Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 04-16-2012, 04:47 PM   #61
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,382
Quote:
Originally Posted by Midpack
I suspect the number of filers using short forms is closer to 9%.

Almost three-quarters are filing online, themselves or through "practitioners," I don't think you can extrapolate as you have from the minority who still file paper forms. I doubt many "online filers" who would pay for tax software and then eFile would be short form folks, and I'd be really surprised if anyone who paid a professional tax "practitioner" would be anything but long form plus. The fact that 52% have to use a professional and another 20-39% use long form suggests to me way too many people are indeed confronted with the "tax code."

1040 Paper20%
1040A & EZ9%
Online filing19%
Practitioner52%
OtherLT 1%
Im certainly in favor of streamlining the tax code process, and I am sure it would benefit many, but I wonder how many people use "professional help" simply because they are too lazy to put any effort into it. The reason I say this as 5 of my closest friends pay someone else to do it. Outside of decent earned income, an HSA and a mortgage deduction, their taxes would not be considered complex in anyway. I have tried to explain how easy it is to use TurboTax, but none of them would even pay attention to me. I think they would pay double the cost if it meant they had to do absolutely nothing but sign their name.
__________________

__________________
Mulligan is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-16-2012, 04:54 PM   #62
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,871
Quote:
Originally Posted by Midpack View Post
I suspect the number of filers using short forms is closer to 9%.

Almost three-quarters are filing online, themselves or through "practitioners," I don't think you can extrapolate as you have from the minority who still file paper forms. I doubt many "online filers" who would pay for tax software and then eFile would be short form folks, and I'd be really surprised if anyone who paid a professional tax "practitioner" would be anything but long form plus. The fact that 52% have to use a professional and another 20-39% use long form suggests to me way too many people are indeed confronted with the "tax code."

1040 Paper20%
1040A & EZ9%
Online filing19%
Practitioner52%
OtherLT 1%
I was referring only to those who file on paper, not those who file using tax software or with a paid preparer. And I have seen that TurboTax ad on TV hundreds of times offering a free 1040EZ return so surely some people have taken advantage of that free service.

And, as I learned in the last few weeks, it does not take much to get bumped up from 1040EZ or 1040A to the longer 1040 form. While doing my ladyfriend's taxes, despite not having to itemize her deductions this time she could not use 1040EZ or 1040A because of two things. One was a direct rollover from her old employer's profit sharing plan into her new employer's 403(b) (that kept her off 1040EZ but not 1040A, and had no effect on her AGI or taxable income), and the other was a small state income tax refund in 2011 from her 2010 taxes, when she had itemized deductions (that kept her off both 1040EZ and 1040A). Her long form was mainly 1040EZ plus two more numbers, one of which was zero.
__________________

__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 04-16-2012, 04:55 PM   #63
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,871
Quote:
Originally Posted by Mulligan View Post
Im certainly in favor of streamlining the tax code process, and I am sure it would benefit many, but I wonder how many people use "professional help" simply because they are too lazy to put any effort into it. The reason I say this as 5 of my closest friends pay someone else to do it. Outside of decent earned income, an HSA and a mortgage deduction, their taxes would not be considered complex in anyway. I have tried to explain how easy it is to use TurboTax, but none of them would even pay attention to me. I think they would pay double the cost if it meant they had to do absolutely nothing but sign their name.
+1, and thanks.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 04-16-2012, 05:23 PM   #64
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,978
Quote:
Originally Posted by scrabbler1 View Post
I was referring only to those who file on paper, not those who file using tax software or with a paid preparer. And I have seen that TurboTax ad on TV hundreds of times offering a free 1040EZ return so surely some people have taken advantage of that free service.
OK, what can you conclude by looking only at the 29% who "file on paper" (20% long form) and the mere 9% who we know for sure file on paper using form 1040EZ & A?

And the tax code is thousands of pages, that's a matter of public record, no one is saying any filer has to read every page. How the code is written is often part of the problem, some parts are very hard to interpret correctly.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 04-16-2012, 05:53 PM   #65
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,871
Quote:
Originally Posted by Midpack View Post
OK, what can you conclude by looking only at the 29% who "file on paper" (20% long form) and the mere 9% who we know for sure file on paper using form 1040EZ & A?
I conclude that about 30-33% of returns filed on paper use one of the short forms, 1040A or 1040EZ (based on the multiple years and projections in the link MichaelB posted).

Quote:
Originally Posted by Midpack View Post
And the tax code is thousands of pages, that's a matter of public record, no one is saying any filer has to read every page. How the code is written is often part of the problem, some parts are very hard to interpret correctly.
My point here is to refute what I hear from politicians who rail against the "5,000 pages of the tax code" and how "it drives Americans crazy" when in fact, as you so well pointed out, most taxpayers don't have to read all 5,000 pages of the tax code or anywhere near all 5,000 pages of it. Furthermore, about 1/3 of taxpayers who file on paper need only concern themselves with a small sliver of those 5,000 pages, what is found in the instruction booklets of 1040EZ and 1040A. A W-2 for wages and taxes withheld, maybe a 1099 for interest, a standard deduction and personal exemption, look up tax on a table, compare it to taxes withheld, and see if you get a refund or need to write a check. That's 1040EZ and most of 1040A, and you don't need 5,000 pages of the tax code to figure it out.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 04-16-2012, 05:57 PM   #66
Full time employment: Posting here.
 
Join Date: May 2011
Location: Marco island
Posts: 813
Quote:
Originally Posted by rodi
On one of the weekend news shows a pundit stated something I thought was interesting.

The tax code is really about spending and legislating social policy. It's easy to add changes that don't sunset or have to be reaffirmed, unlike budget bills.

For example the tax code gives breaks to couples with children who only have one income earner, vs dual income couples. So the policy statement could be that stay at home parents are good (from a tax perspective). And dual income parents are less than optimal. (The so called marriage penalty for dual income households.)

The tax code gives tax breaks for mortgage interest. So the policy is that home ownership and home debt is good. No breaks to renters or to people who pay off their mortgages. That is a social policy.

The tax code gives preferred rates to long term cap gains vs income. So the policy as codified in the tax code is that investment income is better than earned income.

I'm not trying to make a political point. Because I can argue both sides of each of these deductions. The point I'm making is that the tax code is a way of legally implementing social policy in a way that is harder to undo than a traditional law.

As mentioned by others - tax codes that had sunsets in them - intended to be temporary - are now considered to be permanent and a tax increase if they are allowed to expire as designed. The "Bush" taxcuts, the social security reduced tax of the last 2 years, etc.

I thought it was an interesting way of looking at out tax code. It's not about revenue, it's about social policy.
Exactly. That is why the tax code is so cumbersome and lengthy. That is also why Obamacare is so complex. It aims to do the same thing.
__________________
Gatordoc50 is offline   Reply With Quote
Old 04-16-2012, 06:11 PM   #67
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,978
Quote:
Originally Posted by scrabbler1 View Post
My point here is to refute what I hear from politicians who rail against the "5,000 pages of the tax code" and how "it drives Americans crazy" when in fact, as you so well pointed out, most taxpayers don't have to read all 5,000 pages of the tax code or anywhere near all 5,000 pages of it.
Evidently most Americans might disagree with your POV. This is just one of many surveys/polls.
Quote:
WASHINGTON, D.C.-A new national survey commissioned by the Tax Foundation *and conducted by Harris InteractiveŽ shows a majority of U.S. adults think the federal tax system is very complex and the amount of federal tax they pay is too high.

An overwhelming 83 percent of U.S. adults believe the current federal income tax is somewhat or very complex. 78 percent believe the federal tax system needs major changes or a complete overhaul.
The Tax Foundation - Poll: Tax Code Complex, Federal Income Taxes "Too High"
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 04-16-2012, 06:35 PM   #68
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,871
I wanted to see how the survey's question about tax code complexity was worded. Here is what I found:

"How complex do you think the current federal income tax is?”

Hell, I'd have answered along with the majority.

A more relevant question addressing my point would have been written this way:

"Relating to only your own household and income tax return preparation, how complex do you think the current federal income tax is?”

Now you isolate one's personal income tax return from the broader federal income tax code. You would surely get a different response.

Interesting survey nonetheless.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 04-16-2012, 06:36 PM   #69
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,487
Quote:
Originally Posted by Midpack View Post
Evidently most Americans might disagree with your POV. This is just one of many surveys/polls.
The Tax Foundation - Poll: Tax Code Complex, Federal Income Taxes "Too High"
This sounds like the polls I have seen as well.

The tax code is not 5000 pages, that's the Cliff Notes version. The tax code takes up an entire library.
__________________
MichaelB is offline   Reply With Quote
Old 04-16-2012, 06:36 PM   #70
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,382
Quote:
Originally Posted by Midpack
Evidently most Americans might disagree with your POV. This is just one of many surveys/polls.
The Tax Foundation - Poll: Tax Code Complex, Federal Income Taxes "Too High"
I am in agreement with you Midpack, but I understand where Scrabbler is coming from. In addition to my preceding comments about my friends, my daughter is another example. Being 19 years old and attaining income of about $3k, she got the privilege of filing the ez form for which I made her do while sitting beside her. She played every dumb card she could to get me to do this 10 minute exercise. " I dont know what subtract line x from line x and add to line x means". Being in college she is not dumb. She is just lazy and I do think there are many people like her who are only responsible for the most basic of tax forms are unwilling to spend even the most minimal of time learning to fill out their taxes. FYI- I did win the "war" with her but a 10 minute exercise became 30 minutes because of her stubbornness
__________________
Mulligan is offline   Reply With Quote
Old 04-16-2012, 09:34 PM   #71
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,871
Quote:
Originally Posted by Mulligan View Post
I am in agreement with you Midpack, but I understand where Scrabbler is coming from. In addition to my preceding comments about my friends, my daughter is another example. Being 19 years old and attaining income of about $3k, she got the privilege of filing the ez form for which I made her do while sitting beside her. She played every dumb card she could to get me to do this 10 minute exercise. " I dont know what subtract line x from line x and add to line x means". Being in college she is not dumb. She is just lazy and I do think there are many people like her who are only responsible for the most basic of tax forms are unwilling to spend even the most minimal of time learning to fill out their taxes. FYI- I did win the "war" with her but a 10 minute exercise became 30 minutes because of her stubbornness
Sadly, Mulligan, your daughter's attitude about tax returns too typical of young (and oldr) people, even if they are educated.

My own youth in this area was quite the opposite. My mother (since deceased) prepared our family's tax returns and when I was a teenager in the late 1970s she had me look on so I could learn how this stuff was done. She was no CPA nor any kind of mathematical genius but it was still not very difficult for her - she never paid anyone to do them. She never complained about how tough the tax code was, and the family tax return back then was a 1040 and Schedule A with the latter including OOP medical expenses, state and local taxes paid, home mortgage interest, some personal interest (which prior to the 1986 Tax Reform Act, was at least partly deductible) and some charity. I was the math wiz back then and there wasn't anything which really fazed me about doing a tax return even when I was 16 years old. [I know that makes me an outlier, but then again I am an outlier in so many other ways so what's the difference? ]

But this is why my mindset towards doing a personal income tax return (and my own have been more complex than my family's with Schedule D most years) is "What's the big deal?" I have always done my own on paper and always will, as I see no value from paying someone else to do them or from buying any software specifically for doing them - even in 2008 when I had the AMT and lots of little annoying worksheets in the instruction booklet. Yes, I have designed a homemade spreadsheet to aid in the calculations and do some what-ifs and help with estimated taxes, but that's just using my existing knowledge and software to help me out.

If this means I am in a different world than most people from a badly worded survey then so be it. Too bad, because if more people had my upbringing and mindset we could put most tax preparers and software makers out of business LOL!
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 04-17-2012, 08:00 AM   #72
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,978
Quote:
Originally Posted by scrabbler1 View Post
I wanted to see how the survey's question about tax code complexity was worded. Here is what I found:

"How complex do you think the current federal income tax is?”

Hell, I'd have answered along with the majority.

A more relevant question addressing my point would have been written this way:

"Relating to only your own household and income tax return preparation, how complex do you think the current federal income tax is?”

Now you isolate one's personal income tax return from the broader federal income tax code. You would surely get a different response.

Interesting survey nonetheless.
At least we see from your statement in red you acknowledge an overwhelming majority think our tax code needs to be simplified...and your personal opinion is a minority view, somewhere over 9% but less than a third.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 04-17-2012, 08:17 AM   #73
Thinks s/he gets paid by the post
Tadpole's Avatar
 
Join Date: Jul 2004
Posts: 1,174
Quote:
Originally Posted by Gone4Good View Post
Voters are bought off with loopholes too, they just don't call them that. They're called mortgage interest and charitable giving deductions or child-care credits and dependent exemptions. People love them and woe upon any politician who wants to take them away. They're not loopholes though. Loopholes are tax breaks that other people get.
I agree. Every time I see discussions of taxes like this, I can pretend to be in the "smoke filled rooms" of the political parties. You know - conversations like: Hey, Joe, what are we going to do. The voters don't seem inclined to give us much this time. Then Joe answers: Why don't we harp on taxes and write some bills to give a tax break to, well you know, pet owners or something.

You are right that this is a matter of whose loophole needs to be taken away. That is the same as whose critter has stayed too long or which funding is pork.
__________________
Tadpole is offline   Reply With Quote
Old 04-17-2012, 09:08 AM   #74
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,287
Quote:
Originally Posted by scrabbler1 View Post
I conclude that about 30-33% of returns filed on paper use one of the short forms, 1040A or 1040EZ (based on the multiple years and projections in the link MichaelB posted).



My point here is to refute what I hear from politicians who rail against the "5,000 pages of the tax code" and how "it drives Americans crazy" when in fact, as you so well pointed out, most taxpayers don't have to read all 5,000 pages of the tax code or anywhere near all 5,000 pages of it. Furthermore, about 1/3 of taxpayers who file on paper need only concern themselves with a small sliver of those 5,000 pages, what is found in the instruction booklets of 1040EZ and 1040A. A W-2 for wages and taxes withheld, maybe a 1099 for interest, a standard deduction and personal exemption, look up tax on a table, compare it to taxes withheld, and see if you get a refund or need to write a check. That's 1040EZ and most of 1040A, and you don't need 5,000 pages of the tax code to figure it out.


Well, one of the problems is that since 50% of the people do not pay income tax, most of them really do not care that much about the tax code.... they just want to file and get their money...

The code is for the other 50% of the people and for a good majority of them it is becoming combersome.....


Remember back when after you determined your taxable income it was real easy to figure out how much you owed You just looked it up in the table and put it on the form.... now, you have to do a lot more calculations.... and then you have to see if AMT kicks in.... and I might be wrong, but don't you also have to figure out if you can deduct all your deductions
__________________
Texas Proud is offline   Reply With Quote
Old 04-17-2012, 09:40 AM   #75
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,871
Quote:
Originally Posted by Texas Proud View Post
Well, one of the problems is that since 50% of the people do not pay income tax, most of them really do not care that much about the tax code.... they just want to file and get their money...
What makes you so sure of that? It is the tax code, even just a few pages of it, which enable many of those people to pay no income taxes. Some of them receive refundable credits but many others (such as my dad and many other elderly people) simply have zero tax liability so they pay zero taxes and receive no refunds.

Quote:
Originally Posted by Texas Proud View Post
The code is for the other 50% of the people and for a good majority of them it is becoming combersome.....
But for many of them, such as those who use one of the short forms, the tax code is hardly cumbersome. And even for those who file the long form because they are barely unable to qualify to use a short form (or who file a long form unnecessarily), the tax code is hardly cumbersome. Even for someone like me who has filed the long form every year since 1989, most of the lines on the 1040 form are left blank. Most of Sched A is pretty easy, too, just copy a few numbers from the 1098s or from the state tax return.

Quote:
Originally Posted by Texas Proud View Post
Remember back when after you determined your taxable income it was real easy to figure out how much you owed You just looked it up in the table and put it on the form.... now, you have to do a lot more calculations.... and then you have to see if AMT kicks in.... and I might be wrong, but don't you also have to figure out if you can deduct all your deductions
Actually, what you are describing is what I do for my state, not federal income tax form. The state, rightly or wrongly, fairly or unfairly, taxes all income alike, so that special cap gains and QD worksheet does not exist. If the feds taxed all income alike, it would simplify things quite a bit, making it like my state's calculation (i.e. look it up on a table). If you don't have any taxable LTCG or QD, then the worksheet does not apply.

The other two things you mentioned (itemized deduction limitation and AMT) are only for higher-income earners. In all my 27 years of filing income tax returns, I had those things apply to me exactly ONE time, in 2008 when I had that big company stock payout.

Otherwise, one's taxes for many people are pretty much this: "A W-2 for wages and taxes withheld, maybe a 1099 for interest, a standard deduction and personal exemption, look up tax on a table, compare it to taxes withheld, and see if you get a refund or need to write a check."
__________________

__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 08:53 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.