I read an interesting article last week that said that most taxpayers don’t understand even the most basic tax concepts. It went on to report that most adults in the US aren’t sure just how much they pay in taxes. (Hint: possibly more than food, housing, and clothing combined)
Incredible, I thought. How could so many people not know these things?
I mean, how could you not notice the difference between your gross earnings and your net pay (most of which is due to the taxes that are deducted)? You do get a pay stub, right? (Ah, but what if you’re self-employed? You’d have to look at your personal income tax return to see how much you paid in taxes last year.)
I remember quite clearly when my kids got their first paychecks as teenagers and their absolute surprise upon receiving their pay stubs. Their comments went something like this…there must be a mistake here…they told me I’d get paid $8 per hour and I worked 80 hours for the pay period…but my check is nowhere near $ 640… Mom, look at this and tell me what went wrong. A five minute talk about taxes helped explain the arithmetic to them. They weren’t happy, but at least they understood what happened.
I guess I figured that most adults would have had a similar experience in their youth.
I’d been thinking about that article I read and wondering if I should blog about it. I’d been dithering between “maybe” and “no, that’d be a waste of time…who’d be interested?” Regardless of what the article said, I really believed that most people who have ever filed a tax return know the basics.
Then something happened today that completely changed my mind. As I was making a deposit into my business checking account, the bank teller asked me what I did for a living. Upon hearing that I was a CPA, she asked me if there were any changes in the tax law that she should know about.
I started to explain one new deduction for 2008 and she got this very blank look on her face. She kept asking questions and I kept wondering why she didn’t understand what I thought was a simple explanation. This conversation went on for about five minutes, with me patiently trying to use simple words and examples. She still looked blank.
I should mention that I’m quite certain she was older than 23, probably not a full-time student, and I think she had probably filed tax returns in the past. But she apparently had no idea what a standard deduction was or when it would make sense to itemize deductions.
After a few more minutes, she nodded that she understood the new deduction I was talking about. If I were a betting person (which I’m not) I’d be willing to bet my lunch money that she’s still totally clueless.
So I decided to write a series of blog posts over the next few weeks to help educate anyone who wants to learn a little bit more about their taxes. I don’t want anyone to be failing “Taxes 101.”
Got tax questions? Leave me a comment and I’ll do my best to get you an answer.
