Wednesday, April 08, 2009

Federal Income Taxes

I am doing my federal income tax return today. I have done my own taxes every year. It never ceases to amaze me how the IRS can make something as simple as math so difficult. There are many schedules and forms such as; education credit, social security benefits, alternative minimum tax and more. You would think that the number of lines on each of these forms would not change from year to year, but they do. I have a simple spreadsheet that identifies each form I use every year. I simply fill in the amounts and it goes through all the number crunching that the IRS makes difficult and I simply copy the amounts to the actual IRS forms. However, each year I have to verify that the number of lines I have match the number of lines on the IRS forms. I have found four forms that I use where the number of lines have changed.

Did anything really change, no? They either added another line to make an intermittent step or deleted a line to combine two lines together.

What we need is to eliminate itemized deductions. The standard “head of household” is $8,500, married filing jointly is $10,900 and single is $5,450. How many people actually have enough itemized deductions to exceed the standard deduction? The amount of savings is small for most people. Take married filing jointly. Let’s say you have $13,000 in itemized, it saves you your highest tax rate multiplied by $2,100. Think of all the reporting that goes on for this form. Eliminate itemized deductions and lower the tax rates. While we are at it, we need to eliminate all special interest exemptions and deductions.

There are all sorts of deductions and exemptions: elderly, blind, college, child and more. Each time congress wants to help a particular group, they have to tweak the tax code. Because of all the tweaking we now have people falling into the alternative minimum tax trap. Seniors get an extra deduction for being over age 65, why? If they have enough income to pay taxes, why should they get twice the exemptions of working families?

The tax code has become so complicated and unfair that the best thing to do is to scrap the entire code and start over. I would make it along the lines of the Indiana code where there are limited exemptions. One thing I would surely eliminate is the exemption for taxes paid. Those states who have high taxes are shifting the cost of government onto those who live in low tax states. If you want to live in a state where taxes are high, great, but do not expect the rest of the U.S. to subsidize you. By doing this, we may over time get representatives who understand and know the value of a dollar.

2 Comments:

At 2:39 PM, Blogger Bob G. said...

Bill:
You should have seen the "book" (more like a tome the size of the Manhattan phone directory) we were issued every year at the Treasury Dept's IRS centers...that they changed "on the fly" during peak season.
Talk about a clusterf*ck!

Complicated doesn't BEGIN to cover it.

Got some real horror stories to tell there.

 
At 9:21 AM, Blogger William Larsen said...

I am going through a 20 year horror story. Each year the IRS asseses me more money by denying my childrens child tax credit and dependency exemptions. Each year we go through a CDP and they agree with me.

In 2008 we went to US Tax Court, won, the IRS did not even put up a fight, they conceded the second the trial began. They were hoping to keep any record of the case, its basis off the record. Now they are doing the same thing again. At least I have a court case I can reference

Larsen V Commissioner of the Internal Revenue

The IRS pleaded a Writ of Mandamus. The Court did not have authority to order the IRS to do something the IRS was required to do by statute and were not doing.

I hate it when a government agency violates the US Constitution. Government and FWPD are not above the law.

 

Post a Comment

Links to this post:

Create a Link

<< Home



NBC-33 Debate poll results from 2002