I Despise the USA Tax System SO Much

[ERD50]

Totally disagree. There will always be unforeseen and unintended consequences, so we shouldn't have to be stuck with bad forms for an extra year because an arbitrarily early due date. Having new forms out by late summer, after the filing season is over (excluding this year because of COVID-19) still gives the commercial tax form software folks plenty of time for the next tax filing season. I'm just trying to be practical. You want the 2020 tax forms to be ready on 1/1/2020 even though nobody will be able to use them (except for a few such as estimated tax forms) until 1/1/2021? Be serious, now.

I am serious. There's no reason to not get the forms right the first time. Of course, mistakes will happen, nobody is perfect. Fine, get a few mistakes cleaned up in the first quarter. That's really not asking too much at all.

In this way, people could start tracking their tax obligations as they make transactions. To issue this stuff after I started making the transactions is like starting a job with a half filled out, unsigned contract. If we are responsible for taxes for all income in 2020, then I should know the rules on the first day of the year.

-ERD50

 

[scrabbler1]

I am serious. There's no reason to not get the forms right the first time. Of course, mistakes will happen, nobody is perfect. Fine, get a few mistakes cleaned up in the first quarter. That's really not asking too much at all.

In this way, people could start tracking their tax obligations as they make transactions. To issue this stuff after I started making the transactions is like starting a job with a half filled out, unsigned contract. If we are responsible for taxes for all income in 2020, then I should know the rules on the first day of the year.

-ERD50

I already agree with you about the rules. But you don't need the forms right away. I am quite capable of figuring out my cap gains taxes on early-year sales by knowing the tax brackets, not by having the forms in front of me which I won't use for at least 6 months.

 

[JP.mpls]

Midpack,
I'm still stubbornly doing my own taxes without software.

I started to use TT about 10 years ago, but it wanted to store all of my information on their site, and it also made me answer many questions that didn't relate to my situation.
I didn't trust it, and decided to not use it.

It sounds like the majority of "do your own taxes " people, including you, are relying on Turbo Tax to help with their taxes.

This is motivating me to give TT another try next tax season. Hopefully it will work out.

I also purchased new real estate, and did a refi this year. I'm not sure how that might affect my taxes.

Take care, JP

Like many here, you have well above average financial savvy, computer and math skills. I manage fine with TT and spreadsheets too though I’d hate to do it manually. But put yourself in the shoes of the millions of Americans with average or below abilities when it comes to personal finance. Should our system be so far beyond their abilities?

 

[RunningBum]

Midpack,
I'm still stubbornly doing my own taxes without software.

I started to use TT about 10 years ago, but it wanted to store all of my information on their site, and it also made me answer many questions that didn't relate to my situation.
I didn't trust it, and decided to not use it.

It sounds like the majority of "do your own taxes " people, including you, are relying on Turbo Tax to help with their taxes.

This is motivating me to give TT another try next tax season. Hopefully it will work out.

I also purchased new real estate, and did a refi this year. I'm not sure how that might affect my taxes.

Take care, JP

I use the download version, not the web. I don't believe it is storing my info in their system. Perhaps this would ease one of your concerns, unless I am wrong.

TT also lets me explore on my own rather than take their long, guided questionnaire. I use this to speed up the process since not much changes for me year to year, especially now that I'm taking the standard deduction.

 

[38Chevy454]

X2 on the downloaded version of Turbotax.

One thing that a national sales tax, instead of an income based tax, is that it is better for savers. You aren't taxed on savings, just on spending. But unfortunately the government has too much need for the money and income based is here to stay. A flat tax would make easier for people to file. It also would eliminate a lot of IRS jobs.

 

[2177V]

Best thing for me is that I learned to do my own taxes when I was young so I got familiar with the tax system.
2nd best thing for me was the arrival of turbo tax just when my tax return got complicated. When my wife opened a business under a Partnership, turbo tax was there with a general partnership business tax return program which took care of my wife's employees w2 and 1099 forms.
3rd best thing for me is consulting a good CPA on any issue not covered by Turbotax and when a specific issue got super complicated. A good CPA charges $80 to $120 a hour which is inexpensive on a 6 figure issue. For example, I had paid $300 to $400 a hour for a real estate attorney since I was a landlord and I needed to know the rules involving various landlord liabilities and legal discrimination when choosing a tenant. Therefore $80 to $120 an hour consultation fee for a CPA is relatively inexpensive.
I disagree that the tax law should be changed since I like the system as long as you know who to consult when doing your taxes. I never been sued and I never been audited because I have experts to keep me out of trouble.

 

[urn2bfree]

As I recall hearing from several sources, the IRS knows what you owe and could send most people a form saying how much and why and then allow you to contest it. There is no real need for us to calculate our taxes and send it to them. But accounting lobbyists like Intuit make sure that this simple tax change is never implemented. Other countries do this already. https://www.propublica.org/article/how-the-maker-of-turbotax-fought-free-simple-tax-filing

 

[Offgrid Organic Farmer]

As I recall hearing from several sources, the IRS knows what you owe and could send most people a form saying how much and why and then allow you to contest it. There is no real need for us to calculate our taxes and send it to them. But accounting lobbyists like Intuit make sure that this simple tax change is never implemented. Other countries do this already. https://www.propublica.org/article/how-the-maker-of-turbotax-fought-free-simple-tax-filing

\\\
That is the very essence of 'voluntary' as opposed to enforced taxation.'

 

[clobber]

As I recall hearing from several sources, the IRS knows what you owe and could send most people a form saying how much and why and then allow you to contest it. [/url]

One year I made a small mistake on my state taxes. The state returned the form to me with everything corrected. There was a note that said, "If you agree, please send a check for $X and you are complete."

 

[Maidensong]

I just buy Turbo Tax each year and let it figure it out.

What he said. My DH took a tax course once we realized the H&R Block guy we took our stuff to was only moonlighting from his regular job as a bartender. The hard part of doing taxes is gathering and maintaining the records anyway. The course helped the DH codify how and what info he collects. Now the DH just buys Turbotax each year and that's that. It usually warns us we're in danger of an audit, but that's because we have so many different streams of income as opposed to a paycheck. We've got all the documentation for our filings, so no worries.

 

[Paulz]

IMO it's criminal how complex our tax codes are, thanks to politicians & special interests meddling.

I don't mind the complexity, but the constant changes are what gets me. For example, my property tax above $10k was deductible, but now it's not, but may be again depending on the next President.

My Roth is already taxed....but will it stay that way? Who knows!

 

[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-content/uploads/assets/graphics/CI1209021111.JPG

 

[tenant13]

It might be of interest to see how it works in another country; in this case my adopted country, Switzerland.

The Swiss system seems to be a lot less complex both in structure and in execution. With respect to the latter, on the annual tax "declaration" you fill in the relevant information about your income and proposed deductions, and send it in. You don't calculate your tax. The tax offices (federal, canton, and your own town/city) each send you a detailed tax statement, showing what you owe and why. You have 30 days to dispute any part of it; otherwise, after that you are sent a bill to pay (well, actually three bills). These take into account amounts you prepaid during the year either quarterly or through payroll deduction.

Because the system is not overly complex, I am able to calculate my expected tax from year to year within a fairly close tolerance.

That said, as a US citizen I am taxed whether I live in the US or not. So, I also have to make quarterly estimated payments and then send in my US tax return and deal with its complexities along with the intersecting complexities of what I am allowed to count in Swiss taxes as offsets against my US tax bill. Those calcs can be mind bending and are based on interpretations of US tax treaties with other countries (in my case, Switzerland).

In theory I should be able to deduct all of my Swiss taxes against my US ones for the same income. In reality, I always end up paying about 7% still in US tax, plus my regular Swiss tax. The two tax bills together exceed what I would have paid in US taxes alone, had I not moved to Switzerland.

The good thing about the US system is that it is generally quite swift. In Switzerland, one can wait up to 12 months to get your tax bill(s) (what you owe above and beyond what you have paid in advance) from any given year. So, you always need to hold in reserve some funds for those eventual bills. A good thing about the Swiss system is that they do not tax capital gains.

-BB

As a dual US/Polish citizen I'm familiar with both systems so for those who are interested... They have progressive income taxation but with only two brackets, 17% for ppl making 85k or less (their currency - no Euro yet) and 32% for incomes exceeding 85k. Additional 4% for ppl making more than 1 million. "Standard" deduction is regressive: 3k max going down to zero for incomes above 127k. Up to 8k is not taxable. If you were to compare standards of living, in relative terms it's 1:1 even though the currency exchange is 4:1. In other words 85k in PL goes as far as $85k in US even though it's only $20k when converted to USD.

It so happens that 97% of the population pays 17% so in essence it's a flat tax. Capital gain tax is 19%. There are some tax brakes. Not nearly as many as in US but some are quite nice: you can completely customize your property depreciation for example (it can be done in 5 or 40 years - however you want it). Also you can direct where 1% of your taxes go. Anywhere between your favorite charity to your best friend's fund me campaign.

Because your taxes are being paid every time there's a transaction (whether you receive the paycheck or interest from your bank), government takes care of all the calculations so when the tax time comes, you just log in to the website, make sure everything looks good, click "ok" and you're done. Finally There's a 23% VAT tax in PL (major source of budget funding) but minimal property taxes (like $20 a year).

As a US citizen I always have to pay taxes to the IRS regardless of where I live (my income originates in US so no foreign income tax credit). In PL taxes are due only if I'm a resident. It works like state domiciles in US : it's "the country/state that a person treats as their permanent home, or lives in and has a substantial connection with". I live in US so it's not an issue - I don't have to do taxes in PL.

 

[clobber]

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-content/uploads/assets/graphics/CI1209021111.JPG

OP here. Yes, that is a great example of my #5.

 

[Ed_The_Gypsy]

I don't care anymore. I won the game.
In spite of being dumb as a brick, by sheer luck, I managed to arrange things at the very last minute so that we (or the survivor) will never pay income tax again...until they change the rules.

 

[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.

 

[Offgrid Organic Farmer]

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.

No. Looking at my income as a Landlord over half of it goes to property taxes, insurance and utilities.

A 'simple flat tax' of 20% on my gross income would ruin me. And most Landlords.

 

[tenant13]

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.

You could also eliminate income tax - or rather labor tax, I don't have a problem with taxing capital gains - and focus on taxing consumption, essentially introducing VAT to US.

I doubt we'll ever agree on how taxes should be imposed and implemented - the whole discussion goes beyond monetary issues; it's just as much about money or tax codes as it is about the nature of society, what it means to be a community and what values should be prioritized.

 

[johnhkc]

No. Looking at my income as a Landlord over half of it goes to property taxes, insurance and utilities.

A 'simple flat tax' of 20% on my gross income would ruin me. And most Landlords.

But it's an ALTERNATIVE Simple Tax. If you don't like it, go back to the standard smear of crapola. Or, come up with an Alternative Landlord Simple Tax.
Also, what % goes to property tax? Those are eliminated in lieu of AST.

 

[johnhkc]

You could also eliminate income tax - or rather labor tax, I don't have a problem with taxing capital gains - and focus on taxing consumption, essentially introducing VAT to US.

I doubt we'll ever agree on how taxes should be imposed and implemented - the whole discussion goes beyond monetary issues; it's just as much about money or tax codes as it is about the nature of society, what it means to be a community and what values should be prioritized.

That's why it's an ALTERNATIVE Simple Tax. Maybe if we had a separation of taxation and state, we'd have 2000 tax systems just like we have 2000 different churches (counting the Christian churches which are not mono-lithic). As long as the total adds up to 20% who cares how it's structured? Govt spends about 20% of GDP so why not just fork it over in one blob instead of all the complicated form filling etc?

 

[Gumby]

That's why it's an ALTERNATIVE Simple Tax. Maybe if we had a separation of taxation and state, we'd have 2000 tax systems just like we have 2000 different churches (counting the Christian churches which are not mono-lithic). As long as the total adds up to 20% who cares how it's structured? Govt spends about 20% of GDP so why not just fork it over in one blob instead of all the complicated form filling etc?

MOD NOTE:

Now you're just trolling people. You should stop. The tax system is what it is. You won't be the one to change it.

 

[Offgrid Organic Farmer]

... Also, what % goes to property tax? Those are eliminated in lieu of AST.

It varies each month.

All through 2019, I had three tenants paying rent. 2 storefronts and one residence paid a total of $2100/month. Which is $25,000/year.

My property taxes are $5,000/annum, insurance is $4,000/annum. I provide heat in these units, which runs me about $5,000 a year.

So you could say my annual Net profit should be $11,000/annum.

This month I signed up one new tenant and on the first of June I expect another new tenant. Both of these new residential tenants are paying $500/month each. This will increase my annual Gross to $37,000, without any increases in my costs.

I still have eight empty apartments that I hope to have filled within the next few months.

 

[johnhkc]

MOD NOTE:

Now you're just trolling people. You should stop. The tax system is what it is. You won't be the one to change it.

Sorry. I wasn't trying to troll anyone. I was typing without thinking and drawing an analogy where none existed.

 

[AbbA]

I just buy Turbo Tax each year and let it figure it out.

That's partially the reason why the tax code is so complex...thanks to it plenty of businesses have been created to help people file their taxes, take advantage of legal loopholes in the tax code, and help some to stay away from jail... If the US tax code became simple imagine how many people would lose their livelihood because of that. It's all about money and business in this country when you think about it.

 

[RobbieB]

Same as it ever was.