

who refigures their taxes recreationally?

Ummmm, my geek sweetie does. But then, this time of year, I'm always glad he's a professional and can do them for me. I have done them before, but he's much better at it. And if he disappeared off the planet, I'd go back to having my mom do them.

Yeah, sometimes it's really nice to be a member of an entire family of tax/financial professionals.

And he used to be done with his taxes by the first of February (you know, as in the day after W-2s/1099s and whatnot must be sent to you) - but now that he's financially tied to me, I slow him down.... He says we'll owe this year, so he's not in any rush. ;)

[marykaykare.livejournal.com]

Ours are quite complicated with self-employment, many schedules and some itemiztion. (I have some very expensive teeth and we're not done yet.) Before Turbo Tax it used to take Jordin weeks of swearing and hunting for things and etc. Now it only takes a couple of days. Ghu bless Turbo Tax.

MKK

[rivka.livejournal.com]

Will you get more child-having benefit if you itemize?

I don't think so. Kid stuff seems to mostly be handled as tax credits (for example, you can get a credit for childcare expenses) specifically so that low- or moderate-income people can get the benefits without having to file a 1040.

If we were going to paying for the delivery or other baby health expenses out-of-pocket, then it would probably serve us well to itemize - but since we're not, there won't really be a benefit until we have mortgage interest and property taxes to deduct. Right now our state & local taxes and our charitable contributions don't add up to more than the standard deduction.

[rivka.livejournal.com]

Your taxes might be significantly more complicated than ours. I can't think that it would have anything to do with your intelligence.

[rivka.livejournal.com]

See, for that kind of situation I can completely imagine taxes being very complicated, requiring a lot of bookkeeping, and taking a long time. But the IRS figures are for people filing the same form that we are, and they're also for people who aren't filling out any extra schedules.

(And damn, now I'm impressed that Jordin does your taxes. If I had all of that stuff going on, I'd hire a preparer.)

[marykaykare.livejournal.com]

As a result of his upbringing and some unfortunate early expriences, Jordin has some control issues around money. He likes doing it himself because, I suspect, he just doesn't trust anyone else. Not to mention his record keeping is what I find to be idiosyncratic, but as long as he doesn't expect ME to figure it out... And Turbo Tax really does make it a lot easier.

MKK

explanatory note to the explanatory notes

[riarambles.livejournal.com]

A 1099 is also what you get when you work as a self-employed contractor. I get 1099s from the agencies I interpret for.

This is off topic, but...

[patgreene.livejournal.com]

You had footnotes to your footnotes. *swoon*

[tsjafo.livejournal.com]

You are kind, Dear Lady. I seem to have a block on certain things that is difficult to define, but very real. I can be transported by good fiction to a world real enough to see and touch, but a text book puts me to sleep in seconds. Sadly, the result shows any my attempts at furthering my education.

[lisajulie.livejournal.com]

Well, to try to be fair...

First off, I suspect those hourly numbers are based on people doing their taxes for the first time. And, frankly, you are a lot brighter and more literate and more used to officialese than the vast majority of the American populace. And, you have analytical skills.

So, imagine you are sitting down to do taxes for the first time, your reading level is somewhere around 6th grade, and you've been taught to be terrified of numbers.

You'd flounder around finding the various pieces of paperwork you need, W-2, oops, then the 1099, etc. You read and re-read the instructions and they _still_ don't make sense. Eventually you figure out which figures go where. Then you do the math. If you are lucky you have a calculator, if you don't you might do the math two or three times and get different answers. Finally it all stabilizes - at which point you regard it with profound mistrust.

And then, if you are getting a refund, you get to choose to have it deposited directly which means figuring out what the routing number and account number are for your checking account. If you're paying the IRS, you probably spend some time trying to figure out where the money is going to come from.

This scenario is a little exaggerated, but only a little. I've walked many of my friends through doing taxes and all of the incidents mentioned above have occurred.

So, the amount of time seems preposterous for you or for a non-novice. But I'd guess that for the vast majority of the general taxpayer, especially ones filing the 1040-A, it might not be so far off.

[jonquil.livejournal.com]

It's been a long, long time since we could file the short form; we've been homeowners since '87. We also use tax software, because the regulations have gotten way too complex to grok. If we use tax software, at least they have to go with us to the audit. Even so, it takes my husband a good few hours to work his way through our taxes, because some of the rules are so arcane and because the software is rigid about doing things The Right Way.

It doesn't take much to make your life as a taxpayer complex. Stock ownership, stock options, 401(K)s, significant medical costs, childcare costs, charities... many of these involve their own subsidiary worksheets that must then be copied to the main sheet. Calculating Alternative Minimum Tax also eats up time, if you're unlucky enough that you have to run those calculations.

The major process difference I see between your household and ours is that we have to search the fricking house for all the tax records. Both you and my husband and I read much faster than the rest of the population (I infer your reading speed from the speed with which you post and reply).

[jonquil.livejournal.com]

There's also the weirdity of pre-tax childcare. You can choose to have childcare money withheld into a separate account, then use that account to pay for child care. Dear GOD, does that complicate your taxes. Does your employer offer it?

[minnehaha.livejournal.com]

What was the tasty snack?

K.

[timill]

I believe that the UK pays the flat-rate amount, and the arguments go:
(1) it's cheaper to pay the undeserving than to figure out who's deserving and who's not.
(2) the cash goes to the mother directly (who may have no income) rather than to the father (who in this scenario is expected, nay required, to drink it all down the pub). The mother is then expected to spend it on the child, rather than drinking it down the pub.

[writingortyping.livejournal.com]

I was a TurboTax user until last year, when after seven (yep, seven) run-ins with their "help desk" I still didn't have the Maryland software for the Mac (the MD for Mac link kept either giving me the Massachusetts software for Mac, or the Maryland software for PC).

I sent in for a refund, expressed my displeasure (never got follow-up or an apology, but I did get my money back), got TaxCut for Mac and took my usual hour or so to do our taxes. Several days later, my blood pressure returned to normal as well!

[rivka.livejournal.com]

I like a woman who skips right to the essentials.

It was crackers spread thickly with peanut butter, and some baby carrots. Yum.

[rivka.livejournal.com]

Yes they do, and I think it works out to be a better deal than taking the childcare credit at the end of the tax year. Fortunately, for some reason my employer scheduled a double open enrollment period this year - in December for the first six months of the year, and there will be another one in June, at which point I'll know exactly how much I'll be paying for childcare. So I can set up my dependent care savings account then.

[papersky.livejournal.com]

I have to say there were times in my self-employed single-parent life when the weekly fifteen quid that is the undeserved child benefit allowance made a huge difference to survival. I used to fritter it away on food.

[timill]

my self-employed single-parent life

Sure sounds deserving to me... And you spent it on what you were supposed to.

[marykaykare.livejournal.com]

I started to reply it was a very good thing I guess that we've never had a TT problem. But I became trouble by a vague memory of Jordin muttering fretfully some years ago about problems with a TT update. Not more than a vague memory though and I can't ask him as he's gone back to sleep...

MKK

[therealjae.livejournal.com]

Uh, if you're suggesting that anyone in this thread would say that self-employed single parents are undeserving of a child benefit of allowance, then I'd appreciate it if you'd point at what exactly suggests that to you.

-J

[ailbhe]

Probably referring to the voices that call loud across the miles and the years saying things like "Teenage girls have children to get housing benefit," "Everyone on the dole is an alcoholic wastrel," "They make a profit from the state by having kids you know," and so on. Rather than anyone here.

Just guessing.

[ailbhe]

Who are these people who take ten times the amount of time I do, to fill out a form that consists of the front and back sides of a single sheet of 8.5x11 paper?

Illiterate people, I would guess. There are a lot of them.

[fourgates.livejournal.com]

I'm fairly sure those numbers are figured using results from lab-based usability studies. They (contractors for the IRS, such as AIR (http://www.air.org/workforce/workforce_usability.aspx)) ask regular people, selected to be appropriately representative, to bring in their last-year's taxes and re-do them using the next year's forms and rules. My experience with running such lab-based usability studies is that people tend to be quite thorough, IMO probably more so than they would otherwise. This experimental demand effect is hard to eliminate.

Another thing that I noticed in running hundreds of people through studies like these is that people slow down in a big way as they get older. Fifty-year-olds might easily take 5 times as long to do a simple task as 20-year-olds, on average. While my studies were mostly related to using computer software, the effect held with other domains as well. The huge age effect seemed independent of an intelligence effect. Adding a 2- or 3-to-1 (at least) intelligence effect to the age effect, it doesn't surprise me at all that there might be a 10-to-1 difference in your results vs. averages.

I once talked to someone who asked Bill Gates, in his early 30s, what he feared most. Bill said, "slowing down."

[lcohen]

i don't even have all the backup documents i need to do my taxes yet. i guess i should get after someone about that.

i love the homeowner's deductions. since this is the first year in several years that i own my home alone for the entire year, i am probably going to really love them this year. which, since i have a property tax bill sitting, waiting, is not going to be quite the bonanza that it sounds like.

[starstraf.livejournal.com]

I refigure taxes recreationally, usually a "if we were married what would they be".

I'm always amazed at the time estimates also, but I know people, perfectly sane smart people, that try their taxes and give up deciding they need a professional because they are 'to hard' - and these are 1040EZ or 1040A people.