What You Learn if You Do Your Own Taxes

     Most of the people I know do not do their own taxes. They throw up their hands, decide it's too complicated and go to an accountant with their tail between their legs. Or they use H & R Block or Jackson Hewitt. A lot of people use electronic services such as Turbotax. This is kind of like doing it yourself, but the electronic process does hide some details of the tax system and how it affects you.

     I have always done my own taxes -- except for a couple of years when I tiptoed into an accountant's office and found out they don't necessarily do a better job, and they charge you a pretty penny for the service. I have also used Turbotax, but find that it doesn't always make life easier.

     In any case, while it does take some time, and the process is not entirely painless, doing your own taxes can be an educational experience. And I'm not talking about practicing your arithmetic skills. I mean you find out what the government encourages you to do, and what it penalizes. In short, you find out how the world really works, rather than how they tell you it works.

     For one thing, the federal tax system rewards saving and investing, and penalizes working. (Other financial forces may do the opposite ... but I'm talking taxes here.)

     For example, I recall for the year 2010, the government wanted us to work. IRS Form 1040 featured a Schedule M called "Making Work Pay" that allowed you to deduct up to $400 from your tax bill if you had earned income (the IRS term for money you earn by working).

     Apparently, the Feds are no longer quite so eager for us to get a job. There is no Schedule M for 2011. No $400 tax break.

     Working is about the worst way to make money in this country. The main reason we do it is because most of us don't have much of a choice. Getting a job is the only way we know how to make money.

     Speculating in the stock market is much more socially beneficial and is an activity to be encouraged and promoted ... at least according to the Federal government. Some of the money you make from capital gains -- the profit from selling a stock for more more than you bought it for -- doesn't get taxed at all. The rest is taxed at a lower rate than the money you make on your job.

     Your salary is also subject to an additional tax -- Social Security tax, aka the payroll tax. If you have a job, your employer pays half your Social Security tax; and takes the other half out of your salary before you even see it. You're still paying 14%. But it doesn't hurt so much; in fact, you're barely aware you're paying it.

     I myself do not have a job. But I do work. Like a lot of 60-somethings, I do some consulting and freelance work to supplement my retirement income. Nobody deducts any tax from my checks and nobody's paying half my payroll tax. So when I look at my tax form I can see that I not only pay a higher rate on the money I make from working, but I pay an additional 14% on top of that!

     Do you think that's fair?

     The dividends you make from owning stocks also get taxed at a preferential rate -- at the capital gains rate, rather than the earned income rate.

     I honestly don't see the rationale for taxing dividends at a lower rate than earnings. Except for this reason:  Retired people often have their nest eggs in stocks or stock mutual funds, and they rely on dividends to bolster their meager Social Security benefits. This is especially significant these days, when nobody makes any interest from a bank account or from a government bond.

     I think it's a good thing to give seniors a little bit of a break, when they've pinched pennies all their lives so they would have a financially secure retirement. But what about the millionaires?

     Some people in political circles have made noises about raising taxes on dividends and capital gains -- so rich people, stock speculators, wealthy heirs and heiresses pay their "fair share." I don't think that's a bad idea. But I do not think seniors should be penalized. So maybe the best way forward is to keep the tax preference for dividends and stocks, but only for a limited amount of income, say the first $20,000 or $30,000 a year. After that, dividends and capital gains could be taxed at regular rates.

      Here's something else I learned. Apparently, it's okay to discriminate against people on the basis of their advanced age. I tried to use some free e-file software this year. One site offered free e-filing if your household income is less than $57,000, and you're 25 years old or younger. Another site advertised free e-file if your adjusted gross income is $57,000 or less and you are 52 years old or younger.

     I'm over 25; I'm over 52; I'm out of luck.

     Here's one that absolutely amazed me. I live in New York, which is considered a high-tax state. I have a rental property in Connecticut, so I have to pay some Connecticut state tax as a nonresident. In doing so, I had to figure out what my total state tax would be if I lived in Connecticut. I don't know how it works for other people, but for me the state income tax is actually higher in Connecticut than it is in New York!

     Every year, after I figure my state tax, I start thinking once again about retiring to a state that has no income tax. Back in the early 1990s, Connecticut had no state income tax. But it does now! In case you're wondering, according to the IRS there are still seven states with no income tax:  Alaska, Florida, Nevada, New Hampshire, South Dakota, Wyoming and Washington.

     I did incur a lot of medical expense last year (fortunately, nothing serious ... a lot of dental expense added to a few extra medical charges), and I was heartened to see the IRS takes pity on those of us who are sick. You can deduct medical expenses over 7.5% of your income. If you have a business you can deduct the cost of medical insurance as well -- just like you do if you have medical insurance where you work. But you're out of luck if you're just an individual trying to pay for medical insurance -- no tax break for you!

     Apparently there are ways to deduct long-term-care insurance as well. This is something I've been thinking about getting for a couple of years now. I haven't bought any yet. Maybe I'll reconsider this year.

     There are plenty of other noteworthy items about the Federal tax form. The IRS offers tax breaks to save for retirement, to send your kid to college; to improve the energy efficiency of your house. Owning real estate is still a pretty good deal -- at least on paper, if the paper is Form 1040.

     The Federal tax code supposedly runs for some 13,000 pages, detailing all kinds of rules, regulations, breaks, penalties, advisories. Plus many more pages at your state tax level. I can't tell you about them all ... I just got an e-mail about a new job assignment, so I gotta go to work.

     I'll make about $3000 on this job -- and get to keep, maybe $1600 of it. But now I'm wondering, maybe I should spend my time checking out the stock market instead. I hear it's been doing pretty well lately.

Resources for Retirees

     For a while at the bottom of my blog, under the heading "Web Resources" I've been listing various links to other sites that address the needs and interests of the older population. Probably nobody ever scrolls to the bottom of a blog, so let me just prompt you here.

     Of course everyone knows about AARP which offers a pretty good website. But my links under "Web Resources" also include the New York Times site The New Old Age, and the travel site Road Scholar, and a site that indexes a number of helpful government pages, called Senior Citizens' Resources. If you poke around on that government page you'll find advice on a number of subjects, as well as some retirement planning calculators, references to state and local agencies, locators for various services, and other practical information.

     Recently, I've run across a few websites sponsored by academic institutions that offer information for those of us interested in aging, longevity and retirement. (Other universities, such as Duke, the University of Maryland and the University of South Florida do research on aging and offer degrees in gerontology, but they don't publish much practical information for the public on their websites).

     I've found the following five sites are both interesting and helpful, offering sometimes academic but usually fairly accessible articles, surveys and reports on issues facing the over-50 crowd.

     The Center for Retirement Research comes out of Boston College. The website highlights research that focuses on money and retirement, including Social Security, taxes, 401K plans, working in retirement. The site organizes its material under headings such as "Briefs," "Working Papers" "Special Projects," depending on how a topic is treated. The approach leans toward the academic, but will seem familiar to anyone who's been to college.

     The Sloan Center on Aging & Work is another project sponsored by Boston College. Its mission is to develop work and career opportunities for older Americans, and it covers such issues as age bias in employment, flexible work options, volunteerism. There's also a blog that fleshes out some of the issues, such as how older workers deal with younger bosses and ... how do we define older workers, anyway?

     The Legacy Project is run by Karl Pillemer, professor of gerontology at Cornell. He has collected practical advice, as well as plenty of words of wisdom, from more than 1500 Americans over the age of 70. The stories and reminiscenses cover love and marriage, work and career, living with loss, and a host of other topics. Some of this advice was published in his book 30 Lessons for Living, featured in a previous post of mine called How to Grow Old.

     Stanford Center on Longevity studies "the nature and development of the human life span, looking for innovative ways to use science and technology to solve the problems of people over 50." The center benefits from research by some 140 Stanford faculty, as well as "visiting scholars" such as Barbara Strauch, science editor at the New York Times. Some of the topics involve global aging and public policy. There's also a link to a youtube channel that features various Stanford lectures, and you can sign up to receive longevity news email updates.

     The Center on Aging at the University of Utah offers to the public "open access materials" on the study of aging through its college of nursing. Several online learning modules are available. They each run about ten minutes, and offer a broad overview of issues in retirement, health, geriatric medicine and other topics that appeal to the mature audience.

     When you have a few minutes, search around on these sites. They are not purely practical; there aren't many catchy titles, but they all offer in-deph analysis on some of the issues that are important to us.

There Are Two Kinds of People

     I spent most of yesterday buying and setting up a new printer. I found the entire process really annoying, and I got no satisfaction at all from finally seeing my new printer spit out a few sheets of paper -- printing the way it's actually supposed to print.

     My old printer gave out four days ago. I found out that in this day and age you don't last long in life without a printer. Our basic human needs are:  air, water, food ... and a printer.

     So I went down to my friendly neighborhood computer shop, bought myself an HP printer, and carried it home -- with a promise from my friend at the computer store that I could call him if I had any trouble.

     I called a total of eight times.

     First, the pop-up window didn't show up. Then I got confused about Step 5 in the instructions. After I got my desktop hooked up with a USB cable, I went to connect up my laptop via wi fi. I couldn't fit the disk in; I couldn't identify the right cable to plug in temporarily; and on and on. But I finally did get the damn thing working. I should feel proud of myself. Right? But I don't.

The beauty ...

     I'm all thumbs with mechanical things, I admit it. I think part of my problem is that I don't really want to do the job. And I derive absolutely no satisfaction in fixing something, in finally getting some damn thing to work.

and the beast

     The odd thing is that I do not have much of a green thumb either, yet I enjoy gardening. I do not get annoyed when the grass doesn't grow in the shade under the trees in the corner of the back yard., I just go out, every spring, and plant more grass seed. And I actually do take some satisfaction in planting a bush or a tree, and watching it grow. As often as not, it dies. No matter. I must not have dug the hole deep enough, or I didn't give it enough water; or maybe the spot was too shady, or too sunny. I try it again, maybe with a different plant, or the same plant in a little different location.

     And when it does grow, I feel an enormous sense of accomplishment. Okay, maybe "enormous" is a bit of an exaggeration, but I joke that I spend about three times as much time admiring my gardening as I do actually doing the work. But so what? It feels good to admire your own work -- but what's to admire about a new printer that's working, just the same way as the old printer was working?

     Whereas, when you plant a bush or a tree or some grass, you have something there that didn't exist before. If you grow vegetables, you have something good to eat!

     I have a row of bushes on the far side of the driveway that I've planted over the past five years. I admire them every time I back the car out of the garage (although it kills me when B runs into them). I prune the fruit tree in the front lawn -- and admire the trim of the branches, and all the flowers that bloom as a result. I even admire my lawn which, if you don't look too closely, actually looks like grass.

     B's son is the exact opposite. Her brother, too. They both love working on a carpentry project, or figuring out electrical connections, or puzzling over a computer problem and coming up with the right answer. They get big smiles on their faces when the cables are all in their proper place, the computer lights up, and the printer starts whirring.

     The old joke is that there are two kinds of people in the world -- those who divide the world into two kinds of people, and those who don't. But maybe it's really divided into people who take pleasure in fixing things; and people who like to garden.

     Why do I get a sense of accomplishment out of one, not the other? I dunno. You tell me.

   

Doing My Bit to Create Buzz

     First of all, for those of you who don't know, the South by Southwest conference, also known as SXSW, is a gathering of people from the worlds of technology, music, film and fashion. It began in the 1990s, and now takes place every year in March in Austin, Texas. This year the festival runs from March 9 through March 18.

     Honestly, I only know about it because my son works in the music business. He went to the conference last year for the first time. And this year he again traveled to Austin to spend the weekend schmoozing and networking. But aside from that, SXSW apparently really is a gathering of hipsters, geeks and cool cats -- people who, for better or worse, are developing the future of our social and virtual universe.

     SXSW is famous for introducing many new things in our lives, from the singer John Mayer, who wowed the audience in 2000 and because of that signed his first recording contract, to Twitter, which captivated the crowd in 2007 and began its rise to social media stardom. (For the record, while I do Facebook, I do not do Twitter, because it just seems kind of silly to me. I'm not a real John Mayer fan either -- but then I'm not the target audience of the SXSW crowd.)

     But anyway, for those of you who want to know, I have it on good authority that this year's most talked-about item is something called "ambient social networks." These are location based applications for your smartphone -- one is called Highlight -- that merge Facebook and GPS technology to tell people who in their social network is currently located in their vicinity.

     So, with an ambient social network app, you can be sitting in the food court at the local mall, and just by glancing at your iPhone you can see if any of your friends -- or friends of your friends -- are sitting nearby. Maybe the guy at the next table went to the same college as you did. Maybe the woman in line over there shares two friends with you.
   
     Does this sound cool to you, or a little creepy?

     The idea is that the way we meet people in our lives tends to be random and inefficient. This application gives us the tool to target people we want to meet, and people we want to keep in touch with.

     Of course, the flip side of that comes not when you're tracking other people, but when other people are tracking you. Just as you can see somebody else's name, and their photo, and the names of their friends, so others can see your photos and background and friends. And do you really want other people at the mall to be walking around knowing where you went to college, and who your friends are? Isn't that kind of weird?

     I can see this application being very useful to young guys at a singles bar. It could really improve their pickup lines. But that's not going to be helpful to me -- I'm long past that phase in my life.

     But I do see another concrete benefit. You are introduced to someone at a meeting, but of course you forget their name. A week later you see them again at a party. You panic. You should remember their name ... and where did they say they work? Presto. Check your iPhone. "Well, hello Mr. Jones, how's your son doing at Stanford? Did you get out to play golf last weekend?"

     If you think I'm making fun of "ambient social networks," I'm not the only one. Check out "The Highlight SXSW Drinking Game."

     But maybe people making fun of an application actually helps create the buzz. That's okay with me. I myself don't plan on using this app. anytime soon. First, I'd have to get a smartphone! But I don't mind doing my bit to promote technological progress.

Take This Job ... and Love It?

     Back in January I offered to help out with our local library book sale, which is to take place in early April. So now, in March, I'm involved in my volunteer activity, which consists of writing up flyers, sending out notices to local organizations, printing up posters and signs, and planning out how we're going to set up tables and handle the money. In the meantime, we're advised to collect all the boxes we can, because after the sale is over we're going to have a lot of leftover books and we'll have to box them up and either give them away or throw them away.

     So I've been prowling the liquor stores, asking for their empty boxes, and if you looked in my basement right now, and saw all those empty wine boxes and vodka boxes, you'd think I was a serious alcoholic.

     Then when I got back from vacation, I received an email from an old colleague of mine, offering me a paying job to help out on a project. Deadline: April 1st. Most of my work is being done from home on my computer. But I did go into the office to consult for one morning, the first time I'd been in any kind of office in about two years.

     It seemed very strange. I'd spent over 30 years in an office; the territory is very familiar; yet I've set foot in an office only about a dozen times in the last ten years. Even though I'd never been in this particular office before (but they all look the same, don't they?) it felt like it does when you go back to visit your old hometown and walk around the neighborhood and see your old house and check out your old haunts.

     But actually, it was kind of fun to be in a real office -- you know the kind, private offices with glass walls around the perimeter of a big room with a bullpen of desks jammed up one against another. Kind of like the TV show "The Office."

     It's also nice to have a paying job for a change. First of all, I could use a few thousand dollars, especially since the credit card bills will soon be coming in for my vacation out west. But then at one point I wondered: Am I trading a month of my life, just for a few thousand dollars? What kind of deal is that? But when I really considered it, I found it's a good feeling to be engaged in a specific assignment, working on a project that someone is actually willing to pay for -- you know, compared to volunteering at the library, or blogging.

     So I'm pretty busy this month for a change -- after having done nothing but hang around since before Christmas, then go on vacation. The benefit to you:  I have to keep my posts short.

     It's a delicate balance, trying to work in retirement. You want some jobs, but then when you get them, you're not quite sure you're ready. Do you know what I mean?

     By the way, remember the band Men at Work? I dunno what this song is about (maybe it's about drugs; wasn't everything, back in the '80s?), but I prefer to think what's knocking at my door is opportunity.