I've never understood why people get stressed out about tax season—it's always been a breeze for me, probably because my finances have never been that complicated. Your employer gives you a form, you type a few numbers from that form into TurboTax, and then you wait for that sweet refund money to roll in. One time I got a $2,200 refund. Why would anyone object to doing 20 minutes worth of "work" for an extra paycheck? It made no sense.
Well, this year, it finally made sense, because my beloved TurboTax told me that I owed money to New York State. My federal refund came out to $667, but I was expected to pay $1,010 (!) in taxes to the state, meaning I'm on the hook for $343 total. Considering that I make like, nothing, and that I already have to get so much taken out of my paycheck, this was infuriating. It was like if your grandparents abruptly stopped sending you birthday checks and instead demanded you send them money.
But rather than blindly accept my fate, I decided to find out if the TT decree was accurate. Using free tax software is surely the easiest way to file, but what if there was another, better method? Some semi-aimless googling eventually led me to Rus Garofalo, a comedian who turned into an accountant after discovering he had a knack for numbers. He's been accumulating credentials since 2007, and also building up healthy disdain for the IRS in the process. The more he learns, basically, the more he realizes how fucked up the tax system is, and how difficult it is for ordinary people to navigate it.
"You're only gonna google shit for so long," he told me about why people use tax preparers. "At a certain point, you run out of willpower and are like, 'Fuck it. I need to move on with my life.' So you just stop, but did you get the best result you could? There's really not a good way to judge."
I met up with him at Brass Taxes, the boutique tax prep office he runs out of Crown Heights, Brooklyn, to let him tell me what was wrong with my W-2, and learned a bunch of stuff to do for next year.
VICE: I never thought I would need a tax preparer, but I also never learned anything about taxes in general. I basically just want to ask you how to do taxes.
Rus Garofalo: I think what I find fascinating is that there's no way to know if you're doing your taxes badly. There's no reference point for anything you're doing. If you're using an online program, it just says you're allowed to submit now—but that's no reference to quality. All the decision-making processes are so skewed against you. I was angry and frustrated and living on $20,000, so realizing I should have [claimed deductions] and that was costing me in tax savings sucked. It was 5 to 10 percent of my income. I thought people who had tax preparers were rich, lazy, or scared of math. I have a strong reaction when I think I'm being duped.
Is H&R Block duping people, or would I save money if I went there?
Having never used them, I don't know very much about them. But my sense is that it matters who you get. They don't deal with freelancers. We are the weird clients for every other tax place. We're the Goonies. But I think there are things built into H&R Block that are problematic. TurboTax and H&R Block start with the line that they're cheap or free and then every time you hand them something, or need to do a new form, the price goes up and up and up.
It's a little bit like death by 1,000 cuts. And then you're committed. You're like, "I've been doing this for three hours, am I really going to walk away?" It's preying on all your weaknesses. All the marketing is either greed-based or fear-based, like, "Come and we'll get you a bajillion dollars," or, "Come or you'll get audited by the IRS." It's behavioral economics stuff. We're not rational about money, and this preys on it.
Fear is part of the reason some people might wait until the last minute. Is there any true advantage to filing early?
I think there's a couple advantages. Whatever you owe, you then have a few months to figure it out. Like if you think you owe $1,000 but forgot to factor in self-employment tax and you owe $3,000. On the other side of it, if you get a refund, it's like saying, "Hey Allie, you have to walk four blocks but then there's someone there who will give you $1,000."
"It's just math. You're a smart person, and you don't get what's going on. You can add and subtract, so it's like, 'Why the fuck don't I get this?'"
I'm usually in the latter camp, but this year I'm the former. I want to die but mainly because I don't understand why this has happened.
Right. OK. It's just math. You're a smart person, and you don't get what's going on. You can add and subtract, so it's like, "Why the fuck don't I get this?" We all have this intense feeling of shame and lacking for not understanding this stuff. And as I learned more about it, I realized it's very convoluted and antiquated, but we're never taught it. Every person thinks he or she is the only person who doesn't understand it, and it's because nobody discusses it. It's like cross-dressing in the 40s, where everyone thinks he or she is the only one.
So what would happen if I don't pay what I owe?
If you don't ignore them for months at a time—they don't wanna chase you—they just want to get paid. If you're like, "Hey, I owe you $4,000 and I can only pay you $150 a month," they'll be like, "Alright." State tax is about 7 percent interest, and federal is around 3. It's not great, but it's better than most credit cards.
I still want to figure out how I might have made a basic error that resulted in this.
There are things that contribute to people making errors, but it's like human errors as opposed to not knowing some tax secret. Like, when they ask you if you have a home office. It's like reading a New Yorker article where you don't know if it's gonna be a ten-minute endeavor or a two-hour endeavor. You're not really sure that you want to get into it, because you don't know if it's gonna pay off. So [accountants] know, and we can make those judgment calls.
Can you just take a look at my W-2 and W-4?
This is not, "Allie fucked up," this is, "Allie followed what seemed like simple instructions and came up with two [in the box marked for exemptions]." But what does "two" mean?" It's so amorphous that we put down a number and don't find out the results for ten months. When will we all, psychologically, be like, "How are we all fucking up? Maybe it's a societal, systemic thing." It's because we don't discuss money.
So I filled out the W-4 wrong and put two instead of one. Is there anything else?
Oh, this is the other thing that's happening. This isn't uncommon, but it's gonna make you mad. Your employer isn't taking out New York City tax. You are having more money in your paycheck, but it's not like you'd notice it and say you had mad cash. If you're getting an extra 40 bucks in your paycheck, it's not gonna change your life, but times it by 26 pay periods, and you're at whatever the fuck that is. It's cumulative. And what's weird about taxes is that you're settling up for a year's worth of money. It's like if I had you pay for all of your coffee in 2015 right now. It adds up.
What are some other common mistakes people make, though? Should I have been saving receipts?
Did you make or try to make money or try to make untaxed income? Before, I was trying to make money as a writer and failing. Now I have friends who are writing for Parks and Rec, but we were all doing the same stuff. We were businesses that weren't making a profit yet. But you don't become a business only once you start making money.
You got that job because the last four years, you took shitty free gigs at Huffington Post and internships. You might be able to itemize. Does the company pay for your computer, for your phone? Do you need to have internet at home? Do you do research? If you didn't read anything, you wouldn't be as good of a writer. I think that's a reasonable statement. You're allowed to take expenses that are necessary business expenses.
"But that's why when the IRS catches bullshit, they come down like Lauryn Hill–hard. They want to make a show of it."
Well, good to know now, when it's too late for 2015. I guess I'll start keeping track of this now.
That mentality of all or nothing is what makes us do nothing. You can still as accurately as possible come up with what happened last year. You have Google Calendar, your bank statements. You can back it up. Meals is one of the things people get wrong a lot. But yeah, people tend to end up low, because they don't keep good records.
This seems like an easy thing to blatantly lie about.
The amount based on the honor system is stunning. But that's why when the IRS catches bullshit, they come down like Lauryn Hill–hard. They want to make a show of it. I think this is where it helps to be sitting with someone. I could easily get rid of that $1,000. But what's the cost of saving that money versus dealing with the blowback? It takes over your life if they start to audit.
OK, so say I can come up with like, $2,500 worth of stuff I could itemize. Does my refund go up?
The amount would have to be more than the standard deduction for it to be worth it for you to itemize. Basically, the government doesn't tax you on the first $6,300 [you earn], and each person you take care of, they're not gonna tax you on the first $4,000. This is the foundation that our society is held up upon. It's how we don't let old people die in the street—barely.
One of the things that you're allowed to put on the itemized list is state and local taxes. In New York, this is usually a big one. Once you get up in the $60,000 [income] range, this number will be getting close to the standard deduction all by itself.
[In your case], it's preferable for you to take the standard deduction, which is $6,300.
So unless I can get past $6,300 in receipts, I'm stuck with the return TurboTax gave me.
The fucked up part is, say you make like $45,000 and you care a lot about the New York Food Bank and donated $2,000. That's one of the items you can itemize and add up to see if it's more than the standard deduction. So it's not gonna benefit you at all, because you didn't earn enough money. Donations predominately affect people who are making at least $65,000.
I'm furious but I'm glad I at least didn't have to spend $30, or whatever, to file through TurboTax. Thank you!
I was thinking this morning, "I wonder how much the stock of TurboTax and H&R Block would plummet the day the government announced that there was an easier and more efficient way for people to do their taxes." It would get people's refunds out sooner and cost people nothing and save the government money. They would just mail everyone their taxes already completed with the information they already have, and unless you have other information that is pertinent, you just sign it and mail it back in.
Their stock would plummet. I have heard they lobby [Congress] to make sure this doesn't happen.
They've just stuck themselves as a middleman for a transaction that can be done without them. If you send in your taxes without a W-2, they send you a letter saying you missed it and they changed your return, which implies the government could just do it without you. Most of my clients have untaxed income, so they would still need to file taxes. But most of the population should not need to do anything to have their taxes completed besides open the mail and be like, "Yup, that's what I made," and then sign it and send it back.
The whole thing is just a scam based on outdated needs. It's like someone paying to have an AOL email address.
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