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Posted by Null Protocol on 2006-04-16 21:46:11 +0000

bring on the flat tax. the first 600 or so people listed in the NYC phonebook would run things a lot better than what we've got now...

Posted by dawnbixtler on 2006-04-17 00:21:27 +0000

huh?

Posted by Null Protocol on 2006-04-17 02:25:06 +0000

No one understands the current tax code - its time to try something else.

Posted by dawnbixtler on 2006-04-17 02:35:16 +0000

I think I understand the tax code. I do my own taxes and will continue to do so. It's quite simple, broken down into credits, exemptions, and deductions. Honestly, what part/s don't you understand? (Sorry if I'm being overly educational.)

Posted by dawnbixtler on 2006-04-17 04:28:20 +0000

Note: I don't own a house and am not married, and those things do make it a bit more complex.

Posted by tendiamonds on 2006-04-17 13:27:21 +0000

...and you don't have a dependent! We paid someone to do our taxes this year. I did nothing, and got my refund months ago.

Posted by tgl on 2006-04-17 14:08:30 +0000

How about finding the basis for your capital gains on a mutual fund that was originally a gift. Said mutual fund having had additional money added to it since the initial gift, then having the fund being sold off and rolled over into a Roth IRA account? The rollover into the Roth IRA not occuring all at once, mind you, to keep within the yearly limit. Suppose there was an excess contribution during the year the first rollover occured? Then how do you deal with the recurring penalty of an execss contribution to an IRA? It is straight forward to calculate the cost-basis, however, the assumption I made about the value of the gift may or may not be correct. A tax professional may have helped. Now that I itemize deductions, it could be helpful to have someone tell me what sorts of things I can deduct beyond your customary mortgage interest payments, charitable donations, etc. I'm not even an S Corp.! Not all of it applies to individuals, but shit's big.

Posted by Null Protocol on 2006-04-17 17:24:20 +0000

From Last Saturday (april 15th' s) WSJ: Fear of Filing It's April 15, and the alternative minimum tax means many unhappy returns. Saturday, April 15, 2006 12:01 a.m. EDT The mere mention of today's date on the calendar gives the shakes to millions of tax procrastinators. So we're sorry to report that this filing year the complexities of the tax code got a whole lot worse--especially for the record number of Americans who will be ensnared by the dreaded alternative minimum tax, or AMT. You know the tax code is headed toward a train wreck when Republicans and Democrats on Capitol Hill--who don't agree on much of anything these days--have both concluded that this shadow tax system must be scrapped. The AMT was originally designed by liberals in 1969 to snare a few of the nation's super wealthy who had stashed their fortunes in tax shelters. But it has evolved into the tax version of the blob that will soon swallow up nearly one of every three tax filers--most of whom are not rich at all. (See the chart nearby.) Americans are expected to cough up $1.2 trillion in AMT payments over the next decade, or more than the entire income tax now collected in a year. Within 10 years, the AMT may be collecting more revenue than the regular tax code. Our biggest objection to the AMT is that it is patently dishonest. First Congress uses the tax code to gain political credit by offering tax write-offs for social and economic behavior it wants to reward: buying a home, rearing children, driving a hybrid car, donating to the Salvation Army, caring for senior parents, creating savings accounts, and on and on. But then the same politicians use the AMT to snatch those benefits back, since the AMT typically hits taxpayers who claim many of these credits or deductions. Taxpayers who have many children and live in high-tax states are especially vulnerable. We don't favor using the tax code to influence behavior in this way, but millions of families make decisions in part because those tax credits exist. The AMT is an enormous revenue bait-and-switch. Even the very name is fraudulent. The AMT should really be called the mandatory maximum tax. Filers must first tally their tax liability under the migraine-headache inducing standard IRS tax forms. Then when they're done with that delightful exercise, they must fill out the AMT forms and figure their liability under that system. It is by no means an "alternative" (which connotes a choice) and also isn't a "minimum" tax--since you have to pay the maximum of the two. So what is to be done? Some say scrap the AMT altogether, which would be fine by us. But if one of the two tax systems has to go, why not abolish the standard tax code? Any rational person looking at these two tax systems side by side would conclude that it is the standard IRS code with its multitude of loopholes and complexities that should be tossed into the garbage heap. Including its implementing rules, the standard tax code is now estimated at 60,000 pages. Last year six out of every 10 tax filers were so intimidated they had to hire a professional tax preparer to figure out how much they owe. Things are so bad that some psychiatrists are trying to get "fear of tax filing" designated as an official medical disability. The Tax Foundation calculates that all of this complexity imposes an enormous deadweight loss on the U.S. economy of some $250 billion a year, or almost 20 cents of compliance costs for every dollar raised. Tax compliance this year will cost more money than is paid in income taxes by every resident of California. And despite political promises of simplification, the tax-code tinkering gets worse every year. President Bush's tax-reform commission reported that, since the 1986 reform, Congress has added 15,000 new and mostly special-interest provisions to the code. Another deadweight cost of all the carve-outs and dodges arranged by Washington's corporate lobbyists is that tax rates have to be roughly twice as high to raise enough revenue to operate the government. These high tax rates are fiscally self-defeating because they distort and discourage economically productive behavior and thus shrink the tax base still further. The current AMT with its 12-line worksheet and 55-line form is no walk in the park either, but its fundamental structure roughly resembles that of a flat tax. There are two rates: 26% and 28%. There are virtually no allowable deductions except for the first $45,000, which is not taxed. And the eight pages of instructions are much simpler than the hundreds in the "how-to" manual for the standard code. So how about this idea for creating a comprehensible and pro-growth tax system? Don't scrap the AMT, fix it. Lower the AMT rate to 20%. Exclude all income from saving and investment that has already been taxed once. Simplify the form so it fits on a postcard and resembles what Steve Forbes and Dick Armey have proposed with their flat tax. And then abolish the standard IRS code and hold a bonfire celebration in front of the Capitol to burn the tax forms, instruction manuals, and IRS documents. Or if this is too radical, at least create a genuine "alternative" tax code with real taxpayer choice. Convert today's AMT into a postcard tax form and then give every taxpayer the option of using this system or the 1040 forms. For those who want to keep their home mortgage deduction and their child credits--by all means let them stick with the current system. But giving taxpayers a flat tax option would create a genuine alternative minimum tax. The lower tax rates on work and investment would do enormous good for American businesses and workers. And it might even make April 15 just another pleasant spring day.

Posted by tgl on 2006-04-17 17:26:39 +0000

The AMT is probably the single worst aspect of the current tax code.

Posted by Null Protocol on 2006-04-17 17:48:27 +0000

here, here. As said above, nothing alternative or minimum about it.

Posted by dawnbixtler on 2006-04-17 21:06:13 +0000

Adding a dependent is very simple, 10D.

Posted by dawnbixtler on 2006-04-17 21:22:28 +0000

I find little in the WSJ post that says no one understands it, in fact I understand the AMT better after reading it. Yes, 1040s take some time to complete, and there are hundreds of loopholes put in by sleazy politicians, but it's pretty clear each step of the way. I understand some people are terrified by it, but they understand it. TGL, it is my understanding that you have to pay capital gains on a mutual fund gift (a gift less than $5K, gifts over 5K do get tricky with pro-rating), unless it is a municipal fund. Since it's a Roth IRA, you've paid taxes including gains to the new contributions, and I'm guessing excess contributions are penalized for said year only. I've never ever been fortunate enough to have that a problem. Did you sell off the fund all at once, or keep it in a CD and pay out the maximum for the year?

Posted by Miriam on 2006-04-17 22:56:23 +0000

I just filed for an extension.

Posted by Null Protocol on 2006-04-17 23:53:37 +0000

again, this time in bold: Any rational person looking at these two tax systems side by side would conclude that it is the standard IRS code with its multitude of loopholes and complexities that should be tossed into the garbage heap. Including its implementing rules, the standard tax code is now estimated at 60,000 pages. Last year six out of every 10 tax filers were so intimidated they had to hire a professional tax preparer to figure out how much they owe. Things are so bad that some psychiatrists are trying to get "fear of tax filing" designated as an official medical disability. The Tax Foundation calculates that all of this complexity imposes an enormous deadweight loss on the U.S. economy of some $250 billion a year, or almost 20 cents of compliance costs for every dollar raised. Tax compliance this year will cost more money than is paid in income taxes by every resident of California.

Posted by tgl on 2006-04-18 02:32:39 +0000

I have to agree with db in that the tax code is written out and any person with the wherewithal to follow the code can properly fill out the forms. So, in that way, the WSJ has not adequately explained why the tax code is difficult to follow. Yes, the daunting task of finding what you need within 60,000 pages adds complexity. Diffifulty isn't in applying the rules that fit your situation, it's finding them. Since I'm mostly concerned that I'm paying my fair share, and less concerned about finding every loophole, I guess I don't find tax day too daunting. As always, I'll take the moderate stance between db and NP on this one... Funny that the WSJ, which supposedly caters to a "business" crowd is advocating the desctruction of the tax consulting industry. Or that they are playing up the psychobabble "fear of tax filing" angle. My basic problem is that I don't have the wherewithal to find relevant information. I can't get by with just the 1040 form. I need schedules and amendments and what not, it's difficult to track down all the forms. Which is more to do with laziness than complexity of the code. I've used H&R Block's online preparation service for three years now, and I'm happy with the results. I'd just as soon overpay on my taxes (I currently choose the optional higher tax rate n MA, which puts me in with about 930 others.) So, the worry about finding loopholes or squeezing out every deduction is not highest of my priorities.

Posted by tgl on 2006-04-18 02:44:32 +0000

Say I was given the gift of the $5K mutual fund. Is the basis for determining the gain or loss $0 or $5K? I choose $0. I think that's the right thing to do, the 0-basis means I would pay capital gains on the fulll $5K or whatever the value whenever I sold all of the fund. I'm not certain that I could have taken a basis of $5K or a portion thereof. It feels like I did the right thing, but we know that the tax code is not predicated on "the right thing".

Posted by Null Protocol on 2006-04-18 11:06:38 +0000

You don't find that the figure of 6 out of 10 Americans hiring someone else to do their taxes is an indication that our tax system needs change? I'm sure as a counter argument, people will tout the laziness of the typical American. That's all well and good, and I'm sure if I sat down for extra time every week or so, or followed the IRS.GOV website occasionally, I could do my own taxes. But why should it be so time consuming? I have such a finite amount of time with Jackie and Maddie and all my buds as it is. Dedicating more of my life to the IRS ain't gonna happen. A flat tax is the way to go, but dismantling the current tax system will create outcries from those that make their living supporting the current tax infastructure - just like you get static from the tolltakers when you suggest dismantling the tolls.

Posted by cdubrocker on 2006-04-18 11:39:54 +0000

They always screw partial-year residents. Bastards!

Posted by tendiamonds on 2006-04-18 12:14:58 +0000

No it's not. The _filing_ of a dependent is simple. We ended up getting a rather hefty refund, which means we fucked up our deductions for the year. I've been talking to people here in similar financial situations as to how best get our refund down to zero... the nutty shit you hear. Some people claim no exemptions, and then mark a strange additional witholding number that they calculate with a magic wand, or MATLAB... If I fill out the withholding form straight up, it tells me to put down 4 exemptions. If I use the web quiz on the IRS page (which I did with an HR person at my company) it tells me to claim 7 exemptions, plus an additional $2 per paycheck... I have no idea what to do.

Posted by tgl on 2006-04-18 12:20:08 +0000

Americans as a rule out-source most of the tasks that were normally done themselves. How many people buy prepared foods or take out as a majority of their meals? How many did so 30 years ago? The use of consultants is not directly related with the complexity of the tax code. You can't draw a direct relation between the two. I think a bigger reason so many people use consultants is driven by the desire to lower their tax burden. Which is a fair use, not necessarily driven by the complexity of the tax code. For example, knowing which items are deductible are not necessarily complex in and off themselves. If people weren't concerned about being overcharge, a person could add up their incomes (wages, interest, dividends), add your capital gains (or losses), make the standard deduction or of mortgage interest and charitable donations, multiply by 0.265 and send in the check. There is nothing hard about that, and would keep you from being charged with tax evasion. People don't use consultants because their befuddled, they want to lower their taxes. Or their father's pay for the service (you know who you are...). I support a flat tax (on all income above $45,000) not just because it's a simpler system, but because it removes the incentives for finding loopholes in our current system. Low tax revenues due to overzealous consultants is more a problem in the corporate world, tax evasion via these loopholes has substantially lowered revenues the goverment desperately needs.

Posted by G lib on 2006-04-18 15:23:08 +0000

tgl wrote: Low tax revenues due to overzealous consultants is more a problem in the corporate world, tax evasion via these loopholes has substantially lowered revenues here here! Even Chippy who a. likes to do taxes (kinda) b. is good at keeping the details in order went to H&R Block this year. I think it was befuddlement more than anything else, for both of us.

Posted by Miriam on 2006-04-18 16:03:11 +0000

Big time! I also couldn't figure out how to actually file my taxes online. That was more stressful than gathering all the info I figured I needed. Took my almost an hour to file for the extension.