It was gorgeous walking on the Mall yesterday in Washington DC: it was a beautiful afternoon, the sun was out, the tulips were in bloom, there were hundreds of tourists on the Mall and around the White House. It was fun to watch many Chinese and Taiwanese families posing with their children for pictures, handing cameras around from one family member to another.
There were also thousands of immigrants marching around the Washington monument. I enjoyed a long walk, taking pictures while the markets were still moving sideways...
One sign the immigrants carried struck my eye or should I write my lens. We pay taxes! . Contrary to what Lou Dobbs and some others would want us to believe, most people consider paying taxes a civic duty. After all we are all immigrants or descendants of immigrants; even those who first came here in 1607 were illegal immigrants.
Problem with it is that most people do not like paying taxes, do not know how to, and often overpay. It is an attitude problem more than anything else. Here is how you can overcome some of these problems.
You can save yourself at least $200-$500 this year by preparing your own tax forms instead of handing the work over to tax preparers. After all if you have to give all the information to your tax preparer, the only thing they offer is an interpretation of the tax laws.
Tax laws are complicated, most people would agree on. However, if you sit down and start reading the instructions and plow through some poor English and lots of spaghetti code, it is quite possible you understand enough of it to be able to save yourself $200-$500 of unnecessary additional “taxes”. If you start this year and do your own submission year after year, the poor English and spaghetti code become almost entertaining, while your savings do add up.
You can also save more on your taxes by starting this year to itemize deductions. Do you know that two thirds of those filing taxes are not even itemizing deductions? They take a standard deduction which means they are not benefiting from the tax code? All your local and state taxes, property taxes, real estate taxes can be deducted; medical expenses over a certain amount can be deducted; most important all your charitable contributions to local churches, to hurricane victims, to organizations helping the underprivileged, here and abroad, can be deducted. For 2005, because of Katrina, you can deduct even more than 50% of your Adjusted Gross Income.
When it comes to reporting capital gains and losses on Schedule D, make sure you report all losses. Short term losses offset short term gains and short terms gains or losses offset long term gains and losses. If you made more losses than gains you can take up to $3000 off for married filing jointly or $1500 for married filing separately. In short, the tax laws encourage you to take your losses and let your profits accumulate.
So here is one of the best investments you can make this week: before the end of the week-end, clear your dining table, spread out the papers, start reading the tax instructions (don’t give up until you grasp the basics) and prepare your own taxes. You can do it; it is not that complicated. Think: Everyone loves spaghetti. Make sure to itemize and deduct all other taxes you pay, some medical expenses, and all your charitable contributions. Mail in your tax forms before the deadline (now next Monday because April 15th is on a Saturday) and save interest and/or penalties for late payments.
With all the savings you make on your taxes this year, you can treat yourself to some wonderful Easter eggs...
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