I usually support the theory that you should not complain about paying a lot of tax. It usually means you make a lot of money. What I REALLY hate is how we get there.
Macro gripes:
1) We do not teach people (in school or otherwise) how to do their taxes.
2) It is nearly impossible to calculate your own taxes and be confident you got it right. I do it every year and I'm never that confident. Likewise, most of my colleagues complain that their tax pros often get it wrong.
3) It is nearly impossible to anticipate how certain actions will affect your taxes. You can anticipate the things you know about (like your tax bracket), but not the things you dont (e.g., AMT, NIIT)
4) It is nearly impossible to plan for future taxes unless your income is incredibly stable/predictable. If you mutual fund capital gains distributions vary, or work bonus varies, etc - it is not possible.
5) Many things are tied to an AGI or MAGI which makes no sense. Why should my ability to get a certain credit, rest on the decision to contribute to tIRA or Roth?
6) Tax cliffs. They MIGHT be OK if you could predict everything to the dollar, but you cant. So many ER people doing ROTH conversions, I have no idea how you do that calculation so accurately. My AGI varies.
7) We have a system that encourages complexity. Companies want to keep it complex so you will pay them.
Cases in point:
1) AMT is just the stupidest thing. And the fact that in mostly affects the well off, but not the rich/uber rich is annoying.
2) Net Investment Income Tax. I suspect a fair amount more people will be hit with this in 2020. To repeat myself, I'm not all that opposed to the progressive tax system, but stop lobbing surprises. Should I have known? I dunno.
3) Some people were counting on things like AOTC credits. But - if this happens to be the year you unload some equities, then your AGI will be too high.
4) Repayments are a joke. You can literally be overpaid by your employer in one year, pay it back in the next year, and lose the difference in tax.
5) The concept of allowances (w4) was terrible and is now a joke. Yes, they are gone from the new w-4 but they are still built into the withholding tables and they are not gone from the W-4P
Specifics:
I decided to take some money out of the market. Happy I got gains, but believe it has thrown me into AMT and NIIT. Not only that, but it probably disqualified me for AOTC or other credits. I've been able to figure out NIIT, but not AMT (which I have had to pay before). Turbo Tax is telling me how much I will have to pay, but not why (what-if worksheet)
What I would do differently:
Make better use of the Turbo Tax what-if worksheet before taking actions. However, that is very difficult if you don't know that years numbers.
Macro gripes:
1) We do not teach people (in school or otherwise) how to do their taxes.
2) It is nearly impossible to calculate your own taxes and be confident you got it right. I do it every year and I'm never that confident. Likewise, most of my colleagues complain that their tax pros often get it wrong.
3) It is nearly impossible to anticipate how certain actions will affect your taxes. You can anticipate the things you know about (like your tax bracket), but not the things you dont (e.g., AMT, NIIT)
4) It is nearly impossible to plan for future taxes unless your income is incredibly stable/predictable. If you mutual fund capital gains distributions vary, or work bonus varies, etc - it is not possible.
5) Many things are tied to an AGI or MAGI which makes no sense. Why should my ability to get a certain credit, rest on the decision to contribute to tIRA or Roth?
6) Tax cliffs. They MIGHT be OK if you could predict everything to the dollar, but you cant. So many ER people doing ROTH conversions, I have no idea how you do that calculation so accurately. My AGI varies.
7) We have a system that encourages complexity. Companies want to keep it complex so you will pay them.
Cases in point:
1) AMT is just the stupidest thing. And the fact that in mostly affects the well off, but not the rich/uber rich is annoying.
2) Net Investment Income Tax. I suspect a fair amount more people will be hit with this in 2020. To repeat myself, I'm not all that opposed to the progressive tax system, but stop lobbing surprises. Should I have known? I dunno.
3) Some people were counting on things like AOTC credits. But - if this happens to be the year you unload some equities, then your AGI will be too high.
4) Repayments are a joke. You can literally be overpaid by your employer in one year, pay it back in the next year, and lose the difference in tax.
5) The concept of allowances (w4) was terrible and is now a joke. Yes, they are gone from the new w-4 but they are still built into the withholding tables and they are not gone from the W-4P
Specifics:
I decided to take some money out of the market. Happy I got gains, but believe it has thrown me into AMT and NIIT. Not only that, but it probably disqualified me for AOTC or other credits. I've been able to figure out NIIT, but not AMT (which I have had to pay before). Turbo Tax is telling me how much I will have to pay, but not why (what-if worksheet)
What I would do differently:
Make better use of the Turbo Tax what-if worksheet before taking actions. However, that is very difficult if you don't know that years numbers.