Life Strategies - For those with one hand tied behind their back: 10 Things I Told Myself Which Turned Out To Be Completely Wrong

In Part 1 of this series, I told you how I believed I would never get married, and how I was wrong about that.

I also told you how I thought I would never learn to drive, and how I was wrong about that too.

Then in Part 2, I told you how I believed I was a words person and not a numbers person, only to find out after I moved to America and I became a Commissions Analyst, I could be a words person and a numbers person too.

In Part 3 of this series, you learned about a period in my life, when I thought I could invest like Warren Buffett. I came to my senses after I suffered a 50% loss from an investment in Krispy Kreme Donuts.

In Part 4 of this series, you learned about a bunch of things I used to believe in the diet, exercise and wellness area, which turned out to be wrong, and which kept me from living my best life, until I decided to challenge those beliefs, and to modify my choices based on the new information I had at my disposal.

In this post, you will learn about something else I told myself, which turned out to be completely wrong.

I told myself I would never be able to get my head around taxes.

One of the reasons we tell ourselves we can’t do something is we don’t have to try to do it.

By telling ourselves we can’t do it, it gets us off the hook.

Learning something takes hard work.

Learning something in an area in which we are clueless, takes even more hard work.

Taxes was one of those things for me.

I was totally clueless.

My default was to think of taxes as “too hard”, something to be understood only by professionals, which is why I faithfully went to H&R Block to do my taxes.

Little did I know, some of the H&R Block tax preparers are given a crash course just before tax filing time rolls around.

I had my excuses for being clueless about taxes.

There were only so many things I could be interested in.

Besides, I was a busy working single parent.

So after going to H&R Block to do my first tax return, it just became my default.

Of course, there is nothing unusual about going to a tax preparer to do your tax return.

Out of 138 million people who file taxes in America, 111 million use the services of a tax preparer; only 27 million do their taxes themselves.

Of the 111 million, some know something about taxes, some have complicated tax situations requiring a preparer’s expertise, but many who could probably do their taxes themselves, just can’t be bothered to learn.

I was one of those people.

So what precipitated my decision to become tax aware?

In 2003, I experienced a financial wake-up call.

It was triggered by reading the book Rich Dad, Poor Dad by Robert Kiyosaki.

This book has changed many lives. I am aware of at least two lives that were changed in my personal circle, mine being one of them.

Reading Rich Dad, Poor Dad, made me want to become more financially aware, and to take control of all areas of my financial life, including taxes.

I became aware of the importance of taxes as a determinant of financial acumen and financial health for the first time in my life.

I wanted to understand taxes, so I could keep my taxes low, avoid paying unnecessary taxes, and reduce or eliminate unpleasant tax surprises at the end of the year.

Luckily, there was a wealth of information online.

On sites like Fairmark, and H&R Block, and Turbo Tax, I could read the A-Z about taxes.

Armed with this new knowledge, it was then a logical next step for me to try my hand at doing my taxes myself.

My plan was to learn as much as I could about taxes.

Step 2 was to model my taxes on Turbo Tax. I had learned I could do that for free. When you use Turbo Tax, you pay only when you file – so you can model till kingdom come. One of my business friends does this every year.

After modeling my taxes on Turbo Tax, step 3 was to go to H&R Block as I usually did, and check my numbers against the numbers they came up with.

The result of this experiment was a success.

I was able to confirm my Turbo Tax numbers against H&R Block’s numbers

I was given the green signal to do my taxes myself using Turbo Tax, which I began doing the very next year.

Soon after, I decided I had gained enough knowledge to pass on.

So in the next few years, I gave several friends a primer on taxes, and taught them how to use Turbo Tax to do their taxes, just as I was doing.

Like me, many of them have not looked back since.

Today, it is amazing to me, that once upon a time, I was so clueless about taxes, and believed it was beyond my ability.

Now you may ask, “Minoo did you escape the fate of having a bad tax year?

The answer is no.

Also, if you think I didn’t learn my tax lessons the hard way, you would be wrong.

In fact I had a bad tax year very early in my American life.

In my third year of being in America, on a very modest income, I found myself in the position of owing $5000 to the IRS when I filed my returns.

At that time, being totally clueless about taxes, my reaction was that of a deer in the headlights. “How could it be?” I asked the H&R Block tax preparer. “I only made $ money. How could I owe this much?”

“Yes, you owe this much, Ma’am,” he said, trying to hide the fact I was testing his patience, “because your tax withholding was too low, don’t you see. You need to change your W4”.

“Tax withholding! W4!” It was all Greek to me.

I asked him what he meant by “changing my W4”, and he explained.

I had submitted a W4 to my employer with my initial employment paperwork, and I had entered allowances to indicate how much money should be withheld from my paycheck for taxes.

I needed to go back to the payroll department and submit a new W4, claiming fewer allowances.

So in spite of not being able to stand paperwork and all of that, I went to my payroll department, asked for a new W4, and (just to be safe) I changed my allowances to 0.

I have been getting a tax refund from the IRS ever since.

People will say, “Oh Minoo, you are giving the IRS a free loan by doing that, all you are doing is paying excess tax through the year, and then getting it back at the end of the year”.

Yes, but, I’d rather do that than get a nasty tax surprise at the end of the year.

Even after I became knowledgeable about taxes, I have had some tough tax years.

Good tax years and bad tax years are related to overpaying or underpaying your taxes through the year.

The most common reason is an improperly filled W4, applicable to all who are on a salary, and who get W2 income. It describes the majority of tax payers.

Other scenarios are when you receive 1099 income, and do not pay estimated taxes on it, or you do not adjust your W2 allowances to cover the additional 1099 income.

If you receive 1099 income from any source, it is taxable, and you are responsible to estimate the tax you owe for that income, and pay the estimated tax to the IRS in quarterly installments.

Here are some examples of taxable 1099 income…

*Income received for work done as a contractor, for which you will receive a 1099 Misc from the person or company you do the work for

*Income from a stock sale or stock options sale, for which you will receive a 1099-B from the brokerage that handled the sale

*Unemployment income, for which you will receive a 1099- G from the unemployment office

*Income from dividends received, for which you will receive a 1099-D

*Income from a retirement distribution (when you sell some of your 401K or IRA assets), for which you will receive a 1099-R from the company or broker which did the distribution

*Income from a cancellation of debt, such as in a foreclosure, for which you will receive a 1099-C

*Income from a real estate sale, for which you will receive a 1099-S

All of this income is taxable, and most of it is taxable at your marginal rate.

I have seen more than one person get a shock from a bill coming due from the IRS for the unpaid tax on these types of income.

Based on my experience, what do I recommend to avoid or reduce nasty surprises at tax time?

Of course, supremely important, is to become aware of what is taxable, and what is not.

Then if you are a W2 employee, make sure your tax withholding is sufficient, by plugging your income into one of the tax estimators online, and adjusting your W4 allowances based on your estimated tax.

Then factor in what you are paying (or not paying) for healthcare premiums. This can bite you too, but the mandatory aspect is going away starting with the 2018 tax year.

As I said earlier in this post, even with all I’ve learned about taxes, I still get tripped up.

But I am so glad for what I know, and I am in a much better position because of it.

The fact I thought taxes were beyond me, and I turned out to be completely wrong, is so cool.

It means that I may be wrong about some of the things I am not doing now, and strongly believe I cannot do.

There may come a day when I will do those things, and enjoy doing those things, as I enjoy doing my taxes today.

What a great thought!

No matter how strong the “I can’t” belief, there could be an “I can” waiting in the wings to topple it, as happened with me and taxes.

It is things like this that make you realize life is filled with latent possibilities.

These latest possibilities are only waiting to happen, and only waiting to confound the probabilities in our lives.

The probability of me doing any of the things I list as having done in Part 1, Part 2, Part 3, Part 4, and Part 5 of this series, was low.

The imagination and will were lacking. Further, there were ingrained habits and lifelong ways of thinking to oppose it.

And yet at some point, the will was born, and a fresh eye was born, and a powerful determination, such that even ingrained habits were powerless to stop the tide.

What this suggests is you should believe in the future.

Believe you will do wonderful things, you can’t dream of doing now.

Believe new ideas and triggers will emerge.

Believe new dimensions to your life will surface - as a result of those ideas and triggers.

You cannot see these new ideas and new triggers, because they are also in the future.

Once upon a time, Social Security was new.

Once upon a time, the 401K was new (it was introduced in 1978).

Once upon a time, the IRA was new (it was introduced in 1974).

Someone thought them up in response to an idea or trigger.

New ideas often emerge in response to problems.

Problems lead to solutions, as I wrote in my post, The Element of Seeing All Problems as Puzzles and Its Hope for becoming Master Solvers.

To me, “Problems are good”.

The reason I say “Problems are good”, is because a problem provides a trigger to search for or invent a solution.

And who would disagree with me, finding or inventing a solution to a problem is one of the most thrilling experiences ever?

So go ahead and say it… “Problems are good”.

And the next time you face a problem, say, “It’s time to put on my thinking hat, and it's time to seek or invent a solution.”

You can even go a step further, by saying “I will not be intimidated by constraints, because I know constraints will lead to creative solutions”.

How now, Minoo?

Read my post, The Element of Constraints and its Hope for More Creative Solutions, and you will understand how exciting constraints can be, and how powerful an input they are to creativity and innovation.

So get excited about the future, and especially about your unsolved problems and unchallenged beliefs.

I certainly am.

And on that “exuberant” note, I will end this post.

Do come back next week for the sixth part of this series, 10 Things I Told Myself That Turned Out To Be Completely Wrong.

Acknowledgements

Thanks for the feedback, (comments, likes, shares) on Part 1, 2,3, and 4 of this series. I appreciate the kudos from old friends, new friends, and relatives who have become friends. You keep me going.

NEXT, Thanks to all readers, current and future, for sharing my journey to wisdom, meaning and a better life. Like you, I am trying to find my way through this complex maze we call life, and I am honored to have you share my journey, as I continue to seek the wisdom hidden in plain sight.

FINALLY, A Happy Birthday shout-out: to those with June birthdays. If something you have been telling yourself is completely wrong, hope your birthday month provides a trigger for a change of heart, and a change of course.

Have a blessed week, and hope to see you next week.

P.S. Not sure if you have time, but if you do, you may enjoy these other posts:

Friendships