What do Plumbing and Taxes have in common?
We have all heard the phrase on TV crime dramas: “He who represents himself in court has a fool for a client”. This concept applies equally to your taxes. Which leads me to my plumbing project. If you think there is no connection between my plumbing and your taxes, think again.
When my kids were younger, we wanted to modernize their bathroom without a complete remodel. The first priority was to swap out old faucets made of the kind of plastic that turns yellow. When my wife and I agreed, we then disagreed (married readers will understand). She expected me to call a plumber and I was expecting to do it myself. How difficult could it be? Initially, I prevailed and was committed to proving her wrong. We picked out the replacement faucets. I went back home and, armed with my tool chest, proceeded to scope out the project. It should be noted that I seldom used my own tools, and trepidations aside, it was too late to turn back. “I got this!” was my valiant refrain, that is, if I could find a wrench that would fit underneath the sink. After 30 minutes of futility and frustration, I tried disconnecting the faucets from the top, only to see, to my horror, the plastic break and water start gushing everywhere. Only then did I suffer the indignity of asking my wife to shut off the water main, after which I called a plumber. I was happy to pay to get it done right.
I assure you this cautionary tale is not meant to be self-serving. It is simply intended to share the conclusions I came to:
1. What seems simple on the surface could have several layers of complexity underneath that are not visible to the untrained eye. You don’t know what you don’t know. Literally.
2. You should not approach a task unless you are prepared and confident and have the right tools to do it properly.
3. Don’t do your own plumbing, or hair, car repair, construction, investments and especially not your taxes!
Most of the people we speak to that have tried to do their own taxes come to regret it sooner or later. Most of them call it an expensive lesson, their “plumbing story”, if you will. They also admit that saving money was their primary motivation. What appears to be a cost savings on the surface, is elusive and inevitably results in missed opportunities in the long run. That is the best case, assuming something doesn’t cause the IRS to send you that discrepancy letter, which we refer to as the “NastyGram”.
If you don’t already engage the services of a CPA, ask people you respect for a referral. Do they have to be a CPA? No. The CPA (Certified Public Accountant) is a credential which enjoys broad public trust, as evidenced by experience, education and an exam, but there are other credentialed tax professionals out there, such as EA (Enrolled Agent) that can be very good as well. More important than the credential is this person’s level of care and empathy for you, your needs and strategic concerns.
The benefits, both tangible and intangible, to using a Tax Professional more than outweigh their cost. It is important to distinguish between the mechanical process of filling out a tax return versus working with an objective advisor who can be part of YOUR team and collaborate with your financial planner, attorney, insurance and mortgage professionals and bankers, and integrate and align their advice to your financial strategies. The more financial complexity you have, the more important it is for you to do this.
As always, we are here to help if you need us.