Saturday, March 24, 2012

Taxes: You're Doing Them Wrong

Now that I've officially begun as a freelancer (photography is but a subset of what I do--the main bread-and-butter operation is copyediting), I enter the world of Dutch tax forms and all their insane, crazy, and confusing glory.

Oh. Sorry. My apologies to the Netherlands. I meant US tax forms.

Something that I never did truly appreciate up until now was how simple Dutch tax forms are to fill out. At the end of the year, most people receive a jaaropgaaf from their place of employment, which contains just four numbers. When you do your taxes in the Netherlands, you basically match up the four numbers on the forms with the four names on the online form, and (assuming you haven't made any significant investments or bought a house or had a baby) click through the entire form in about 10 minutes. If you have made significant investments/bought a house/had a baby, clicking on the box next to the scenario leads to a drop-down menu, in which you can enter in relevant data. What you do need is a working DigiD account to complete the form (it's sort of like the electronic PIN you get when you take out money for your student loans), but even that's relatively simple to arrange.

As a small business owner, though, perhaps the nicest part of doing taxes is that the Belastingdienst has made every effort to simplify the tax forms I need to fill out, to the point where, even though I don't know what half of the words mean, I can still enter in the right numbers (mostly--adding and subtracting have always been a bit iffy). And furthermore, rather than putting any onus on me to look up the right form to fill out, the Belastingdienst sent me the form, with directions, and a self-addressed envelope. It was mind-bogglingly-simple, so much so that I felt sure that in my mess of papers (looking up receipts and all makes everything a bit messy) some monster tax form was about to rear its ugly head.

Contrast this with the US: when you go on the IRS website, the section on internationals gives you a screen filled with small type, most of it highly legal-esque. Do I qualify for this exemption? Do I have to fill out that form? Clicking on the forms leads to a PDF rather than an explanation. The PDF, granted, does have an explanation: "Fill this form out if you meet conditions A, B, C, D, but not if you meet conditions E, F, G, H." It's positively Vogon-ish, compared to the simplicity of the Dutch system.

And then there's the fact that if you don't have a W2 ( = jaaropgaaf, but with more blocks and inked in bright red), you can't use the relatively simple online software to zip through your taxes. The Dutch government gets around this by (sensibly) not requiring citizens living abroad to contribute to its coffers. The US government is the only industrialized nation that requires its citizens to keep paying income taxes even though there really is no way to do it properly once you leave the land of the "free" (used ironically, as I am a woman and the uses of my uterus can be legislated by creepy white guys). Up until now, when I had been a regular working stiff, things were relatively simple, but now that I'm a small business owner (even if it goes belly-up) it gets infinitely more complicated. I'm sort-of-jokingly-considering renouncing my US citizenship, just so I won't have to deal with the IRS. Several millionaire expats have done just that, actually, since their tax burden has gotten too onerous to bear. Happily, my income falls well short of that bracket, but there's still the question of whether I can do my own taxes correctly.

Is it the government's responsibility to make things easy? I don't know, and given the vitriolic tone of recent US politics, I don't particularly care to venture an opinion. But what I will say is this: if you make it look easier, people are certainly more willing to try, and more likely to succeed. I think the Dutch government got it right: you shouldn't need an accounting degree to do your taxes properly, which is something that seems to have escaped the IRS.


  1. I agree with you that the Dutch tax forms are very easy: they remind me of the Forbes "it should fit on a postcard" doctrine. Three additional points:
    -- The 30% rule is golden if you qualify. Not only 30% of income, but exemption from Box 3 tax on worldwide asset value (eg: a home in the US)
    -- VAT refunds and small business tax rebates are important, and an accountant pays for itself (and my time) to get them. (For example, Lease car rules are massively changing in July).
    -- If you're American, you still have to file US taxes too, and the lag in completing business accounts in the Netherlands means that you can't finish personal filings until October. File for an extension in April.

  2. I've already filled out my forms for 2011. The business didn't start until this month, so I'm counting it as 2012. But good to know about the need for the extension, thanks!

    Definitely am going to get an accountant to do my business taxes in 2013...I'm pretty good about keeping track of my business expenses and getting VAT refunds and what-all (that was surprisingly simple) but I agree that just because it's easy doesn't mean it's simple...

    I know I qualify for the foreign tax exemption, so I'm just taking that. I'm too poor for the IRS to screw over :-D

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