I have just paid my biggest bill of the year. The invoice was for a cool 9% of my entire annual income – or my “Adjusted Gross Income” (AGI) as it appears on my tax returns, which have just been filed. And that invoice was from my accountant who just filed them for me.
I have a pretty modest income – so modest, in fact, that my AGI is of the order of a half of the median household income across the United States – the kind of income that triggers significant subsidies under the Affordable Care Act. Even the “top line” of my income falls short of that median: so it’s not as if I’m earning loads and deducting huge amounts.
My financial life last year was pretty simple: my earnings derived from a modest real estate portfolio and some freelance/consulting work. My income is earned through my small business, which, for those who know about these things, is an S-corporation. I have no employees. I do no payroll.
Yet, I have just paid my accountant more than a month’s worth of income to complete my tax returns.
How many pages of tax returns do you think that I, a single individual, and my S-corporation (a small business) had to file, bearing in mind the small amount of income in question?
Frankly, there’s no good reason the answer is not one or two. But you already know the answer is more than that, don’t you?
Ten? Try again.
Twenty? Keep going.
Surely not 50?
You’re still not close.
Did I hear you say 100 – you’re going for three digits now? Wow.
Still not there.
The answer, my fellow American tax victims, is 149.
Just take a moment to absorb that. A sub median-earning American taxpayer, engaged in simple business activities, has a 149 page tax return. And if he doesn’t get it right, his error is punishable. Of that 149, about 100 go to the Feds.
Completing 149 pages of tax forms/schedules/supporting statements is a lot of work. And I know exactly how much it is, because of that big invoice from the accountant that I already mentioned.
It’s $2000 of work – my aforementioned largest bill of the year. And it’s $2000 of work I in no way could have done myself.
I’m no high school drop-out. I have a first class degree in physics from one of the best universities in the world. I like numbers. I like logic. I like intellectual rigor. I even have a nerdy love of spreadsheets (which tells me, for example, exactly how much I spent on groceries this month five years ago ($173.41, as it happens. I’m low-maintenance)).
But I could not reverse engineer those 149 pages of tax returns if my life depended on it. And I would defy anyone without a CPA qualification to be able to do so.