Taxes Like A Normal Person

After spending several hours figuring out the correct profit/expense allocations for each lot of GLD purchased from 2006-2009 (you don't want to know the details, but it involves calculating how many OUNCES of gold you owned at any given time, and how much was sold to pay expenses, and converting this back into a dollar value for every month for several years, for each lot purchased), I came across a problem when reviewing the trade confirmations. Because of wash sale rules, you have to transfer basis between lots. But to do that when the basis is based on a commodity weight and not just dollars would be very complicated indeed. So I just decided to not do it.

It was getting late last night, and I had a moment of clarity. I decided to just do my taxes like a normal person, not like a tax partner in a large accounting firm.

A normal person would not even CONSIDER calculating the correct basis in their gold ETF. The instructions in the forms provided by the ETF company would not even look like gobbledy-gook to them, because THEY WOULD NOT HAVE DOWNLOADED THE TAX INSTRUCTIONS from State Street. I've been trained to be on the lookout for this sort of thing, but I'm sure normal people don't go looking for extra legal documents, they just take whatever their brokerage sends them.

A normal person would not even know if TurboTax was making errors in their return. So I just made sure that I checked off all the boxes I was supposed to check off, and didn't have any overrides, and will just rely on TurboTax's guarantee that if the IRS finds a problem that is the fault of the software and not user-error, then TurboTax will pay the penalties. We get audited pretty routinely, every couple of years I have to deal with an IRS agent. Every time, they find no adjustments necessary, so they really don't cause me any anxiety, but they are a big nuisance and irritation to me.

I read the exclusion rules for homeowners several times (it's only a few paragraphs), and it seems that we won't even owe tax on the sale of our condo in New Jersey. It says right on their website that they follow the Federal rules, and we get the exclusion for Federal (at least, according to TurboTax, and I did input that only Terry met the residency requirements).

I don't have the same feeling of satisfaction I get when I know a very complicated set of tax returns is lock-down no-errors perfection, but I'm satisfied that it's better than any normal person would have done, and better than a lot of professional tax preparers would have done, too. Maybe not as brilliant a package as my old compatriots at Arthur Andersen would have put together for me, but this year's return would've cost me several thousand dollars to send it out to them (if any are still in the business, I think most moved on to corporate jobs), so I just suck it up and do the work myself.

At any rate, I just efiled the Federal return, and when W wakes from his nap I'll take him to the library where I'll make copies of the state returns and mail them from the post office. As an added bonus, I just applied my refunds to my 2010 taxes, so I can skip preparing the final estimated payment.

Maybe, just maybe, I'll actually file my 2010 taxes by April 15th of 2011. I'll have to see what K-1s I need to wait for (they are usually not available until March), but I haven't been trading too actively this year, things should be simple. Well, simpler. I did start trading options, which have their own set of tax rules which I don't know yet. Sigh.