When my kids were young, we had bought them several cheap videos of Donald Duck shorts, some of which were created in the 1940s to help drum up support for the war effort. One of them encouraged people to be putting aside money to pay their income taxes, as this was before the days of withholding. The tag line “pay your taxes to defeat the Axis” was rather memorable.
So it’s been rather, shall we say, “stunning” when two of President Obama’s cabinet nominees
“made mistakes” in filing and paying income taxes. And a third nominee had problems with paying employment taxes on a household worker (not an unusual one, given what a hassle it can be for one person).
This morning, former Sen. Tom Daschle withdrew his name as the nominee for the next Secretary of DHHS, a job which will carry the lead role to enact new healthcare legislation. He owed more than $100,000 in back income taxes, and that did him in. Some of it had to do with one or more charities which did not provide the required receipts in order to take the deduction. Most of it had to do with the use of a car and driver that should have been reported as income- and the company should have issued him a statement in the first place. There was also, apparently, an issue with some of his work since leaving the Senate. While not required to register as a lobbyist, he worked in the lobbying section of a law firm. Drop this on top of Treasury Secretary Geithner, who didn’t bother to report 1099 income from the World Bank, and, well, his nomination was doomed. Geithner was widely seen as having exceptional skills and experience, and other than a screw up in reporting income, clean. Daschle – well, maybe one nominee will get a pass, but that’s it.
When I was starting out, I got some good advice. One was to pay my taxes. Being self-employed these days, I have to track expenses that normally are not deductible, and are supported solely by documentation that I create, such as mileage. I buy the little record book at the beginning of the year, and just log it. I don’t track totals during the year, looking to pump up deductions – I just log it, and total it at the end of the year. Surprise!
Most years I do my own taxes. Some years I’ve had a CPA review them to make sure that I was handling things correctly. Sometimes I’ve had a CPA do more work because it was a bit more complex and needed to be done correctly.
For most people, their tax returns are pretty straight forward affairs. If your affairs are complex, then you need to retain an expert. You have no trouble referring out a patient – the principal is the same. I also urge practices to use a payroll service – they are relatively inexpensive, they make sure everything is done correctly, they get people paid on time (and direct deposit is a nice bonus), and tax deposits and filings are made on time.
When it comes to taking care of your taxes, separate your politics from the business task at hand. This is going to be a tough year, but we need to be focused on the long term growth of the practice.