Simple poll: Taxes too complicated for individuals?

[Doc Savage Fan]

It appears that a majority of Republians are too stupid to figure out their taxes. I would have never seen that coming. :hmm:

I hereby nominate you for writing the most idiotic post of the day. But don't get your hopes up...the day is still young.

 

[dank69]

I hereby nominate you for writing the most idiotic post of the day. But don't get your hopes up...the day is still young.

I'm sorry I offended your delicate sensibilities.

And since that post was from yesterday, and yesterday is not young, I'll nominate yours for today.

 

[Lithium381]

I'm not talking about YOUR personal taxes, i'm saying the tax code. The 73,000 page monstrosity. Most of us here can fill out our own 1040. Ive got two incomes, and one kid and a house, other than that no deductions. But i'm creeping up on the AMT territory.

 

[Doc Savage Fan]

I'm not talking about YOUR personal taxes, i'm saying the tax code. The 73,000 page monstrosity. Most of us here can fill out our own 1040. Ive got two incomes, and one kid and a house, other than that no deductions. But i'm creeping up on the AMT territory.

AMT has now become a direct assault on the middle class....and neither party is brave enough to take steps to fix it.

 

[dank69]

I'm not talking about YOUR personal taxes, i'm saying the tax code. The 73,000 page monstrosity. Most of us here can fill out our own 1040. Ive got two incomes, and one kid and a house, other than that no deductions. But i'm creeping up on the AMT territory.

I count the word 'individuals' 4 times in your OP.

 

[Lithium381]

I count the word 'individuals' 4 times in your OP.

indivudual tax as opposed to corporate tax / CG

 

[FoBoT]

your poll is unanswerable without more realistic options, bias much?
repeal of the Sixteenth Amendment would be a good starting place on this issue

 

[MovingTarget]

It's rather ironic that (according to the poll results) the dimlibs seem to favor the complex tax code, when the increased complexity is exactly what allows those at the higher end of the income scale to set up schemes to reduce their tax burden. Loopholes and exceptions work best for those who can afford to pay for experts to figure out how to take advantage of them, not for the average Joe.

Some level of complexity in the tax code is a good thing. That does not mean that liberals/Democrats are opposed to simplifying the tax code. It just has to be done in an equitable way. As it is, most 'alternative' reform plans proposed by the right would have the us end up with a de-facto moneyed aristocracy.

 

[BonzaiDuck]

I suppose I have a smug reply to this. I have to allow for a disparity between what I can read and absorb in a given time, and whether others can keep up. It's not my fault -- I was just born this way.

Last time I got audited, it was for the 1983 tax year and the audit occurred in 1984. I think '83 was the first year I was using software to do my taxes. And that's really incredible, since it was early in the dissemination of the PC and before release of the PC-AT. Incredibly -- I think I was using a Sinclair-ZX-81 and a $35 program for it on casette tape.

About 7 years earlier, I had picked up an AA magazine in the couch section of a passenger jet. It summarized the computer selection and flagging of certain deduction items. Somehow, I retained that information, and when I was doing the '83 taxes, I noticed I was over the threshold on a particular item. So I literally anticipated a high chance of an audit.

I emerged from the audit -- terminated prematurely even though I asked the auditor to continue -- with the US Treasury owing me $175. For 80% of taxpayers undergoing audit, it is the other way around -- they have to pay something.

I migrated to Intuit Turbo-Tax around 1993. I figure it saved me at least a weekend of work, and if I'd been somebody else, somewhat more.

Couple years ago, the conservative blogo-sphere and news was pointing at Tim Geithner's failure to pay payroll tax on his World Bank income. In his testimony to Congress, he noted he was using Turbo Tax. I quickly understood what had happened: Geithner got to the point of the "interview" mode using the software where it asks "do you have income from foreign sources? [Yes][No]." He clicked "no" because he worked for a World Bank headquartered in New York. If he had selected "Yes," the payroll tax questions would've popped up.

It depends on the complexity of the individual taxpayer's situation, to answer the question "are they too complicated." Here, I tend toward "less sympathy." Unless someone's tax situation is volatile and changes from year to year, it only takes an up-front investment in time to do the research and become familiar with the details. Therefore, the following and succeeding years' taxes would be informed by the initial time invested, although the taxpayer would be wise to review the use of certain schedules to see if there had been changes in the law or court decisions affecting choices with those schedules.

Add to this the computer software, the "friendly interview mode" and e-filing -- and like I said -- my sympathy is a bit short.

A lot of people who are PC-savvy still choose to pay a tax-preparer. A tax-preparer may charge as much as $500 per annum. And people with modest incomes who must complete more than the short form or use schedules in addition to Schedule A may bristle at the expense.

IRS could make it easier, even for their huge library of on-line publications. For instance, if you had a home from which you moved and kept it as a rental/investment property, the mortgage interest deduction can be puzzling. To get the clear picture, one has to read excerpts from three different publications, each at least 50 pages long with small print in three columns on each page. Portions of the mortgage interest applied to auto or household purchases under refinance are not deductible on Schedule E but deductible on Schedule A. However, Schedule A must meet a threshold before the schedule becomes preferred to the standard deduction. I imagine a lot of people take their end-year mortage interest statement and apply it to a rental property without thinking further -- claiming a deduction in excess of what is proper.

So just for that example, you'd think IRS would merge the material in the three publications to produce some handbook for novice rental-property taxpayers.

 

[Lithium381]

your poll is unanswerable without more realistic options, bias much?
repeal of the Sixteenth Amendment would be a good starting place on this issue

thanks, that's been said. I don't know how to edit my poll, sorry.


Really? Repeal of the 16th? do tell.

 

[CPA]

Can you give an example?

That's easy, just check out the numerous threads in OT about the tax-ability of receiving a gift. It gets frustrating to have to remind folks the person giving the gift could potentially be taxed, not the one receiving it.

 

[woolfe9999]

Anyone who thinks taxes aren't complicated either a) doesn't pay taxes or b) pays someone else to do their tax return and is unaware that their tax returns are wrong.

Basically - no matter how you fill out your taxes, you are wrong. Even if you call the IRS with a tax question, you can ask 5 different people, get 5 different answers, and they are all wrong. The only thing keeping you out of jail is a) the random chance of not getting audited and b) how much your particular IRS auditor thinks you are wrong by and how you go about paying their ransom money.

Nonsense. I've done my taxes every year since I started paying them, and that's a lot of years. I've only gotten it wrong 3 times. 2 of those times I was entitled to a refund that I hadn't identified, and the IRS sent me the refund in spite of my calculation to the contrary.

Jail is an extremely rare occurrence. You are generally given multiple chances to pay before that will happen.

That said, I'll concede that tax preparation is complicated for people who are in two categories: 1) are poorly educated/stupid/math challenged, or 2) people who have complicated portfolios, typically the wealthy but sometimes middle class. Such people may require assistance with preparation even if they aren't stupid or math challenged.

- wolf

 

[BonzaiDuck]

That's easy, just check out the numerous threads in OT about the tax-ability of receiving a gift. It gets frustrating to have to remind folks the person giving the gift could potentially be taxed, not the one receiving it.

With your "handle" on these forums, you should probably find a way to use this forum to provide tax advice. Then, charge less than the standard "Turbo-Tax Advisor" $40 per incident. After that, I could become your assistant . . .

There is more to doing taxes than completing the forms or even reading the IRS publications. If perception is 90% of "reality," I also suspect that people confuse their own responsibilities with those of either IRS or tax-preparation itself.

A business is responsible for its record-keeping. A "serious" business needs to do good record-keeping for score-keeping, planning and other functions -- so there are innate reasons to doing it that have nothing to do with taxes and tax preparation.

Similarly, individuals need to "own" their responsibility for record-keeping. Yet, I suspect that many irate taxpayers blame the IRS because they're required to do what a business does: maintain an orderly file of source-documents. Turbo-Tax or no Turbo-Tax, short-form or long-form -- that's about half the work. If you get caught in an audit sample and don't have the source-documents to back up your tax return, it's your own fault.

The tax-code, that's a different issue as it pertains to giveaways to businesses, obtuse loopholes and other things that got into the tax-code when some lobbyist went to a congressman, the congressman went to a committee, and the legislature passed some mutation of the tax-code when half the people in the congress didn't think sufficiently about what they were voting for.

I and several tax-advisors and preparers I've talked to blame the Bush administration for understaffing IRS so that the agency can't even adequately perform routine random-sample audits.

 

[Lithium381]

With your "handle" on these forums, you should probably find a way to use this forum to provide tax advice. Then, charge less than the standard "Turbo-Tax Advisor" $40 per incident. After that, I could become your assistant . . .

There is more to doing taxes than completing the forms or even reading the IRS publications. If perception is 90% of "reality," I also suspect that people confuse their own responsibilities with those of either IRS or tax-preparation itself.

A business is responsible for its record-keeping. A "serious" business needs to do good record-keeping for score-keeping, planning and other functions -- so there are innate reasons to doing it that have nothing to do with taxes and tax preparation.

Similarly, individuals need to "own" their responsibility for record-keeping. Yet, I suspect that many irate taxpayers blame the IRS because they're required to do what a business does: maintain an orderly file of source-documents. Turbo-Tax or no Turbo-Tax, short-form or long-form -- that's about half the work. If you get caught in an audit sample and don't have the source-documents to back up your tax return, it's your own fault.

The tax-code, that's a different issue as it pertains to giveaways to businesses, obtuse loopholes and other things that got into the tax-code when some lobbyist went to a congressman, the congressman went to a committee, and the legislature passed some mutation of the tax-code when half the people in the congress didn't think sufficiently about what they were voting for.

I and several tax-advisors and preparers I've talked to blame the Bush administration for understaffing IRS so that the agency can't even adequately perform routine random-sample audits.

Exactly this.

 

[CPA]

With your "handle" on these forums, you should probably find a way to use this forum to provide tax advice. Then, charge less than the standard "Turbo-Tax Advisor" $40 per incident. After that, I could become your assistant . . .

There is more to doing taxes than completing the forms or even reading the IRS publications. If perception is 90% of "reality," I also suspect that people confuse their own responsibilities with those of either IRS or tax-preparation itself.

A business is responsible for its record-keeping. A "serious" business needs to do good record-keeping for score-keeping, planning and other functions -- so there are innate reasons to doing it that have nothing to do with taxes and tax preparation.

Similarly, individuals need to "own" their responsibility for record-keeping. Yet, I suspect that many irate taxpayers blame the IRS because they're required to do what a business does: maintain an orderly file of source-documents. Turbo-Tax or no Turbo-Tax, short-form or long-form -- that's about half the work. If you get caught in an audit sample and don't have the source-documents to back up your tax return, it's your own fault.

The tax-code, that's a different issue as it pertains to giveaways to businesses, obtuse loopholes and other things that got into the tax-code when some lobbyist went to a congressman, the congressman went to a committee, and the legislature passed some mutation of the tax-code when half the people in the congress didn't think sufficiently about what they were voting for.

I and several tax-advisors and preparers I've talked to blame the Bush administration for understaffing IRS so that the agency can't even adequately perform routine random-sample audits.

Actually, I began, and Eaglekeeper eventually took over, the Annual Tax Time Thread that's posted in OT each year. Unfortunately, neither myself, EK, nor any of the other folks that reply get any $$$'s for our assistance.

 

[BonzaiDuck]

Actually, I began, and Eaglekeeper eventually took over, the Annual Tax Time Thread that's posted in OT each year. Unfortunately, neither myself, EK, nor any of the other folks that reply get any $$$'s for our assistance.

Commend yourself for volunteerism.

A general remark: There is a practical side to "tax-simplification," and it is a double-edged blade. The drivel I see promoted about "flat tax," "no tax," and other cockamamie ideas could prove worse for throwing the baby out with the bathwater.

There is also afoot this idea that the government should not engage in constructing incentives and disincentives -- "just let the market take care of it" -- another "Palin-ism." Which -- is more drivel. I could draft pages and pages on this. I suppose we can wait until somebody throws in with their argument . . . .

 

[BonzaiDuck]

Nonsense. I've done my taxes every year since I started paying them, and that's a lot of years. I've only gotten it wrong 3 times. 2 of those times I was entitled to a refund that I hadn't identified, and the IRS sent me the refund in spite of my calculation to the contrary.

Jail is an extremely rare occurrence. You are generally given multiple chances to pay before that will happen.

That said, I'll concede that tax preparation is complicated for people who are in two categories: 1) are poorly educated/stupid/math challenged, or 2) people who have complicated portfolios, typically the wealthy but sometimes middle class. Such people may require assistance with preparation even if they aren't stupid or math challenged.

- wolf

Definitely on my wave-length, and you could even elaborate on "categories" of taxpayers such as those you identified.

There are clear guidelines on the criminal liability issue, mostly related to under-reporting of income or the hiding of income through frivolous deductions. The underpayment of tax in such cases must exceed 10% of real taxes owed. Even then, you'd have to be audited, and unable to show you made a mistake.

Mistakes I have made -- like yours and over the years -- may have amounted to underpayment of less than $60 on a total tax bill ranging between $15,000 (working life) and $4,000-something (retired life). Once, I'd made an estimated tax payment of $200, failed to find it in Quicken at filing time, and only discovered it three years later and too late to obtain a refund.

If you make mistakes, you can correct them with an amendment. It isn't worth filing an amendment for additional tax payments less than $100 -- but you can do that. Filing an amendment doesn't expose you to some sort of "scrutiny" ending in audit unless they are frivolous amendments, and it's the same way with frivolous tax returns.

On the contrary -- amending returns less than three years old will give you a sense of confidence and peace of mind.

Here's how those not cerebrally challenged can make things easier:

-- Use good tax-preparation software
-- Get a software license to a document management program like PaperPort, and a decent flatbed scanner
-- Scan important or tax-related documents to folders related to tax-preparations the day or week they arrive in the mail -- in PDF format. Move the thumbnails around and stack them as merged documents. Add "title" pages in PDF format, and use a PDF program like "Xchange Viewer" to annotate the documents or even summarize arithmetic.

This way, You'll practically have your taxes done before the tax-software's final revisions are available for download.

An old rule-of-thumb which may no longer apply: "Don't e-file; print, sign, mail with USPS tracking, and send it a week before due." Supposedly, audit sampling has a bigger chance of snagging you for filing early.

But if you eliminate mistakes on your return, these things shouldn't matter, and e-filing is probably a good idea.

 

[bfdd]

There's actually a lot of reasons why it's bad. It's being regressive is ONE of the reasons and not even the biggest. It's a stupid idea thought up by stupid people marketed to utter retards who think it's the bees knees because they have as a group the combined IQ of cheese.

Except it's not regressive, those that say simply don't understand the legislature. You do not know what you're talking about, you haven't read anything to do with the fairtax you're just parroting political slogans.