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You Don’t Have to Worry: Tax Answers from Jeff Schnepper

You Don’t Have to Worry: Tax Answers from Jeff Schnepper

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    No matter how prepared you are for tax season, you probably worry at least a little whenever April 15th is getting close. We’ve covered your last-minute tax options in the past, but no matter how close that deadline is getting, we want to reduce your worry. Jeff Schnepper, MSN’s tax expert, agreed to answer a few questions for us, and offered a little reassurance.

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    Tax Misconceptions — and Problems

    One of the major reasons that our taxes keep us up at night, according to Jeff, is that there are so many myths and misconceptions about taxes: topics like who you can claim as a dependent and what you can take as a deduction involve as many urban legends as a bad horror movie. And it doesn’t stop there. Jeff says: “The most common misconception people have about taxes is that everybody else is cheating and getting away with something….giving them the “right” to fudge. Cheating is wrong and I’ve found that the taxpayers I work with understand, and want to do the right thing. The problem is that the law changes every year, and sometimes three and four times in a single year. The professionals are overwhelmed and the average taxpayer completely lost. It’s not that people are cheating – they’re making errors because they don’t know the rules.”

    The past few months have shown the truth of that statement. If you consider just the appointments that President Obama has made (or attempted to make), it becomes obvious very quickly that even politicians who can afford the best tax preparers in the country can’t get their taxes done correctly.

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    What We Can Do to Reduce the Worry

    Just because the tax system is complicated doesn’t mean that the average taxpayer needs to spend the time between now and April 15th cringing, however. Even the biggest tax bogeyman of them all — an audit by the IRS — isn’t something you should spend too much time worrying about. While you can minimize your overall chances of being audited by following the rules as closely as you can, and by having the right documentation, there’s a certain element of chance.

    “You can’t avoid an audit. Returns are selected randomly as well as based on the IRS DIF computer program,” says Jeff. If there’s nothing left that you can do to make sure that your tax return is filled out accurately, you can stop worrying. If the computer picks your number, you may have to sit down with an auditor, but there’s nothing else you can do to affect the process.

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    A Few Last Minute Options

    Even though you’ll get the best results for preparing your tax return by starting as early as possible, Jeff was able to point out a few last minute deductions that you can pick up after December 31st: “Do you qualify for a deductible IRA or would a Roth be better. Can you contribute to a SEP?” He suggests looking into your IRA options if you’re still searching for deductions.

    Jeff also notes that there are a few extra things to consider this year, if you’ve been affected by the current economic situation. Jeff says, “Sit down with a tax pro if you may lose your house. Congress passed a law that wipes out any taxes on debt discharge income on a principal home. But, you have to do it right and file the appropriate forms.” He also pointed out that if you’ve refinanced your mortgage, you can deduct any points you pay over the life of the refinance. You can even deduct any unamortized points on your original refinance if you refinance a second time.

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    “The laws are in flux and are changing as you read this. For example, now the first $2,400 received in unemployment benefits escapes tax. You can get a $1,000 deduction for real estate taxes even if you take the standard deduction. For 2009, you can deduct sales tax on a new car even if you don’t itemize. If you don’t know the rules, you’re going to have a hard time playing the game,” says Jeff. He makes it clear that if you aren’t staying up to date on the changes in tax laws, you’re going to have a hard figuring out your taxes.

    Getting Ready for Next Year

    You can make your 2009 tax return easier by starting now. The secret to making tax season simple is setting up a system to document both your income and your deductible expenses throughout the year and keep it up to date. Jeff described one system his clients have been known to use: “For substantiation, I have clients who throw all their checks and receipts in a box. Once every month or so they sit down and put those checks and receipts into envelopes with tax classification. So, there’d be an envelope for contributions, investment expenses etc. At the end of the year, they add them up, don’t double count, and put the number outside the envelope. Those are the numbers they give me for their tax returns. And, they never have to fear an audit. An audit can only ask them to substantiate the numbers on the return. They already have the backup available in each envelope!” It doesn’t matter exactly what system you use, though, as long as you have one in place — and you keep it up to date throughout the year.

    If you have a question about your taxes, Jeff Schnepper is MSN.com’s Tax Expert. You can find him at money.msn.com, where he answers questions every day. In addition to his MSN columns, Jeff is the author of How to Pay Zero Taxes, which is now in its 16th edition, as well as several other finance and tax-related books.

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    Last Updated on January 13, 2020

    The Importance of Reminders (And How to Make a Reminder Work)

    The Importance of Reminders (And How to Make a Reminder Work)

    No matter how well you set up your todo list and calendar, you aren’t going to get things done unless you have a reliable way of reminding yourself to actually do them.

    Anyone who’s spent an hour writing up the perfect grocery list only to realize at the store that they forgot to bring the list understands the importance of reminders.

    Reminders of some sort or another are what turn a collection of paper goods or web services into what David Allen calls a “trusted system.”[1]

    A lot of people resist getting better organized. No matter what kind of chaotic mess, their lives are on a day-to-day basis because they know themselves well enough to know that there’s after all that work they’ll probably forget to take their lists with them when it matters most.

    Fortunately, there are ways to make sure we remember to check our lists — and to remember to do the things we need to do, whether they’re on a list or not.

    In most cases, we need a lot of pushing at first, for example by making a reminder, but eventually we build up enough momentum that doing what needs doing becomes a habit — not an exception.

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    From Creating Reminders to Building Habits

    A habit is any act we engage in automatically without thinking about it.

    For example, when you brush your teeth, you don’t have to think about every single step from start to finish; once you stagger up to the sink, habit takes over (and, really, habit got you to the sink in the first place) and you find yourself putting toothpaste on your toothbrush, putting the toothbrush in your mouth (and never your ear!), spitting, rinsing, and so on without any conscious effort at all.

    This is a good thing because if you’re anything like me, you’re not even capable of conscious thought when you’re brushing your teeth.

    The good news is you already have a whole set of productivity habits you’ve built up over the course of your life. The bad news is, a lot of them aren’t very good habits.

    That quick game Frogger to “loosen you up” before you get working, that always ends up being 6 hours of Frogger –– that’s a habit. And as you know, habits like that can be hard to break — which is one of the reasons why habits are so important in the first place.

    Once you’ve replaced an unproductive habit with a more productive one, the new habit will be just as hard to break as the old one was. Getting there, though, can be a chore!

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    The old saw about anything you do for 21 days becoming a habit has been pretty much discredited, but there is a kernel of truth there — anything you do long enough becomes an ingrained behavior, a habit. Some people pick up habits quickly, others over a longer time span, but eventually, the behaviors become automatic.

    Building productive habits, then, is a matter of repeating a desired behavior over a long enough period of time that you start doing it without thinking.

    But how do you remember to do that? And what about the things that don’t need to be habits — the one-off events, like taking your paycheck stubs to your mortgage banker or making a particular phone call?

    The trick to reminding yourself often enough for something to become a habit, or just that one time that you need to do something, is to interrupt yourself in some way in a way that triggers the desired behavior.

    The Wonderful Thing About Triggers — Reminders

    A trigger is anything that you put “in your way” to remind you to do something. The best triggers are related in some way to the behavior you want to produce.

    For instance, if you want to remember to take something to work that you wouldn’t normally take, you might place it in front of the door so you have to pick it up to get out of your house.

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    But anything that catches your attention and reminds you to do something can be a trigger. An alarm clock or kitchen timer is a perfect example — when the bell rings, you know to wake up or take the quiche out of the oven. (Hopefully you remember which trigger goes with which behavior!)

    If you want to instill a habit, the thing to do is to place a trigger in your path to remind you to do whatever it is you’re trying to make into a habit — and keep it there until you realize that you’ve already done the thing it’s supposed to remind you of.

    For instance, a post-it saying “count your calories” placed on the refrigerator door (or maybe on your favorite sugary snack itself)  can help you remember that you’re supposed to be cutting back — until one day you realize that you don’t need to be reminded anymore.

    These triggers all require a lot of forethought, though — you have to remember that you need to remember something in the first place.

    For a lot of tasks, the best reminder is one that’s completely automated — you set it up and then forget about it, trusting the trigger to pop up when you need it.

    How to Make a Reminder Works for You

    Computers and ubiquity of mobile Internet-connected devices make it possible to set up automatic triggers for just about anything.

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    Desktop software like Outlook will pop up reminders on your desktop screen, and most online services go an extra step and send reminders via email or SMS text message — just the thing to keep you on track. Sandy, for example, just does automatic reminders.

    Automated reminders can help you build habits — but it can also help you remember things that are too important to be trusted even to habit. Diabetics who need to take their insulin, HIV patients whose medication must be taken at an exact time in a precise order, phone calls that have to be made exactly on time, and other crucial events require triggers even when the habit is already in place.

    My advice is to set reminders for just about everything — have them sent to your mobile phone in some way (either through a built-in calendar or an online service that sends updates) so you never have to think about it — and never have to worry about forgetting.

    Your weekly review is a good time to enter new reminders for the coming weeks or months. I simply don’t want to think about what I’m supposed to be doing; I want to be reminded so I can think just about actually doing it.

    I tend to use my calendar for reminders, mostly, though I do like Sandy quite a bit.

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    Featured photo credit: Unsplash via unsplash.com

    Reference

    [1] Getting Things Done: Trusted System

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