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.
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 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
The United States of
Friendship – Part 1, Part 2, Part 3, Part 4, Part 5, Part 6,Part 7, Part 8, Part 9, Part 10, Part 11, Part 12
Family
Our Cake Boss Family, Family Songs, The Nightdress Brigade, Family Advice I Am Grateful For, The Porki And Bonkers Tradition, No Need for 23 and Me,Letters to Lucas, Flying Lessons
Pets
A Fresh Perspective on Pets, Secrets of The Super Models In Our Family,BowWow, Meoww, Why You Should Not Abandon Your Pet
Nature
Hobbies
Managing Your Money
Yoga for Investors, How to Turn Your Girl Scout or Cub Scout Into
a Stock Scout, Financial Piece of Mind, Financial Piece of Mind – Part Deux, A Retirement Planning Formula You Won’t Find
on Oprah
Simplifying Your Life
You know what Wesabi is, How About Wabi Sabi? The Simple Life, The Element of Simplicity and Its Hope for
Living a More Satisfying Life
Getting Over Your Self-Consciousness
The Element of Release From Inhibition, The Element of Being Less Self-Centered and
Its Hope for Seeing Things in The Correct Light, The Element of Getting Out of Our Comfort Zone
and Its Hope For Experiencing More of What Life Has to Offer
Learning to Laugh
How To Deal With The Sheldon Coopers in Your
Life – Part 1, Part 2, Part 3,Part 4, The Nightdress Brigade, You Aced the SAT, How About the LAT?, How To Cause Atmost Confuzen at the Scripps
Spelling Bee, How To Go From Madonna to Lilly to Myrtle in
The Course of A Single Evening - And Even Have a Sex Change, A Facebook Face-Off, A Short Stint in Advertising
Learning to Relax
How To Become a Low Maintenance Person, Connected Minds, How To Become The Kind of Person People Want
to Work with, How Many Times a Day Do You Visit Ireland? The Art of Carrying Things Lightly
Health
Raising the Bar, 4 Healthy Eating Ideas I Learned from My
Friend Julia, The Element of Becoming More Focused and
Precise In Our Goals and Its Hope for Achieving Powerful Results
Pursuing A Dream
What’s Next For You? The Element of The First Step and Its Hope for
Getting Big Things Started In Our Lives, She Victories
Changing in Good Ways
Maybe Its Time To Become More Receptive, Maybe It’s Time To Live More Purposefully, Maybe It’s Time To Bust Some Myths, Maybe It’s Time to Walk In The Direction Of
Your Fears, Maybe It’s Time To Understand What Freedom Is, Maybe It’s Time To Turn the Page, Maybe It’s Time To Rock The World, Maybe It’s Time For Freshness
