The answer is “yes.” The cost of male-to-female or female-to-male operations may be a legitimate tax deduction.
Here’s another one for you: It’s possible to take a tax deduction when you lend money to someone who then defaults on the loan.
And did you know that if you foster an animal from a nonprofit charitable agency you can claim certain expenses on your tax return?
Me neither. But I don’t feel bad about it, because the tax code is well-nigh impenetrable. When the NerdWallet personal finance site surveyed 1,015 U.S. residents last month, the average score was 51 percent.
In other words, we flunked IRS 101.
“The U.S. tax code confuses the average American, and that confusion can be costly,” says Shiyan Koh, general manager of NerdWallet’s Ask an Advisor.
“It’s clear that consumers need to search out the best expert advice to steer through thorny tax questions that hit their pocketbook.”
Interested in taking the 10-question quiz? Go for it, but remember that I just gave you several answers. Be honest: Would you have known them on your own?
Don’t pay more than you must
I gave myself points for knowing that – as counterintuitive as it sounds – gambling losses may be deductible. But I wouldn’t have had a clue about the pet-fostering, the unpaid loan and sex reassignment surgery being deductible.
That’s why I’m with Koh: It pays to seek out expert advice. For some people that means tax preparation software. For me, a full-time freelance writer, it means talking at length with my friendly enrolled agent at H&R Block. Last year the lovely and talented Joshua explained the pros and cons of different corporation types and what would best suit my current needs.
He showed me how to get set up as a limited liability corporation, and went to bat for me when the IRS thought I missed a filing deadline. It took three letters, but he fixed it. Joshua also walks me through my payroll and quarterly tax filings.
Could I have learned all this on my own and/or with tax-prep software? Maybe. I prefer to do it this way, because it’s good to have a calm and rational person just a free e-mail away. (That was especially useful when the second and third “you goofed” letters came from the IRS.)
Point being: Unless you’re a super-smart tax nerd, get help from some source. Otherwise you may be shorting yourself some dough.
Readers: Do you use software? An accountant? A tax preparation service?
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I use Turbo Tax. Fairly simple taxes and I’m a retired IRS agent. I can handle my own. I have also prepared taxes professionally from H & R Block up to CPA firms.
Accountant
I’m self-employed and we use an accountant, which came in handy last year when we got one of those “you goofed” letters from the IRS. Contacted the accountant who did up a reply letter for us, and then after that we got an apology letter from the IRS!
The first year we were married, our tax situation changed a lot and we ended up owing a good chunk of change. For our emotional health, we let someone else (accountant) do the paperwork.
I have always let someone else do my taxes. I try to keep up with the deduction changes but as you said….it is confusing. It isn’t that we have tons but I want to keep what is rightfully mine!
That’s what the guy who does my taxes says: That he would never encourage anyone to avoid taxes or to play fast and loose with the rules, but neither does he want them to pay any more than they must, i.e., they should use every legal method to keep what’s theirs.
My taxes are simple. I use a retired teacher who charged me $70. Next year I might do them myself.
It helps if you live in a state that does not charge tax on SS or a state funded pension. Check all of these out before you move. My last state taxed everything and I wound up owing every year. This year I am getting a refund.
Enrolled agent. Sold a second residence with carry-over loss. Home part-time business and now added some social security income. She is probably saving us more than the amount of her fee by knowing the ropes.
That does sound complicated. And yeah, the EA who does my taxes is a godsend. All that stuff I mentioned — writing letters, doing my (one-person) payroll, making sure I get the quarterlies paid, answering questions throughout the year — is stuff he does for free. I just hope he doesn’t retire before I do…!
I’ve already sent everything to an accountant. I will probably keep doing this for as long as I have a rental property, but this year in particular it was important due to a couple weird items. I don’t want to deal with the IRS without help if I can avoid it.
Our taxes are very complex because we have two LLCs, self-employment, and some rental properties. If I did our taxes, we would be screwed! My husband is still doing them at this point, and I feel confident he is doing them well. That could always change in the future as things get more complicated.
I’m with other posters… use an Enrolled Agent. We have a guy who does our taxes, plus the kids’ (very simple) returns, and he’s worth every dime we pay him.
On another note, I think it’s a crime that reasonably intelligent, literate people can’t penetrate the tax code. It is ridiculous that there’s so much minutiae in what should be pretty straightforward.
Wouldn’t even THINK of trying to do my taxes myself. Accountant is just winding up my personal and corporate returns…she has forty more to go and is about to fall over face-forward with exhaustion.