Every year around March, I start the same foot dragging as I do every year. I gather up the pile of papers, log onto various websites and download some data, then sit in front of the computer and wish I didn't have to do my taxes. Invariably, I'll decide that I don't want to do them, and I won't. That "file extension" button is really handy in some of this recent tax-filing-assistance programs.
For more years than I care to admit, I decided not to file at all. I had overpaid on my taxes, and didn't want the stress of actually doing all of the number crunching. Such an attitude does, however, wreak havoc on one's financial situation when, oh, getting a home loan, or starting a business, or, you know, avoiding the taxman.
When Kris and I married, and decided to file jointly, I had to clean up my act. I filed all of my old tax returns, received a pleasant chunk of change, which I, of course, paid taxes on the following year, and basically caught up.
During this whole avoid-filing-tax-returns phase, Kris would look at me like he had married a lunatic. What sort of person have I married that she won't file her tax returns?
The sort of person with taxes so complicated that even my mom, who earns a living filling out tax returns for other people, didn't want to touch my taxes, that's what sort of person.
The first year, I did our joint taxes, and, surprisingly, did them on time. The second year I let Kris do our taxes. We received a nice pleasant tax refund, which we enjoyed until we received the tax bill. Kris had double entered a deduction, and we not only had to pay taxes on the deduction, but also had to pay a penalty on the incorrect refund. Yeah, that year wasn't too fun.
This year, I took pity on Kris, for one very big reason, and told him he wouldn't have to do our taxes this year.
I hired my mom instead.
Mom did as much of our taxes as she could. When she was done, we owed the IRS another $6000, on top of what we had already paid during the year. I cried. I couldn't believe that, after doing everything right with the business, including paying some payroll company to do the company payroll and taxes correctly, even though they failed at that, that I would owe another $6000 in taxes.
And that didn't include the taxes I might have to pay from the business, after its taxes were done and filed.
So, I did what I normally do with the taxes. I put them aside to worry about later.
Well, today was later. I pulled them out to see what was going on with them. I had all of my credit card statements with me. I had all of my bank statements. I went over each of them, including my expense journal, with a fine toothed comb. I entered all of the data in correctly, and still owed $6000 in taxes.
I couldn't understand how someone who takes zero deductions on her income could end up owing $6000 in taxes.
So, I did what I always do when faced with a perplexing problem that has me stumped. I went back to the beginning. I pulled out all of the paperwork that Mom used to start our taxes. I pulled out our income statements from our employers. I pulled out our dividend statements. I pulled out every piece of paper in the stack of tax paperwork, and I started at the top.
About 20 minutes into the process, I discovered the source of the problem.
When entering in my stock sales from last year, in particular the sales I was making to clean out my savings in order to make the sixth biggest financial blunder in my life, Mom had entered the cost-basis of the stock from one share, instead of the 100 shares of stock that I would routinely buy. So, instead of making $200 on a stock sale, Mom recorded that I made $6600 on a stock sale (as a true example of the difference in errors). Calculating the cost basic correctly was the difference between a recorded $3100 gain and the actual lost of $2000 on one stock sale.
Instead of owing the IRS, we are now expecting a $195 refund.
$195. That's how well I calculated our taxes.
I'm mighty pleased with myself. I'll be skipping all the way to the post office to mail these returns.