Tax filing is like grocery shopping
Technology has transformed the annual tax filing ritual but far too many people are replacing good judgement with purely online mechanical tools. The result is a recent spike in errors leading to costly tax penalties and higher tax payments over the long-term. The most important part of the tax process has always been and will always be the collaborative critical review. That means combining your best ideas with another person’s best ideas to come to a result that is better than ether of you could have done alone. Yet about half of all taxpayers completely skip the tax planning review process. The results almost certainly means paying more tax than is necessary over the long-term.
Widely available online professional tax services or DIY tax services with professional support are likely faster and cheaper than other options but still many chose other routes. I wrote this post “Why do people prepare their own tax returns?” back in 2016. The topic is still actively discussed among tax professionals. Certainly everyone has the right to prepare their own taxes, but that doesn’t mean that it is the smartest, least expensive or best decision.
In most cases, I suspect, ignorance of the law or the current state of our nation’s tax process are to blame. Some dose of consumer fear, uncertainty or stinginess are probably also contributing factors to poor tax decisions. I am increasingly aware of cases where taxpayers actively sough tax advice but didn’t get their money’s worth or were given wrong information.
The current tax situation is like grocery shopping: just because a product is on your grocery store shelf does not mean that you should eat it. A large number of those products are harmful to your health. Certainly the grocery store and the food industry do not hold your health as their highest priority. It takes some level of enlightenment to make the best food and tax choices.
I am interested in exploring the psychological factors that control individual tax decisions. A recent informal survey of attorney attitudes about taxes and tax planning revealed some surprising results. Those results will be covered in future blog posts.