Learning to do your own taxes

[apopTorey]

Hello all,

I have a week off between clerkships coming up and would like to learn how to do my own taxes. I figure now is as good time as any to learn so that I somewhat of a knowledge-base before starting residency when I assume my personal income taxes will start becoming more complicated. I recently purchased J.K. Lassers Your Income Tax 2018: Preparing Your 2017 Tax Return, which I plan on referencing to rather than reading front-to-back.

For all of you out there who do your own taxes:

• Any tips that you wish you knew when you started doing your own taxes?


• Any resources that you found particularly helpful?


• Anyone recommend NOT doing your own taxes?

Thanks much for any advice!

[Lithium]

I've been training as a tax preparation volunteer.  The IRS's link and learn website, however, has online courses anyone can access.  They are pretty good, since they are question-based rather than just passive reading.  Here's the "basic" version:

https://apps.irs.gov/app/vita/basic_student.jsp?level=basic

 

[Peds]

1) read taxes made simple by Mike Piper.

2) use TurboTax taxact or even fill out the paper version.

3) everyone should know how to do their taxes. After that then you can pay someone if you want. They are really not that hard. Medicine is much harder....

[The White Coat Investor]

apopTorey wrote:

Hello all,

I have a week off between clerkships coming up and would like to learn how to do my own taxes. I figure now is as good time as any to learn so that I somewhat of a knowledge-base before starting residency when I assume my personal income taxes will start becoming more complicated. I recently purchased J.K. Lassers Your Income Tax 2018: Preparing Your 2017 Tax Return, which I plan on referencing to rather than reading front-to-back.

For all of you out there who do your own taxes:

• Any tips that you wish you knew when you started doing your own taxes?


• Any resources that you found particularly helpful?


• Anyone recommend NOT doing your own taxes?

Thanks much for any advice!

Click to expand...

How complicated can your taxes be as a med student? Just do your own taxes, reading the instructions as you go and looking at the book if you want to learn more about something. Next year there will be a new schedule for you to add. And a new one the year after that and the year after that. It's no big deal to learn a new schedule every year.

I guess my advice would be don't worry about making a mistake. It really is no big deal to correct them later. You get three years to do so and it usually involves filling out a 5 minute form and mailing it in. 4-6 weeks later, you get a check from the IRS, no questions asked.

[LizOB]

Turbotax is really pretty easy.

We went in person to H&R Block for the year that we got married and I started an attending job so we figured it would be more complicated... biggest waste of money ever. She just entered everything into their software instead of me typing it in, and it cost $400 instead of $40. Got maybe 1 or 2 useful tidbits out of her just from chatting but that was it. I'm never doing that again unless my situation becomes much more complicated

[DMFA]

RTFM :-) https://www.irs.gov/pub/irs-pdf/i1040gi.pdf the 100+ pages might be intimidating, but there's like an entire page for how to put your name and address in, so it's intended for, um, simple folk.

Also clicking the "help" boxes going through TT, HRB, or TaxAct and looking at the forms yourself.

[Jaqen Haghar MD]

I started doing my own taxes at age 16.  It was just filling out forms and following instructions then.  Now with something like Turbo Tax all it is is plugging in numbers and takes maybe an hour.  I had an accountant do it for me twice I think.  Why?..  I don't know.  He used a program similar to Turbotax, threw in a bunch of numbers, took two visits to his office, and he charged me $500-$800.

Went back to doing it myself.  You don't need a book.  Get your tax stuff/records together, sit down and do it with tax prep software program.  Just google any questions you have.  It's not hard.

 

[FIREshrink]

Start now, while your finances are presumably simple. Use the paper and pencil forms; reference Lasser or irs.gov as needed for help. Go through it a few times and make sure you’re comfortable with the results. Then plug your info into TurboTax and TaxAct and see if you get the same results (you don’t have to pay until/unless you file). Next year do the same. After a couple of years, you’ll be more confident you understand the basic outline and can switch over to TaxAct or TurboTax permamently. Over the years you’ll add schedules and complexity but presuming they are added on slowly, it won’t be a big deal.

Personally I have run into two or three situations over the years where it would have been helpful to have a pro. The first is rental property. I’m just not 100% confident I have chosen the optimal depreciation strategy or correctly categorized each expense. But I sally forth. The second has to do with a very esoteric IRA situation which apparently neither TurboTax nor TaxAct can handle without requiring me to print and paper file - annoying. And then nanny taxes were a little difficult to figure, and we were paper audited by the IRS - though with no additional tax due. But other than that, I’ve done my taxes myself for 20 years and not had any problems.

[DMFA]

Also the average tax preparer only needs a high school diploma and 50 hours of on-the-job training before flying solo, I believe. They're not all CPAs...it's trained squirrel stuff.

There's no magic about "finding money." The IRS tells you what the deductions and credits are. You get that from structuring your life in a tax-efficient manner - tax-advantaged retirement accounts, business expenses, HSAs if eligible, FSAs if eligible, tax-efficient investments - and not from having someone else enter it into the form for you.

[Complete_newbie]

Would be honest. Taxes, not my strong suit, but WCI is absolutely correct: learning to do it teaches you so much about money, our tax system, deductions etc.

Eagerly awaiting WCI tax book. If it is anything like the posts, it'll be awesome.

Jim...get to work :-)

[jhwkr542]

Just read through 1040 and read the 1040 instructions as you go along.  Additionally, note how the math works out.  Then, when you have a good idea about it, you'll understand what different terms mean that are used on websites like this.  Above the line deduction, marginal tax rate, etc.

I'd highly recommend doing them by hand during residency, going line by line through whatever 1040 form you use.  Which 1040 do you use:  1040, 1040A, 1040EZ? Do you need to itemize?  You'll never understand where and how things get phased in and out if you don't read the instructions.  If you're plugging all the numbers into turbotax, you'll miss out on some of the details and the grind of actively learning.

[The White Coat Investor]

Complete_newbie wrote:

Would be honest. Taxes, not my strong suit, but WCI is absolutely correct: learning to do it teaches you so much about money, our tax system, deductions etc.

Eagerly awaiting WCI tax book. If it is anything like the posts, it’ll be awesome.

Jim…get to work

Click to expand...

I can tell you this, we're still getting the initial push for the course out, then we've got the conference in a month and in the mean time I've got to get the Financial Bootcamp book out so I don't have to pay another trademark extension fee. We'll see if anybody buys it after I gave 90% of it away for free on the emails.

I'm really looking forward to doing this tax book, but don't expect it for a while.

[wideopenspaces]

The hardest part about doing your taxes is gathering up the W-2's, interest statements, etc. And you have to do that even if you pay someone so you might as well figure it out yourself. I actually love doing our taxes and look forward to it every year! I know, I'm weird. We've always used the online h&r block program that costs $50 ( was free before we moved to a state with state income tax). Our taxes are pretty simple though. Got a little more challenging once my husband started a side business but still easy enough. I'm sure you can figure it out without much effort.

[Asher]

So long as the process is straightforward and you're taking, e.g., income amounts from K-1s, 1099s, etc., then an educated doctor should be able to follow the instructions and prepare the IRS forms.

However, things change, the complexity increases and additional issues emerge when you have to consider concepts like depreciation, listed transactions, foreign tax credits, PFICs (passive foreign investment companies), foreign entities like trusts and corporations.  At that point, you may need professional assistance.

 

 

[ENT Doc]

Get your 2016 tax return, gather up all the information that pertained to that tax return (W2s, etc.), and download the 1040 instruction for 2016.  Go through the instructions line by line, section by section, and see if you can follow along to have an appreciation of what the 2016 tax preparer did.  You'll learn a lot, and sometimes you'll even catch mistakes.  It'll make 2017 so much easier, but this time without the training wheels.  Download the 1040 instruction for 2017 and have at it.  If you don't itemize, have a business, passive income, didn't sell property, didn't have a stipend, etc. your taxes should be very easy.  Each schedule feeds into the 1040, and there are multiple publications covering everything from what earned income is to retirement plans - the schedule instructions and these publications will help you understand and fill out the schedules where appropriate.  There's no reason to go out and buy a bunch of books IMO.  Everything you need is available online and free.