AskDong

I finally got around to filing my taxes for 2008.   I generally owe taxes, so I’m never in much of rush to file them.  Every year, my taxes become more complicated to my general displeasure.   I’m happy to pay my fair share in taxes.  I don’t feel unjustly burdened by the actual amount of taxes I pay, but I am becoming more irate about the overly complex tax code.

I accept that much of the added complexity is of my own making.  My taxes have steadily gotten more complicated over the years.   When Ifirst graduated from college, my taxes were blood simple.  I didn’t have a mortgage, owned nothing in terms of stocks, and had no money on which I earned interest.   Today, it’s a much different story:

1. I have a personal mortgage
2. I sold over 20 different securities last year (mutual funds, stocks, options, etc)
3. I earn taxable interest, federal exempt interest, and federal and state exempt interest
4. I own a rental property
5. I have business income - I earn about $40 a year from AskDong.com
6. I’ve steadily increased my charitable giving

Printed, my taxes were over 45 pages, and my taxes could easily be more complicated.    I’m single and I have no dependents, which automatically makes my taxes more simple.   The Alternative Minimum Tax does not apply to me.    Even with the rental property my taxes shouldn’t be this complex.

The problem is the tax code has become increasinly obtuse with every passing year.   Half of my taxes are taken up by calculations that only determine that I don’t need to make those calculations.  Student interest has not been a deductible expense for me in years.   As my salary has increased, I’ve given up more and more deductions.  I’m OK with not having those deductions.  What I’m not OK with is the shoddy and fragmented tax code that all us have to spend undue hours wrestling with.   There are too many different phaseouts for far too many different deductions.

Policy makers have fallen in love with carving out different pieces of tax code with the best of intents, and pitifully poor execution.  Who doesn’t want to encourage higher education with deductible interest?  Phasing out that deduction make sense as it should only be benefitting those who really need a leg up.   I may not have a problem with each specific aspect of the tax code, but taken as a whole the tax code is bloated and confusing.  

I spent about 4 hours this past year doing my taxes, not including all the time I’ve spent over the past year making sure I had records.  There are deductions I missed because I couldn’t find receipts.    There are dates for stock purchases I had to make my best guess on because I no longer have exact records.    At the end of the day, I’m very conservative with my taxes.  I’d rather pay slightly more in taxes,  and despite TurboTax indicating I have a very low audit risk, I still  worry about it.  

Taxes should not have to be as complicated as it has become.   I’ve always believed the better the tax code the simpler it is.   Lump all deductions in one category.   Phase all of them out as necessary, but all at once instead of provisions hitting at different points.  Better yet, increase the standard deduction so that most people don’t even have to worry about deductions.   Unify all the different retirement vehicles so everyone gets X dollars to invest tax deferred (401k, IRA, Simple IRA, etc) and Y dollars tax free (Roth).   The Government needs to tackle the issue of Tax Reform, not because it needs to raise or lower taxes, but because it needs to make the tax code understandable and more accessible to the average tax payer.

Despite my rant against Citibank the other day,  I’m pretty glad I bank with them today.   I just booked a flight on JetBlue from Boston down to Washington Dulles on Easter Weekend using Thank You points earned primarily though my Citibank account.   I had been pretty grumpy about traveling down that particular weekend because a flight that would normally cost me under $150 was running in excess of $250.   Prices have since come down since I did my original search, and now I can get down to Washington DC for a little less than $200.   However, the flight the following week is even cheaper, at less than $150.

I had never booked a flight through the Thank You Network before.    I was very impressed.   One of the network partners is Expedia, and as a result it looks like any flight that’s available on Expedia is also available through the Thank You Network.  The cost of a flight is not fixed.  Thank You points are effectively treated as dollars (on a 1000 points to a dollar ratio).  As a result the flight I booked cost me a little over 24,000 points for a flight that was about $240 booked independently.    I prefer the flexibility of point system when used actually used reflect real flight costs.   With frequent flier miles, I feel restricted in how I spend those miles.   I only book flights that make the most economic sense since a flight to Florida would use the exact same miles as a flight to Sioux Fall, South Dakota.  I would never book a fight to Florida with miles because those flights are typically very inexpensive.

I got good use out the Thank You points.  Additionally and especially because of the less than ideal financial situation that Citibank is in, using points now instead of later makes much sense.  Citibank could change the payout ratios.   Worst case, Citibank if it were nationalized, might choose to reneg on all Thank You point obligations.   By using the points today, I bypass this uncertainty that exists with all loyalty programs.  It’s almost always best to use points as soon as you can - it’s not like I earn interest points in my account.

I spend more time than the average person looking at finances.   I like to think I’m pretty good at it.   At the end of the day, however, I’m not a particularly good accountant.

I’m still putting together my year end summary.  I keep monthly numbers that I can just add up, but I also try to make the effort of creating a cash flow summary using annual numbers.   Currently the two numbers do not jive.  I’m off not by a few dollar or even a few hundred dollars.  I’m off by a few thousand dollars.  Not good.

I don’t think I’ve misplaced any funds, and am even pretty sure what the source of error is.  I don’t balance my checkbook.  I never have, and probably never will.  This is not to say I don’t track what flows in and flows out.  I do, and I have spotted anomolies that I’ve had to track down.  But, at the end of the day I don’t reconcile the transfers between my various checking, saving, and investment account.  I track some of them, and that’s part of the problem.    Because I have a haphazard tracking system, I’m never quite sure what I’m counting and what I’m not counting.   So as I go through my annual review, I’m having a difficult time making sure I compare apple to apples.

Despite the accounting irregularities, I spot an unpleasant trend:

I’ve basically increased in my spending across the board over the last 3 years.   My housing costs have gone up substantially this past year because I decied to buy the apartment that I was renting.   My variable spending and utilities (damn iPhone!) have gone up as well.  While my expenses are still below my income, I have to be first to acknowledge that I’ve been rather laconic with regards to managing my expenses and cash flow.  At the end of the day, I’m less upset that I’ve spent more money and more upset that I’m not sure how I’ve benefited.

I made a bit of boo boo on my trip to Europe with respect to my phone usage.  A mistake that might cost me as much as $24.95.   Before I left for Europe, I signed for AT&T Global Traveler Add On for my iPhone.  Data roaming internationally can be ridiculously expensive.   It’s not unheard of someone racking up a couple thousand dollars in charges because he or she doesn’t know better or isn’t careful.

AT&T normally charges  0.0195 $/kb for international data, while the data add on includes a base level of Megabytes (1024 kb to a megabyte), and lower overage rate of .005 $/kb.  Unless one uses less than 1281 kilobytes, an add on package will be markedly cheaper.  Below is comparison of the available data plans, and how the pricing works out.

On the chart, I’ve cut off the Y Axis at $2000, as seen on the table the charges for data can well exceed a couple thousand dollars.  I used about 10 MBs in the course of 9 days abroad.  Without the data plan, it would’ve cost me around $200.  Instead I paid $24.95.  It’s almost a no-brainer to get the data add on if one’s going to use data while traveling internationally.  Having used my iPhone in Europe, I cannot rave enough about how great it is to be able to access google and google maps abroad.  My phone got me out of jam more than once.

Sounds good so far.  I signed up for the data plan before leaving.  I picked the right plan, the smallest data package as I easily stayed under the data limit or so I thought.  The problems?  My billing cycle ended on January 2nd.  I left Europe the morning of January 4th, and I used my phone on January 3rd.  Nor is 20 MBs  always 20 MBs.

AT&T has a particular ways of charging it’s customers.   AT&T bills based on what packages are active at the time of producing the bill, not what packages may or may not be active at the time of the use.  While I believe I can cancel my add on package, the information I’ve found so far is vague enough to warrant some caution.  For travelers who traverse to more exotic locales, it’s a greater risk as it’s possible charges do not make it to AT&T until months later (as much as 3 months according to AT&T).  In addition to having crossed over into another billing cycle, I failed to sign up for the plan early enough.  AT&T prorates the megabytes in a plan according to the date that one signed up.  I signed up on 24th out 30 days in the billing cycle, and as a result I only got 6/30 or 1/5 of the total 20 MBs (4 MBs) free.  This last item, I didn’t realize until I did some research previous to writing this post.  In actuality, I was able to knock off those excess charges because I called customer service earlier today because I didn’t understand why I was getting charged.  The woman I spoke to was kind enough to make an adjustment to my bill.

I’m hardly the only one to be trapped in the quagmire of of AT&T billing, some have ended up with bills in the 5 figures.  International roaming is a cash cow for AT&T.  Individuals at least make an attempt to be careful (which I wasn’t careful enough), and call customer service after the fact if there is a problem.  Many users are corporate users who never ever see a bill.  These are the users that AT&T is likely making a killing off of.

I’ve been somewhat disappointed by the early numbers for holiday shopping season.   The season has started off strong.  While a strong consumer is important to economy, I’ve been hoping against hope that Americans were ready to turn a new page in it’s book of consumerism.   It seems however that Consumer Americanus is still going strong.  Though early indicators show that the beast has evolved into a bit more of bargain hunter.

Personally, I’ve yet to start my holiday shopping, but I plan on doing it soon.   I don’t enjoy shopping, and I’m not very good at picking out gifts.  I hate giving bad gifts and as a result to go immense pains not give bad gifts.   Of course, I’ve taken the easy route to avoid giving bad gifts - I limit my gift giving to the bare minimum.   However, I do have a few people on my list that I do have to get some gifts for.  This year, I want to do it early rather than late and get it all out of the way.

Left to my own devices, I’m likely to do all my shopping online.  As much as I don’t like shopping even for myself at a mall or department store, I find shopping for gifts in the crowd of the mall even more loathsome.  This of course might be attriubutable to fact that I’ve found myself shopping on December 23rd of 24th 3 out of the last 4 years.  Picking from the dregs is never very much fun.   Hopefully this year, nobody will find me at Target this year at 7pm the night of Christmas Eve.