I Despise the USA Tax System SO Much

[Maidensong]

Quote:

Originally Posted by johnhkc How about this for a solution? Keep the current wad of crap and introduce: The Alternative Simple Tax You pay a flat 20%. You're done! All forms of realized income are included - no deductions, credits, carveouts, exemptions, yadda, yadda. Totally flat. ALL other taxes at all layers of govt and of all types are eliminated for anyone who files the AST. Then, a special room will be created where the layer upon layer upon layer upon layer (fed, state, county, local) of bureaucrats and paper-pushing pinheads (and anyone else who wants someone else's earnings) can meet to duke it out with each other and figure out who gets what. No complicated forms. No huge time requirement. No more headaches listening to everyone's endless theories about their "fair share" of what you earned and they didn't. It's like single-payer for government! THIS is the single-payer we need.

Interesting... But even God Almighty only ever asked for 10%.

[2177V]

If it doesn't make sense, then it is politics.

Our tax code will NEVER be simplified...unless we do away with politics and special interests all together.

That is not going to happen. Wet dream... if you believe ordinary citizens can change it.

Every time a politician tries to simplify the tax code, that politician gets defeated by the rest of the corrupt politicians with special interests who are the majority in the House and Senate.

I hate to break this news to you but it is true in my opinion. This is why our tax code will NEVER make sense to ordinary citizens.

[Gumby]

Quote:

Originally Posted by vchan2177 If it doesn't make sense, then it is politics. Our tax code will NEVER be simplified...unless we do away with politics and special interests all together. That is not going to happen. Wet dream... if you believe ordinary citizens can change it. Every time a politician tries to simplify the tax code, that politician gets defeated by the rest of the corrupt politicians with special interests who are the majority in the House and Senate. I hate to break this news to you but it is true in my opinion. This is why our tax code will NEVER make sense to ordinary citizens.

Even more generally in government - one man's waste, fraud and abuse is another man's paycheck, and that second man is going to fight hard to keep it.

[athena53]

Quote:

Originally Posted by Maidensong The hard part of doing taxes is gathering and maintaining the records anyway.

I realized that when I married and "inherited" the CPA my husband and his first wife had used for their taxes. (Both were financially clueless.) Once I provided all the records, receipts, etc. he pretty much used software to wrap it up. The final straw was that I called him in December and told him we'd married the previous May. On April 14, I kid you not, he called and needed two very large (to me) checks. One was $$ owed to the state of NJ because, having married, our salaries were "stacked" and one was taxed at the highest marginal rate. The second was a Quarterly Estimated payment. While I didn't expect him to do a full projection of our taxes when I called in December, a heads-up to let me know this torpedo was coming would have helped. Never used him again.

And if I may add one more thing that drives me crazy: I file as Single. Every threshold, cliff, etc. for IRMAA, standard deduction and other calculations is either double that for couples, or half- whichever works to my disadvantage. I get a standard deduction of $12K- couples get $24K, IRMAA hits me at half the AGI levels that it does for couples.

It would be nice if my mortgage, property taxes and utilities had halved after DH died but they did not.

[pb4uski]

Quote:

Originally Posted by Raygun99 Just to add another gotcha "IRMAA surcharge" Tax software programs don't warn you of the increase to Medicare based on other income thresholds: Selling that rental can really bite you in the rear!! https://www.investmentnews.com/wp-co...1209021111.JPG

You can always appeal. While I previously thought that they would only allow appeals for the enumerated reasons, another poster here recently appealed based on a one-time increase to income like in your case and their appeal was accepted.

[pb4uski]

Quote:

Originally Posted by athena53 ..... And if I may add one more thing that drives me crazy: I file as Single. Every threshold, cliff, etc. for IRMAA, standard deduction and other calculations is either double that for couples, or half- whichever works to my disadvantage. I get a standard deduction of $12K- couples get $24K, IRMAA hits me at half the AGI levels that it does for couples. ...

Get over it.

Why wouldn't a couple get twice as much income excluded as a single? Ditto for IRMAA.

I think you're somehow confusing deductions/exclusion from income with living costs.

[gerntz]

Quote:

Originally Posted by Offgrid Organic Farmer No. Looking at my income as a Landlord over half of it goes to property taxes, insurance and utilities.

We'd have never been a landlord if this was true for us given our mortgages are over 50% of income.

[gerntz]

Quote:

Originally Posted by athena53 And if I may add one more thing that drives me crazy: I file as Single. Every threshold, cliff, etc. for IRMAA, standard deduction and other calculations is either double that for couples, or half- whichever works to my disadvantage. I get a standard deduction of $12K- couples get $24K, IRMAA hits me at half the AGI levels that it does for couples.

Don't think there should be separate tax rates based on marriage status.

You realize that when IRMAA hits married couples it causes payments to rise on two people, not one as in your case, right?

[gerntz]

Quote:

Originally Posted by vchan2177 If it doesn't make sense, then it is politics. Our tax code will NEVER be simplified...unless we do away with politics and special interests all together.

Perhaps I'm wrong, but I thought the higher standard deduction simplified the tax code for a lot of folks.

[scrabbler1]

One thing to consider is that tax simplification and tax fairness, in itself a moving target, are often in opposition to each other.


Take the tax treatment of long-term cap gains. We could tax it as ordinary income or not at all. The former is how many states handle it, making it simpler than the federal system with its lengthy, PITA worksheet, but would it be fairer to tax it solely as ordinary income when part of that income is due to the inflationary gain within it? We could tax it not at all, also simpler than the aforementioned federal system and its worksheet. But would that be fairer? The current federal system is far less simple but arguably fairer than either simpler extreme. Perhaps indexing LTCG but taxing whatever gain remains would be the most fair but would probably be more complicated than the current federal system.

[38Chevy454]

Quote:

Originally Posted by gerntz Perhaps I'm wrong, but I thought the higher standard deduction simplified the tax code filing for a lot of folks.

FIFY
The recent change did not simplify the tax code to any real extent. It did make it easier for many to file using the increased standard deduction, as opposed to previously filing with Sch A deductions.

[clobber]

Quote:

Originally Posted by gerntz Perhaps I'm wrong, but I thought the higher standard deduction simplified the tax code for a lot of folks.

Very slightly. Now there are some people (maybe even lots of people) who won't itemize. Most or all of the stuff in my OP has nothing to do with itemizing. In fact, I have never itemized.

[pb4uski]

Quote:

Originally Posted by gerntz Perhaps I'm wrong, but I thought the higher standard deduction simplified the tax code for a lot of folks.

It did in that for many people the most complicated part of their tax return was Schedule A and the increase in the standard deduction and combination with personal exemption allowances ended up simplifying tax compliance for many Americans.

[clobber]

Here is another case in point. The IRS have just announced some proposed rule with respect to the ACA Premium Tax Credit and personal exemptions. I have loosely read the document, and have no idea what it means

[clobber]

Quote:

Originally Posted by clobber Here is another case in point. The IRS have just announced some proposed rule with respect to the ACA Premium Tax Credit and personal exemptions. I have loosely read the document, and have no idea what it means

Ugh, and yet another one Somehow the default withholding for pensions and such (married claiming 3) is possibly changing. But I can't tell how.

[clobber]

I'm on a tear today. Here is a recently released, very long, very technical paper about minimum taxes - including AMT.

My favorite quote so far:

Quote:

Instead, to thoughtful observers (whether or not this mattered politically), it became clear that the AMT’s main influence on new enactments was to decrease public understanding of them

[2177V]

Quote:

Originally Posted by gerntz Perhaps I'm wrong, but I thought the higher standard deduction simplified the tax code for a lot of folks.

Not necessarily. As an example: the standard deduction for a married couple is $24,000. People still have to check if their deduction is less than or more than the $24,000 standard deduction. The higher standard deduction is just that...a higher standard deduction. The only group of people who simplified their taxes are recently married your couple with no children, no house, no investment, etc.

If you look at the new schedule 1 (additional and adjustment income), you still have to complete and attach when applicable schedules C, E, F, SE or Forms 4797, 2106, 8889, 3906, 8917. For Schedule 2 (additional taxes), you have to complete and attach when applicable schedule SE, H and forms 6251, 8962, 4137, 8919, 5405, 8959, 8960, 965-A.

Fortunately, TurboTax figures out these forms. In other words, you still need a computer program to figure out your taxes unless you are in the most basic and low income group or are recently a young married couple.

[SecondCor521]

Quote:

Originally Posted by vchan2177 Not necessarily. As an example: the standard deduction for a married couple is $24,000. People still have to check if their deduction is less than or more than the $24,000 standard deduction. The higher standard deduction is just that...a higher standard deduction. The only group of people who simplified their taxes are recently married your couple with no children, no house, no investment, etc. If you look at the new schedule 1 (additional and adjustment income), you still have to complete and attach when applicable schedules C, E, F, SE or Forms 4797, 2106, 8889, 3906, 8917. For Schedule 2 (additional taxes), you have to complete and attach when applicable schedule SE, H and forms 6251, 8962, 4137, 8919, 5405, 8959, 8960, 965-A. Fortunately, TurboTax figures out these forms. In other words, you still need a computer program to figure out your taxes unless you are in the most basic and low income group or are recently a young married couple.

As a AARP tax aide volunteer tax preparer, I can tell you that it has simplified things in the sense that when you tell people who come in to our service what the standard deduction is, most of them immediately know that they're nowhere close to that number, that they won't be close to that number in the future, so they can essentially stop tracking all those itemized deductions that they used to keep track of.

Yes, the law could change back, and yes, they should keep an eye on the standard deduction. But for many many people they can stop worrying about tracking their OOP medical, state taxes, contributions to charity, safety deposit box, tax prep, etc. etc. and all the collection and maintenance of the associated forms and reports. It also means for us volunteer tax preparers that most of the time we don't have to type in a bunch of different numbers from a bunch of different forms and see if it's close. We can just take the standard deduction without all of that data entry (which then would need to be double checked for quality in our process) - after of course checking that they're not close.

Out of several dozen returns I prepared this year, there was only one client who was even close enough to where it was necessary to do some quick math, and IIRC that client didn't even exceed the SD.

(And yes, I know that AARP tax aide clientele probably are a different population in terms of those taxpayers who itemize or not.)

[clobber]

Quote:

Originally Posted by SecondCor521 But for many many people they can stop worrying about tracking their OOP medical, state taxes, contributions to charity, safety deposit box, tax prep, etc. etc. and all the collection and maintenance of the associated forms and reports. It also means for us volunteer tax preparers that most of the time we don't have to type in a bunch of different numbers from a bunch of different forms and see if it's close. We can just take the standard deduction without all of that data entry (which then would need to be double checked for quality in our process) - after of course checking that they're not close.

Good post. Thanks

[USGrant1962]

Tax Foundation estimates ~31% itemized before TCJA, it is down under 14% now. I guess >80% are most basic and low income?

https://taxfoundation.org/standard-d...rent-law-2019/