I would have thought Scott Adams would put something complicated but sorta realistic in the joke instead of complete nonsense. “Multiply line 22 by the eigenvalue of lines 23 through 38.”
I have had my last April 15 tax day! I started helping dad with taxes with his new fangled device – a photo copier when I was (I figure) 8 years old. The original and a sheet of the special treated paper were put through the top slot and a green light came on and a picture of the page made. Then the treated paper was sent through the lower slot and a wet copy came out of the page. My job was to hang up the page to dry.
So now over 60 years later I have decided that this was my last tax season. I had planned to keep the practice going as long as I had clients – some of whom knew me as a child – but IRS is more and more making impossible for small practices to continue down to 5 clients).
I still have 2 returns to do – a 2024 return for a friend and 2025 return for a very long time business client . After that I will only be doing our personal return and our craft business return. It will certainly be a different life during tax season for me (and for husband).
No more Manhattan SOHO gallery artist clients. No more 47th street jewelry exchange clients. No more small factory clients. No more friend of husband’s from work whose taxes I do for $10. No more widow of a professor who taught with dad at local college (they moved to New Mexico). No more friend whose taxes I do free as I had to push to give me the info and I did not want her to think I was pushing her for money for me – why should she lose her refund for not filing. NO more having to take annual exam so I can call myself a tax preparer.
Meryl: If it’s the exam and the work you want to get away from, ignore the rest of this message.
But if it’s just the IRS paperwork frustration that comes with having paid clients, you could consider putting your skills to work as a VITA volunteer. Lots of people could still use your help.
It isn’t necessarily that the tax instructions are complicated, per se, it’s that they are written in such a way as to totally obscure what it is they are actually doing that drives me insane. Taking the lesser of lines 3 or 4 and subtracting that from line 5 doesn’t give me an insight into what I am actually doing, and so I have no intuitive feel if the number even makes any sense. Tell me to take 30% of my total income, minus these qualified deductions – this I can do and know what I am doing. But they’ve written them in a way that assumes the average taxfiler can barely add or subtract, let alone do percentages.
In college, I had a friend who took some Navy ROTC courses for fun (he sailed as a hobby). He said navigation was one of his favorites, because the Navy had come up with a fool-proof 18 step (or whatever) algorithm whereby any idiot 18 year old recruit could figure out the position of the ship, but they had to follow each step of the algorithm religiously, and that’s mostly what the course was doing, training you in each step of this algorithm. He found it amusing, because he knew how to do navigation, he knew how to do math, yet he was unable to map the algorithm being taught to what he knew about navigation without trying really, really hard. But he saw the value in having a fool-proof algorithm you can train blank-slate recruits on that doesn’t require any existing skills, that you can deploy on a large scale, and it will always work, all across any Navy ship.
This is obviously what they do with the tax code, too.
But I still hate it.
(I never have even the slightest idea what my taxable income for any given year is after having done the return — I usually have to calculate that on my own for my own curiosity and then see if I can match it up to any of the numbers on some line of the return. Heck, I don’t even have a feel for how much taxes I actually paid in the year, what with withholding and refunds — if I want to know that, I’m best off calculating my taxable income and then looking up the tax rates on the internet, and applying it to my self-calculated income to get an idea. Then, if I want, I can play the game of figuring out which random lines on the return I need to add together to get that number.
Of course, I stopped doing my own returns a while ago, and now we pay someone to do it for us. He does a lousy job, and if my wife wasn’t the obsessive type, there’d have been all types off errors in our returns over the last few years; I don’t know why we keep the guy, but it’s my wife’s prerogative – I don’t want to do returns ever again, and this is the only way she seems to agree to that proposition, nevermind it doesn’t make any sense, she’s basically doing the returns herself, but whatever.)
The mere fact that most people misunderstand tax refunds proves that the obfuscation of the tax filing instructions really work to the gov’t’s benefit: you don’t want a large refund (really!), you want as small a refund as possible! A refund is proof the gov’t confiscated your money that it wasn’t entitled to, and is only now giving it back to you — you gave the gov’t an interest-free loan and deprived yourself of the funds for all this time!
But have the sheeple subtract line a from line b or c, whichever is larger, and they’ll be cheering when at the end you tell them, “Congratulations! You’re going to get $x of your own money back!”
larK (#4): That was especially true when I did my own taxes back in Ontario in the early 80s: you’d get some big number and go “O good” and then in the next section realize no, that was bad!
My dad had an incident in the late 70s, let’s say 78/79. There was a place on the 78 return where you’d add lines 35 through 41 to get 42; on the 79 return, you’d add lines 35 through 40 to get 41 and then copy that to 42. IRS ran the wrong year’s program and doubled his income, which took months of calls and, ultimately, intervention by his congresscreature to get fixed. By that point they were threatening fines and garnishment. Stuff happens, but it was definitely a cautionary tale!
larK – The 1040 tax form is quite straightforward. Line 11a is how much you made. Line 24 is how much you owe in taxes. Line 33 is how much you paid towards taxes. The difference between 24 and 33 is your refund or how much more you have to pay. The stuff between is just the details of what counts towards each category.
As for whether you want a large refund or not, you are correct that getting a refund is an interest free loan to the government. But the amount of interest you are losing out on is minuscule, generally. A $12,000 refund means you gave the gov’t $1000/month. Someone who invested that at 8% would have an extra $500 at the end of the year. But that requires them to invest it every month and get an 8% return. Not likely. A refund of $3000 would net around $100. For most, that money would go into a savings account earning at best 1%, meaning they lose out on $20 IF they got a $3000 refund and IF they invested it at the start of every month.
larK – Unlike the government, I really don’t trust you’ll pay it back. No offense. I have no idea who you are.
You are 100% correct I’m losing money on the deal. But the exact cost of that is often overstated. For most, it would be less than $5 year, if even that much.
We all do things that aren’t financially optimal. Like taking a vacation. Getting a refund is often more gratifying than a distributed payout. It can feel like a bonus and be more emotionally satisfying, even if the math and reality say otherwise.
Congress creates the tax law without any consideration as to how complicated or difficult it will be to calculate taxes, and the IRS has the job of figuring out the calculations. Sometimes parts of the law don’t make sense at all and “technical corrections” need to be made.
And sometimes Congress has a brilliant idea that totally messes things up. Like for instance when they decided that it wasn’t enough to have just long-term and short-term capital gains; they needed medium-term as well. That made Schedule D super complicated that year.
“No tax on overtime” and “no tax on tips” are ideas like that. If you make “time and a half” for overtime, you pay income tax on the “time” but not on the “and a half” except that you pay Social Security taxes on all of it, except it phases out as your income goes up, and it only applies to certain employees anyway.
@larK, you seem to be sidestepping TedD’s point that there are factors beyond “the cold figures” — including the mental costs of keeping track of expectations, and the well-explored consideration that preferences (and “wise decisions”) can and maybe should be based on more than expected value.
Consider the exercise going around on Facebook etc recently. Would you take an offer of (A) one million dollars free and clear right now, or (B) a 50% chance in a drawing to get either 50 million dollars or nothing? The expected value of B is much larger, but for someone not already rich probably A is a good choice. If you can put a name to the explanation of why A is better for some subjects, then you also have an explanation of why getting a refund is for many preferable to having a zero-balance (or something due!) tax bill.
larK – the part you seem to be missing is that I’m willing to pay the interest to the government in exchange for 1) getting what feels like bonus money in February 2) no stress about underpaying. The $100 is a wildly top end return someone might get if they did everything exactly right. $5 is closer to the real financial loss. So if you are willing to pay any underpayment penalties I’ll incur I’m happy to send you $5.
Comics I Don't Understand 
I would have thought Scott Adams would put something complicated but sorta realistic in the joke instead of complete nonsense. “Multiply line 22 by the eigenvalue of lines 23 through 38.”
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I have had my last April 15 tax day! I started helping dad with taxes with his new fangled device – a photo copier when I was (I figure) 8 years old. The original and a sheet of the special treated paper were put through the top slot and a green light came on and a picture of the page made. Then the treated paper was sent through the lower slot and a wet copy came out of the page. My job was to hang up the page to dry.
So now over 60 years later I have decided that this was my last tax season. I had planned to keep the practice going as long as I had clients – some of whom knew me as a child – but IRS is more and more making impossible for small practices to continue down to 5 clients).
I still have 2 returns to do – a 2024 return for a friend and 2025 return for a very long time business client . After that I will only be doing our personal return and our craft business return. It will certainly be a different life during tax season for me (and for husband).
No more Manhattan SOHO gallery artist clients. No more 47th street jewelry exchange clients. No more small factory clients. No more friend of husband’s from work whose taxes I do for $10. No more widow of a professor who taught with dad at local college (they moved to New Mexico). No more friend whose taxes I do free as I had to push to give me the info and I did not want her to think I was pushing her for money for me – why should she lose her refund for not filing. NO more having to take annual exam so I can call myself a tax preparer.
I wonder what life will be like next April.
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Meryl: If it’s the exam and the work you want to get away from, ignore the rest of this message.
But if it’s just the IRS paperwork frustration that comes with having paid clients, you could consider putting your skills to work as a VITA volunteer. Lots of people could still use your help.
LikeLike
It isn’t necessarily that the tax instructions are complicated, per se, it’s that they are written in such a way as to totally obscure what it is they are actually doing that drives me insane. Taking the lesser of lines 3 or 4 and subtracting that from line 5 doesn’t give me an insight into what I am actually doing, and so I have no intuitive feel if the number even makes any sense. Tell me to take 30% of my total income, minus these qualified deductions – this I can do and know what I am doing. But they’ve written them in a way that assumes the average taxfiler can barely add or subtract, let alone do percentages.
In college, I had a friend who took some Navy ROTC courses for fun (he sailed as a hobby). He said navigation was one of his favorites, because the Navy had come up with a fool-proof 18 step (or whatever) algorithm whereby any idiot 18 year old recruit could figure out the position of the ship, but they had to follow each step of the algorithm religiously, and that’s mostly what the course was doing, training you in each step of this algorithm. He found it amusing, because he knew how to do navigation, he knew how to do math, yet he was unable to map the algorithm being taught to what he knew about navigation without trying really, really hard. But he saw the value in having a fool-proof algorithm you can train blank-slate recruits on that doesn’t require any existing skills, that you can deploy on a large scale, and it will always work, all across any Navy ship.
This is obviously what they do with the tax code, too.
But I still hate it.
(I never have even the slightest idea what my taxable income for any given year is after having done the return — I usually have to calculate that on my own for my own curiosity and then see if I can match it up to any of the numbers on some line of the return. Heck, I don’t even have a feel for how much taxes I actually paid in the year, what with withholding and refunds — if I want to know that, I’m best off calculating my taxable income and then looking up the tax rates on the internet, and applying it to my self-calculated income to get an idea. Then, if I want, I can play the game of figuring out which random lines on the return I need to add together to get that number.
Of course, I stopped doing my own returns a while ago, and now we pay someone to do it for us. He does a lousy job, and if my wife wasn’t the obsessive type, there’d have been all types off errors in our returns over the last few years; I don’t know why we keep the guy, but it’s my wife’s prerogative – I don’t want to do returns ever again, and this is the only way she seems to agree to that proposition, nevermind it doesn’t make any sense, she’s basically doing the returns herself, but whatever.)
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The mere fact that most people misunderstand tax refunds proves that the obfuscation of the tax filing instructions really work to the gov’t’s benefit: you don’t want a large refund (really!), you want as small a refund as possible! A refund is proof the gov’t confiscated your money that it wasn’t entitled to, and is only now giving it back to you — you gave the gov’t an interest-free loan and deprived yourself of the funds for all this time!
But have the sheeple subtract line a from line b or c, whichever is larger, and they’ll be cheering when at the end you tell them, “Congratulations! You’re going to get $x of your own money back!”
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larK (#4): That was especially true when I did my own taxes back in Ontario in the early 80s: you’d get some big number and go “O good” and then in the next section realize no, that was bad!
My dad had an incident in the late 70s, let’s say 78/79. There was a place on the 78 return where you’d add lines 35 through 41 to get 42; on the 79 return, you’d add lines 35 through 40 to get 41 and then copy that to 42. IRS ran the wrong year’s program and doubled his income, which took months of calls and, ultimately, intervention by his congresscreature to get fixed. By that point they were threatening fines and garnishment. Stuff happens, but it was definitely a cautionary tale!
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larK – The 1040 tax form is quite straightforward. Line 11a is how much you made. Line 24 is how much you owe in taxes. Line 33 is how much you paid towards taxes. The difference between 24 and 33 is your refund or how much more you have to pay. The stuff between is just the details of what counts towards each category.
As for whether you want a large refund or not, you are correct that getting a refund is an interest free loan to the government. But the amount of interest you are losing out on is minuscule, generally. A $12,000 refund means you gave the gov’t $1000/month. Someone who invested that at 8% would have an extra $500 at the end of the year. But that requires them to invest it every month and get an 8% return. Not likely. A refund of $3000 would net around $100. For most, that money would go into a savings account earning at best 1%, meaning they lose out on $20 IF they got a $3000 refund and IF they invested it at the start of every month.
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@TedD: Great! You wanna loan me $3000 interest free? ;-)
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larK – Unlike the government, I really don’t trust you’ll pay it back. No offense. I have no idea who you are.
You are 100% correct I’m losing money on the deal. But the exact cost of that is often overstated. For most, it would be less than $5 year, if even that much.
We all do things that aren’t financially optimal. Like taking a vacation. Getting a refund is often more gratifying than a distributed payout. It can feel like a bonus and be more emotionally satisfying, even if the math and reality say otherwise.
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Congress creates the tax law without any consideration as to how complicated or difficult it will be to calculate taxes, and the IRS has the job of figuring out the calculations. Sometimes parts of the law don’t make sense at all and “technical corrections” need to be made.
And sometimes Congress has a brilliant idea that totally messes things up. Like for instance when they decided that it wasn’t enough to have just long-term and short-term capital gains; they needed medium-term as well. That made Schedule D super complicated that year.
“No tax on overtime” and “no tax on tips” are ideas like that. If you make “time and a half” for overtime, you pay income tax on the “time” but not on the “and a half” except that you pay Social Security taxes on all of it, except it phases out as your income goes up, and it only applies to certain employees anyway.
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larK – Unlike the government, I really don’t trust you’ll pay it back. No offense. I have no idea who you are.
We can skip the loan part and you can just pay me the $100 interest then — no risk! ;-)
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@larK, you seem to be sidestepping TedD’s point that there are factors beyond “the cold figures” — including the mental costs of keeping track of expectations, and the well-explored consideration that preferences (and “wise decisions”) can and maybe should be based on more than expected value.
Consider the exercise going around on Facebook etc recently. Would you take an offer of (A) one million dollars free and clear right now, or (B) a 50% chance in a drawing to get either 50 million dollars or nothing? The expected value of B is much larger, but for someone not already rich probably A is a good choice. If you can put a name to the explanation of why A is better for some subjects, then you also have an explanation of why getting a refund is for many preferable to having a zero-balance (or something due!) tax bill.
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larK – the part you seem to be missing is that I’m willing to pay the interest to the government in exchange for 1) getting what feels like bonus money in February 2) no stress about underpaying. The $100 is a wildly top end return someone might get if they did everything exactly right. $5 is closer to the real financial loss. So if you are willing to pay any underpayment penalties I’ll incur I’m happy to send you $5.
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Being a traditional procrastinator, I filed an extension online.
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