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May 3  / Strategy
Thank You Tax Man
Taxes Paid Today


Death and Taxes

Both are inevitable, but sometimes its nice to think that maybe we can take advantage of little things. That is the case with paying my taxes.


Last year I did quite well with my investments. I know that the tax man is going to want his share and while I may not like taxes, there isn't a lot I can do about it, or is there?



All the previous year I was adding to my profit, but I never paid the tax man at all during the year. In fact, I didn't pay anything to the tax man in 2010 for 2010's earnings. I live in Canada so taxes are due by April 30 - or that's the deadline. But April 30 fell on a Saturday so the deadline is extended until May 2.


I therefore keep all my money working for the first 4 months of the year and then send in my taxes. My tax returns were all done a few weeks earlier, but I learned NOT to file my tax return electronically. Instead I hold onto my return including the check I have to send them for last year's income tax. I make sure I date the check April 30 but I do not put it into the mail until the very last day, which this year was May 2. I never file my return or pay the return electronically. I want to extend the time before they cash my check.


Some day that may end when governments demand electronic filing from everyone but governments in general are huge bureaucracies that are slow to change. They normally have to accommodate everyone including those who are still not using technology like banking on line, to pay bills and such. I'm counting on that being the case for many years to come.


By delaying my big payment until the very last day and then mailing it,  I am using the tax man's money to assist with my investing right up until the very last minute. It's certainly better than margin and doesn't cost me a thing in interest payments. Just remember when applying the tax man's money to trades, use it for safe trades that are far out of the money to reduce the chance of assignment.


There is nothing worse that using the tax man's money for the first 4 months of the year only to find out that I get assigned, need the cash and have to borrow on margin to pay the tax man.



So while like everyone I am not very thrilled with paying taxes, at least I get to use the money for an extra 4 months of the year. So I guess I can say Thank You Tax Man.




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