The chilling truth about taxes:
We had a good discussion. But two of the most interesting parts of my time at WAMU didn't make it on the air.One came right after the show. After hearing so many listeners complain about having to pay for electronic filing when that saves the government money--an objection I entirely agree with--I had to inquire further. So I told Williams about my own positive experience with Virginia's free e-filing and asked him if the IRS was thinking about following this example.
He answered affirmatively, saying that the IRS was considering ways to reduce the cost of e-filing and remove other obstacles to it (he suggested, for instance, that as an interim step the service might require professional tax preparers to file electronically). In a follow-up e-mail, he pointed me to this summary of state e-filing initiatives; I was surprised to see how many states had moved to free, direct online filing.
The other was Williams' reaction when I got into my usual rant about how the complexity of the tax code has turned a fundamental rite of citizenship into some sick little game. I could see him nodding vigorously in agreement, and during the next break in the program, he said as much to me directly. A little later, as we were both heading out of WAMU's offices, he mentioned that before he started at the IRS, he'd spent 14 years working on tax policy in Congress, going back to 1986's tax reform--and even with all that experience, he was never quite sure that he paid the right amount in taxes each year.
I spent about half an hour trying to measure my oddly shaped house and home office, and then realized I didn't qualify for a deduction. Then there was the time I spent calculating exactly how much of my home television and internet consumption consists of work. And don't even get me started on allocating bank statement interest income between New York and DC . . .
But it's good to know the professionals are confused too.
Interesting how a thread like this, on a topic which impacts everyone, egregiously so in many cases, generates only one comment. Throw in a thread about alleged torture of suspected terrorists and whether it ever was, or wasn't the law of the land, and posters go berserk.
Rising taxation, and the unchecked ability by politicians to pile layer upon layer of complexity to the tax code, represents a far greater threat to the nation than anything john yoo ever wrote.
"But it's good to know the professionals are confused too."
IOW...worry not Proles, even your betters can't figure it out...
maybe RL could speak to the idea of "unconscienability of contracts"
If you want to make taxes easy, just throw away the deductions! Done in 10 minutes tops.
What's truly infuriating is utilizing the IRS help line does not preempt liability. That is, if I have a question, ask the IRS for help, get their opinion and follow their advice -- I can still be audited and found liable for that incorrect advice. The fact that it was their own advice is not a defense.
Absolute insanity IMO.
What it seems to come down to is, nobody can manage to follow all the rules correctly. Or maybe even know what all the rules are. So your best course is probably to figure out what you think you owe, add 10% or so, and pay that. Then, if you are wrong, most likely you still paid enough that you are not liable for penalties (and interest).
A person with an ounce of paranoia would easily believe that the intent of the system is to make it possible to take out for tax evasion anybody that those in power cannot get rid of any other way. Al Capone would make an obvious case in point. (Whether you think he was a terrible person who had committed lots of crimes or not. The fact is, what they got him for was tax evasion -- because they couldn't prove anything else.)
"[H]e'd spent 14 years working on tax policy in Congress, going back to 1986's tax reform--and even with all that experience, he was never quite sure that he paid the right amount in taxes each year."
Could a plausible argument be made that the tax code is unconstitutionally vague?
My taxes are pretty simple, and I filed them in about 5 minutes. I'm a professional who rents, and contributes money to my 401(k), receives benefits, and donates to charity through automatic paycheck deductions, all of which shows up on my W-2. So all I really had to do was enter the information on my W-2 and do a cursory glance over the list of deductions to confirm that none of them applied.
I agree that the tax code is over-complicated, but the majority of the cause is related to tax deductions, and nobody wants to give up the tax deduction that actually helps them-- they just want to get rid of everything else. The tax code could be vastly simplified overnight by getting rid of all these deductions and their ilk. However, the majority of such items tend to be of maximal benefit to those who actually have money to pay tax on (i.e., the ones who finance most campaigns)...
Speaking as someone who did a lot of contract work up through early 2007 and thus has filed Form 1040, Shedule C, Schedule SE, and Form 4562 for the past few years (and avoided Schedule A only because the standard deduction was simpler to deal with and sufficiently generous), e-File would have been my enemy. All of that uncertain data can now be called up in a few keytstrokes from the moment it is filed, and the auditor can mark you out for Unscheduled Fun with a simple click.
At least when you file on paper less than a month before the deadline, your unforgiveable minor mistakes, if any, are more likely to get lost in a blizzard of paper and data entry procedures.
At some point, that will no longer be an option; even the government must eventually get caught up to the information age. Until then, however, I say there's no reason not to use the safer option while it is still available.
What's all that measuring about? They never verify home office deductions, I've been getting away with it for years.
ScottK-
My taxes are pretty simple, and I filed them in about 5 minutes.
Be thankful... :o)
I don't pretend my situation is particularly complicated, but 'filing' my taxes this year absolutely sucked!
1)I "rolled" my car on 11/18/06 - leading to medical expenses in excess of $60K- and I was uninsured.
2)I sold off some of my (taxable) mutual funds early in 2007 to pay for the above- leading to lots of calculations concerning "long-term"/short-term" Capital Gains 'holding periods', and whether I should treat them as "average cost" or FIFO (First in, first out).
3)Given these (over 7.5% of income) "medical expenses", I chose to "itemize" my deductions- which means I also had to find "documentation" for claimed deductions on my "property taxes", my "sales tax" on the used car I bought, my visit to the dentist in March, my charitable contributions, etc. ad nauseum.
4)I also had a pretty good 3 year 'run' in those mutual funds I owned- many had "cap gains/dividend" payouts of 15%+ last year.
5)Which means I also received an extra tax penalty for not paying enough money during the year.
6)Because of this penalty, I also get to pay quarterly "estimated" taxes this year!
7)If I understand the details of the current "stimulus plan", I will receive $600 sometime in May-- and my "estimated tax" payment due June 16, 2008 is exactly... $600.
I sympathize to some extent, as I had to pay taxes in three states this year, all with different definitions for how to determine which earnings where taxable in which location. It's one of those downsides to having fifty different legislatures running around.
But since you seem to believe that liberals don't really want to pay more in taxes since they're not tipping the government every April 15th, doesn't the same logic apply here? After all, if you really wanted simpler taxes, couldn't you just take the standard deduction and pay more? Revealed preferences and all that apply here, right?
Well, right, except that my argument for simplifying taxes includes lowering the marginal rates; otherwise it's a massive tax increase on families, homeowners, and the self-employed. So my revealed preference is for lower rates on a broader base, followed by lower rates on a narrower base. This is not particularly surprising.
@fletch
This is why I save receipts. Organized by type of deduction and by time. Which is easy to do, you juts start with separate piles/envelopes/folders and stack the stuff as it comes in.
Takes me a few minutes to add it all up in January (last year I ended up with itemizing being about $100 below what the standard gave me), and the 1040 is off in the mail two hours after I start.
This phrase, "fundamental rite of citizenship" strikes me as very odd. The entire requirement of personal income taxes was so alien the the US that it required a constitutional amendment, but it is now taken for granted. How sad.
I'm aware that simplifying the tax code would coincide with a reduction in tax rates. Let's face it though, if you're dealing with a fair number of complicated deductions, odds are that under a revenue neutral Great Tax Simplification, you're going to end up writing a large check to the government than you are now - the big winners are going to be the folks who take the standard deduction, who see their tax rate fall without losing any write-offs. So the problem remains, if you're willing to pay more in taxes as part of a systematic change in tax policy, but not willing to do so to only simplify your own 1040 experiences, how is that any different from what you were castigating liberals for back in February?
ISTR a few years ago that the IRS actually wanted to make e-filing free, or at least much cheaper, but that Intuit (makers of TurboTax) lobbied the government to keep the rates high so that people would be more likely to use their software.
If you make less than $54,000 an your taxes are simple enough that you can do 1040 or 1040EZ without special stuff, you can do your federal return for free on the Internets. Almost all the tax sites (Turbotax, H&R block, etc.) charge for the STATE return. You are, however, under no obligation to purchase their STATE return service. So if you live in a state like Wisconsin (where I live) you can do your taxes online totally for free - H&R for Fed, and WI Dept. Revenue website for State. So if you're poorer like me, then doing your taxes is free!