Taxes Are Such An Imperfect Science

By: Pete
Date posted: 08.01.2012 (6:08 pm) | Write a Comment  (0 Comments)

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It’s amazing really. I’ve always wondered what the difference was between using an accountant, a firm like H&R Block or a private accountant. It turns out that testing was fairly easy and interesting.

A Businessweek magazine reporter decided to do a test for his personal taxes and he used 4 different sources. I was very curious to see how close they would be. One source was way off but even the 3 others turned out to be very different.

How Can Taxes Be Interpreted So Differently?

It’s amazing when you think about it. Taxes are at their core about revenues, expenses and deductions. You might not think that there would be so many differences between methods but it does turn out that there are.

It’s Not (Necessarily) That Some Do It Wrong

I personally think that as our financial situation becomes more complex, especially for those that have a personal account, there is a lot more interpretation involved. Which expenses can or should be deducted? There is a lot more involved than what those of us (non-accountants) can imagine.

How Aggressive Are Accounting Methods?

I would imagine that most cheaper alternatives (H&R Block, some software, etc) don’t make enough to try to battle it out with the IRS, or put much energy into trying to interpret the right move. Those would probably result in more taxes to be paid.

Is it better to be more agressive?

I guess to an extent it is as long as the accountant is ready to stand by you if the IRS eventually knocks on your door (odds of that happening have increased in recent years). Personally, it is not a big issue for my US taxes because I fully expect to never owe money to the US Govt as long as I pay taxes here in Canada. For those domestic taxes, as I can increase my income, it becomes more worthwhile to get better accounting and save more on my taxes.

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