A taxing season
I'm still recovering from doing my own taxes, three sets for the family. Several years ago I mentioned to a friend that I put myself through this masochistic episode each year and he laughed, couldn't believe I didn't use an accountant. Finally broken, it will be an accountant doing this work from now on. Form 8615, AMT, K-1's, estate integration, rule changes, it all almost got the best of me this year.
Why did it take so long to realize this? For many years my taxes were simple and as they grew a little more complex I had this stubborn belief that any citizen, and certainly one with a finance and banking background, should be able to do their own taxes. There was also the belief that I wouldn't really understand what was going on unless I did it myself.
As early as the late '90's it became apparent that the complexity was growing and the tedious process was driving me nuts. At that time, however, and through 2003, I was working all of the time, almost literally, and if not working taking some intense but enjoyable vacation with my family to reward myself. I did not have the time to organize myself for someone else, an accountant, and was somewhat leery about explaining all of the trading I was doing to someone else, all above board but who wants to be second guessed.
When the big job ended, my rationalization was that now I really do have the time to do this, why hire someone else. Why? This year the IRS published "Tax Guide 2010 for individuals" was 270 pages. That really just scratched the surface because filling out various schedules led to 8 - 15 pages of instructions for each, in my case. The IRS estimate for completing one form related to schedule E was 14 hours, 40 minutes. It is highly unlikely that any form with that complexity would be one that I could do accurately even if I took the time. I did a short cut on that one and may have paid a little too much, but no choice there, my sanity was at stake.
In a state with an 8.5% sales tax, a marginal state income tax rate of 9.5%, and property tax that is huge, getting caught in the IRS's sweet spot for AMT was the clincher for a miserable experience. All of the property tax benefit on Schedule A was wiped out and then some by the AMT trap. Many things that require some discipline and hard work at least end with a feeling of satisfaction. Completing my taxes did not.
The complexity can be daunting and at this point is almost inexcusable. If Congress is not getting kickbacks from H&R Block they should be. That said, many folks could live with the system, however flawed, if they thought they were being treated fairly. Several days ago I saw an article saying that the average tax rate for individuals making over $5 million in 2010 was 17%. I can assure you that we paid much more than that.
Tax shelters, managed write-offs, and top notch accountants do their job. AMT can catches many with over $125,000 of income and peaks out at about $650,000, and somehow plays no role after it catches this segment of productive members of the top third of the middle class and what would be called the upper middle class or the marginally wealthy. People in high tax states get hit the hardest, somehow seeming doubly unfair as those states are generally the most expensive to live in.
This quote from mystery writer Donna Leon's Venice based detective Commissario Brunetti in the book "A Question of Belief" caught my eye:
"Underlyling it all, and this is what troubled Brunetti, was a sense of despair. He was troubled by the helplessness which so many people felt and their failure to understand what had happened, as if aliens had taken over and imposed this system on them. Governments came and governments went, the Left came and then gave place to the Right, and nothing changed. Though politicians often talked of it and promised it, not one of them gave evidence of having any real desire to change this system which worked so very much to their real purposes."
Why did it take so long to realize this? For many years my taxes were simple and as they grew a little more complex I had this stubborn belief that any citizen, and certainly one with a finance and banking background, should be able to do their own taxes. There was also the belief that I wouldn't really understand what was going on unless I did it myself.
As early as the late '90's it became apparent that the complexity was growing and the tedious process was driving me nuts. At that time, however, and through 2003, I was working all of the time, almost literally, and if not working taking some intense but enjoyable vacation with my family to reward myself. I did not have the time to organize myself for someone else, an accountant, and was somewhat leery about explaining all of the trading I was doing to someone else, all above board but who wants to be second guessed.
When the big job ended, my rationalization was that now I really do have the time to do this, why hire someone else. Why? This year the IRS published "Tax Guide 2010 for individuals" was 270 pages. That really just scratched the surface because filling out various schedules led to 8 - 15 pages of instructions for each, in my case. The IRS estimate for completing one form related to schedule E was 14 hours, 40 minutes. It is highly unlikely that any form with that complexity would be one that I could do accurately even if I took the time. I did a short cut on that one and may have paid a little too much, but no choice there, my sanity was at stake.
In a state with an 8.5% sales tax, a marginal state income tax rate of 9.5%, and property tax that is huge, getting caught in the IRS's sweet spot for AMT was the clincher for a miserable experience. All of the property tax benefit on Schedule A was wiped out and then some by the AMT trap. Many things that require some discipline and hard work at least end with a feeling of satisfaction. Completing my taxes did not.
The complexity can be daunting and at this point is almost inexcusable. If Congress is not getting kickbacks from H&R Block they should be. That said, many folks could live with the system, however flawed, if they thought they were being treated fairly. Several days ago I saw an article saying that the average tax rate for individuals making over $5 million in 2010 was 17%. I can assure you that we paid much more than that.
Tax shelters, managed write-offs, and top notch accountants do their job. AMT can catches many with over $125,000 of income and peaks out at about $650,000, and somehow plays no role after it catches this segment of productive members of the top third of the middle class and what would be called the upper middle class or the marginally wealthy. People in high tax states get hit the hardest, somehow seeming doubly unfair as those states are generally the most expensive to live in.
This quote from mystery writer Donna Leon's Venice based detective Commissario Brunetti in the book "A Question of Belief" caught my eye:
"Underlyling it all, and this is what troubled Brunetti, was a sense of despair. He was troubled by the helplessness which so many people felt and their failure to understand what had happened, as if aliens had taken over and imposed this system on them. Governments came and governments went, the Left came and then gave place to the Right, and nothing changed. Though politicians often talked of it and promised it, not one of them gave evidence of having any real desire to change this system which worked so very much to their real purposes."
posted by John Borden at 3:48 PM
1 Comments:
Well said Commissario!
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