Friday, April 13, 2007

Tax Procrastination and The Black Box

The PBS television series adapted from Agatha Christie's famous books about Belgian detective Hercule Poirot features a familiar cast of characters one might expect to find in a charming British mystery. We have the clever, eccentric detective; the devoted, helpful sidekick who is consistently amazed by the detective's brilliance; and the fallible Inspector who requires the detective's special insights and unique abilities to solve the crime. But in the Hercule Poirot series, there is another character who is also clever, eccentric, brilliant and downright fascinating: Miss Lemon.

Miss Felicity Lemon may be the most organized secretary in the world of fiction. (Pauline Moran portrayed the nearly flawless Miss Lemon with the requisite poise and dignity, and, when required, with a sensitivity that made the character so likeable.) Miss Lemon's office was always tidy. She remained unruffled in the face of any of Poirot's business concerns. Most significant was her impressively detailed and highly sophisticated filing system in which every item was ultra-efficiently cross-referenced, allowing her instantaneous access to any information her employer might require.

Alas, that is not my system; sadly, I am not remotely like Miss Lemon. And every year at tax time, oh, how I lament my fate and wish I could emulate at least a few of her admirable organizational qualities. Instead, I sit with my piles of unsorted receipts and face the frustration of re-assembling the past year of my life so that I can even begin calculating my taxes. Naturally, I wait as long as possible to commence this sorry ritual. But I've always assumed that I was not alone in procrastinating at tax time, so I decided to make an effort to learn more about why people procrastinate. This interesting task also allowed me to procrastinate further.

According to an article on, the most obvious motive for procrastinating is that preparing taxes is an unpleasant task and, because people prefer to feel good rather than bad, they tend to postpone anything that they know will make them feel bad. Money coach and author Ruth Hayden offered her assessment: "Usually, any form of procrastination is either fear or rebellion. How much am I going to owe? Are 'they' going to take it away from me? What if I can't do this?"

Whatever the reason, it turns out that tax procrastination is so common that Intuit, manufacturer of the popular computer tax software program Turbo Tax, has created an annual list of the top ten cities with the largest number of last-minute on-line tax filers. This year, the phrase,"Houston, we have a problem," takes on new meaning as that Texas city earned the dubious honor of achieving first place, with the largest number of tax procrastinators. Here in Los Angeles, we've fallen off the list at last, finally coming in with a ranking of number twelve. Obviously, I did nothing to help that ranking, although I use H&R Block's TaxCut, so I wasn't being counted anyway.

Now, I confess that was an unusual, seemingly contradictory decision. I don't know what possessed me, but a few years ago, after receiving another substantial bill from our accountant for preparing my very straightforward tax return, I decided that I would try to do it myself. To my utter amazement, TaxCut was easy to use (no, I'm not getting paid to promote the program; I just think that if a tax-phobic person like me can use it without exploding my head, it's worth giving it a plug). The problem that remained was assembling all the information before I could use it. An organized person would suggest a simple filing system or perhaps a program like Quicken in which I could easily track my expenses. I've tried the filing system, in numerous permutations. I've tried Quicken. Both options are fine solutions in the hands of someone who doesn't detest doing the actual work and avoid it as if it were the plague.

Probably most surprising in my procrastination research, however, was discovering the number of people who simply don't file taxes at all. These are the ultimate tax procrastinators. However, reports, "According to the IRS, 1.8 million individuals who failed to file a tax return in 2003 left a total of $2.2 billion in unclaimed refunds in the coffers. Half of those non-filers would have received a refund of more than $611." If you're one of these folks, you might want to consider catching up a bit. There's a deadline for claiming that cash, so if you owed no taxes in 2003, you have until April 17th of this year to file and get whatever refund is due. Of course, you have to file for all the intervening years, too, so it looks like you'd better get to work!

Is there a solution for those of us who abhor managing the paperwork required to handle our tax preparations? One suggestion I'd like to offer is that, as usual, most of us keep too many papers in the first place. It's yet another example of excess stuff making life difficult. Of all the papers we get throughout the year, what papers do we need to keep for tax purposes? Receipts for all deductible items (or potentially deductible items such as medical expenses, car expenses, charitable donations and anything else appropriate if you've spent enough that it's wise to itemize). It is not necessary to keep such items as register tapes from the grocery store, multiple credit card cash advance offers, booklets full of coupons you'll never use, neighborhood flyers for swimming pool repairs if you don't own a pool, advertising supplements from the newspaper for stores where you don't shop, or all those enclosures that are tucked into probably every one of the envelopes that held your bills. Keep cancelled checks, if you still get them, or a legible check register showing payment for other deductible items that didn't generate a receipt. It is not necessary to keep cancelled checks for the car wash, the daily newspaper, or a $10 loan to your sister. Keep W-2 forms, when they show up in the mail, and 1099 forms, if you get those, as well as mortgage and investment brokerage information, of course (but not all the enclosures and solicitations that your lender or broker probably send you regularly). Hang on to your annual statement of IRA or other retirement information, even if you're not drawing out funds yet. That's pretty much the lot. You'll be amazed how easily your pile of tax receipts shrinks if you toss out the useless stuff immediately rather than let it accumulate to sort "later." We all know that later means "never," or at least "not until tax time."

My plan to organize my receipts for next year is the boldest one yet: one fairly large black box with attractive metal corner details that sits on top of a filing cabinet (yes, I do manage to force myself to file a few things, but the effort usually requires chocolate, and plenty of it). Every receipt will be placed in that box at the time I receive it. It will be a chronological record of the year. Of course, this type of record will be utterly useless at tax time, but at least I will no longer torture myself with recriminations for not faithfully filing by category throughout the year and having to gather receipts from several locations labeled, "To Be Filed." No, I will embrace my new system, accept myself as a non-filer, and simply confront the tax-paper challenge once a year, confident that all my receipts are in one place.

I feel better already. And I'm proud to report that my 2006 taxes were filed "early" this year, appropriately enough, on Friday the 13th!

(c) 2007 Cynthia Friedlob

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