Money at 30: Lessons I Learned from This Tax Season
It’s now been several years since I’ve been on my own as far as tax preparation goes. Once upon a time, my father — who was a CPA in another life — would navigate me through the process, ask me about potential deductions I might qualify for, and eventually print off a stack of paper for me to sign and mail in. However, around the time that I started being self-employed, my dad figured that, if I was going to work for myself, I should also probably be doing my own taxes. Fair enough.
Since then, things have gone pretty well, all things considered. Yet, each time April rolls around, I realize that I could be doing a much better job at assisting myself throughout the year. So, with April 18th now behind us, I thought I’d share a few things that arose this year as well as how I hope to do better in the future.
A last-minute IRA contribution
For at least five years or so now, my wife and I have made a point to max out her Roth IRA each year. Note that I said her IRA though. All the while we’ve been focusing on that Roth, I’ve actually had a Traditional IRA open in my own name (one that was the result of a 401(k) rollover more than a decade ago at this point). Yet, we’d mostly let this sit there without paying it much mind — until now.
When I finished the rough draft of my tax return, I went to see what the damage was. Luckily, it wasn’t too terrible but was on the upper end of what I expected. So, just for fun, I decided to see how things would change if I were to hit that contribution limit for my IRA. As it turns out, between the deduction in taxable income and the increased amount in Saver’s Credit we’d receive, I’d be getting about a quarter of my contribution back in tax savings. After seeing that, I quickly headed to my IRA site to make this hypothetical a reality.
Funny enough, in doing so, I discovered that the site for my IRA has apparently changed(?). Rather than try to figure that out, I remembered that I’d previously opened an IRA with Vanguard. Moments after that revelation, my contribution was already in motion and my return was one step closer to completion.
Maybe it’s time for a business credit card
This is going to shock you but, for as many times as I’ve discussed the need for me to keep up with my Quickbooks transactions in the past, I’ve still fallen behind frequently. In fact, I’d reckon I’d left most of my transactions alone since last April — aside from taking care of a few in real-time and a few more while adding business mileage trips to the app. Luckily, thanks to all of the rules I’ve set up on the platform, it didn’t really take me that long to get caught up. Nevertheless, this experience made me wonder if it’s about time I look for a dedicated business credit card that might make this whole sorting process a bit easier.
Incidentally, while I don’t have any business credit cards, I did just open a business charge card called Karat. What’s more, Karat now integrates with Quickbooks, so I was able to set it up to monitor my transactions and label the account as “mostly business.” Of course, as someone who enjoys maximizing credit card rewards while not going overboard on options, I’m sure there will be plenty of cases where I put business transactions on my “personal” cards, but perhaps Karat will help me make the move to business-only cards and, thus, make my sorting sessions that much simpler.
The “happy medium” in tax prep
All things considered, my taxes didn’t take me all that long nor did I run into too many issues (that I know of). Still, how nice would it be if I could just hand all my info off to someone else and have it done? Well, obviously such services exist, but I’ve ignored them in a bid to save money. Meanwhile, if I wanted to save even more money, there are other platforms I could use to file for free. So why don’t I do that?
Well, to tell you the truth, I did decide to take a peek at another option this time around. Although my TurboTax filing was really already paid for because of my Quickbooks plan, I wanted to check out Cash App Taxes (formerly Credit Karma Tax) to see what the service was like these days. Alas, I didn’t get very far. To be clear, this wasn’t because I thought the platform was bad — but more that I’ve grown accustomed to the way TurboTax walks me through everything. I’m sure if I gave Cash App Tax more time, I’d be able to navigate it just fine. But, since I’d already committed myself to using Turbo Tax anyway, I didn’t feel like wasting energy on it.
Now that my taxes are filed, perhaps it would be worth taking another glance at Cash App Tax or other options to see if they could save me money in the future. For now, though, I’m fine with the middle ground.
Despite being stressed about the impending tax deadline for weeks, it turns out that my experience really wasn’t much to worry about. After finishing the bulk of our return on Saturday, I filed on Sunday with no major issues. Yet, while things went well enough and some of the work I did throughout the year contributed to that success, my experience this year also highlighted a few areas in which I could improve. With 2022 tax returns now due in less than a year (not to mention quarterly tax payments), you can bet I’ll be paying more attention to my traditional IRA, considering a business-only credit card, and perhaps even exploring other tax prep options outside of the “happy medium.”
Also published on Medium.