Simple Taxes
Simplify. In many ways, the answer within my life and that I describe in Dream. Invest. Live. is to simplify. Working to my own dreams, investing in stocks for the long term, getting rid of stuff, living in a smaller house, all are things that simplify my life. Simplify taxes? That's possible too, but as my web bio says, I am a "Writer, Speaker, Teacher, Photographer, Engineer, Entrepreneur, etc." My taxes could be simple, but then my life wouldn't be as entertaining.
There was a time when my taxes were very simple. I had a job, no house, no investments, and wasn't running a business. The best way to simplify taxes is to lead a life that fits into a simple niche. If all you have to worry about is a W-2 from a properly managed company job while you live in a rental, then be glad for all of those blank spaces on the 1040. Maybe you'll be lucky enough to fit into the 1040-EZ and such.
Bureaucracies work best for those who fit their model, whether that is a model employee, taxpayer, homeowner. Anything else requires judgment, and bureaucracies survive by adhering to policies that they hope cover every possibly thereby eliminating the need for thought. The training expenses and the probability of being sued are lower. They can always point to the rule book as a font of knowledge, if not wisdom.
Living your own dream usually means a self-defined life that can be hard to describe at parties and harder to describe when faced with blank spaces on a form. Am I retired, self-employed, an artist, unemployed, an entrepreneur, or on a very extended sabbatical? Someone called me a social innovator, which I like, even though I don't think that covers the bases either. I’d be surprised if the IRS recognized the title.
Taxes aren't complicated by design. They are complicated by Congress. Special tax credits, programs, rebates, subsidies, and answers to loopholes create a list of regulations that expands beyond my understanding. A tax bill passed that affects 0.5% of the population means that 99.5% of the population has to make sure they can check NO on some box.
My taxes could be simple. My living expenses come from selling stocks that I've held for more than a year. The taxes are low because they are long-term gains or losses. That's it. If I lived based on a stock portfolio I could fill out my taxes without much head-scratching.
My taxes aren't simple. I bought a house. I am glad I bought a house. It allows me to live more simply because I don't have to negotiate with a landlord, and any improvements I make are accomplishments that I can build upon. Owning a house adds some complexity with mortgages and things I can't think of without consulting the tax code, but owning a house is conventional, so it too has a reasonable place in the tax code.
My taxes become complicated because I try to contribute something to society rather than sit on the couch eating bon-bons every day. My writing, speaking, and photography generate revenue and expenses. I value my time and efforts and others do too, so money flows. People buy my art, or pay for me to talk, and I buy supplies and pay maintenance fees. Income and expenses happen and I am required to operate a business. There are licenses and reports required at every level from city to federal. I have retail, commission, contract, royalty, and performance revenue. I have publishing, printing, advertising, and maintenance expenses. And because the writing, speaking and photography overlap, there are no clear lines delineating each bit of cash flow. It isn't tidy. The tax forms like tidy.
And if, I donate time or money, or create something that affects a charity, then, well, the taxes doesn't get simpler.
Many of the complications are tax benefits, but they certainly cost time and increase the risk of getting something wrong, and getting something wrong on a federal form is a federal issue.
A life that is inherently simple results in taxes that are complex. More of us are finding ourselves in this state. The classical career life is behind us. We are contributing to the world around us, expressing ourselves and valuing our contributions, and living lives that don't have convenient titles or labels. I think the shift is healthy for us, society, and the planet. Unfortunately, a such a healthy life is out of synch with government policy.
I actually don't mind paying taxes. That isn't the issue. Every life choice includes a cost, and taxes are the cost for choosing to live in a society that isn't an anarchy. I think the taxes are spent inefficiently, but I accept that with every charity I contribute to, and I consider the federal government just another charity organization that includes me as a member.
Life is more important than taxes, and if a choice improves my life but complicates my taxes, then I'll complain about the taxes, but make the choice anyway and simply pay the complicated taxes. It’s that simple.
Now, pardon me as I temporarily relinquish control to the tax software and simply trust Intuit.
Wednesday, April 7, 2010