The annual tax and AMT moan
Yes, it is tax preparation time again as we all know. This year, for the first time ever, an accountant is being used here for our taxes. For so long I had clung to the notion that an American citizen should be capable of doing their own taxes if they chose to spend the time doing it. Part of that rationale was that doing it myself would allow an understanding of what's going on. Another part is that with an MBA in finance and a part of my job life spent in banking, why shouldn't it just be done here, everything arranged neatly on the ping pong table. The last part was just some sort of internal pride - "I can't even do my own taxes?"
Each year it became more and more tedious and at times I began to wonder what I was missing. Last year I had a local accountant do older daughter's taxes because she had earnings in two states and I did not want to go through the effort of learning another state's tax law and forms. He did a fine job for a reasonable cost, and then offered to take a look at my taxes for review. He found a couple of beneficial credits that I was unaware of and that clinched it. What he found may well have paid for a good part of his services, and a ton of tedious work would have been avoided here.
Of course, having an accountant does not give any relief to the record keeping and document retrieval. That's taken some time but it's done, and the first review copies of our returns are being looked at, checked, and a few minor errors corrected. It's such a relief to be near the end of the process.
Yesterday, on Bloomberg radio the previous head of the IRS was interviewed by Charlie Rose. The IRS man was asked "Is it true that you hire an accountant to do your taxes?" His response was "Yes, they're too complicated. In fact I use two accountants, a primary one in New York to do the work and another specialty firm in L.A. to double check what has been done. Having served in my previous job I don't want to take any risk of embarrassment by filing my taxes incorrectly."
Guess I'm in good company, but what a statement that is about the ridiculous complexity of our tax system.
Readers here will know that the AMT(Alternative Minimum Tax or is it, I'm confused, Alternative Maximum Tax) is frequently mentioned as an abuse of taxpayers. If one lives in a state with high income taxes and high property taxes(hand raised here) it is absolutely and almost immorally punitive. It hits the middle class(even a few at income levels not much more than $100,000) like a hammer in those states and with its weird logic has no impact on those making income above around $$750,000 when last checked. It just chews through the middle and upper middle class, a law that was originally designed years ago to make sure that the really really wealthy were paying their fair share of taxes and not hiding all of their wealth in trusts and munis. Those really wealthy folks are now not even touched by this law.
Politicians of both parties just let the law ride, Clinton did, Bush did, Obama does, because it raises money for the government from a class that "has no reason to complain." If one looks at where the real political campaign money comes from, especially now, one could also say "and has no real political power as well." "Slimeball phony politicians all" one can think as our accountant shows how much that law added to the fair calculated rate of the return this year, more than last year.
Enough on AMT. It is an annual rite here.
Footnote: a primary aspect of AMT is that it essentially eliminates all deductibility of state and local income and property taxes on Schedule A. So unless you have a boatload of mortage interest, really disasterously poor health, or sell a kidney for charity, there is no way to offset being vulnerable to AMT. There is of course a threshold of income that is required to reach that vulnerability, but it is a threshold that is not so high considering the money one needs to live in this state. Ah, we also have an 8.6% sales tax.
Each year it became more and more tedious and at times I began to wonder what I was missing. Last year I had a local accountant do older daughter's taxes because she had earnings in two states and I did not want to go through the effort of learning another state's tax law and forms. He did a fine job for a reasonable cost, and then offered to take a look at my taxes for review. He found a couple of beneficial credits that I was unaware of and that clinched it. What he found may well have paid for a good part of his services, and a ton of tedious work would have been avoided here.
Of course, having an accountant does not give any relief to the record keeping and document retrieval. That's taken some time but it's done, and the first review copies of our returns are being looked at, checked, and a few minor errors corrected. It's such a relief to be near the end of the process.
Yesterday, on Bloomberg radio the previous head of the IRS was interviewed by Charlie Rose. The IRS man was asked "Is it true that you hire an accountant to do your taxes?" His response was "Yes, they're too complicated. In fact I use two accountants, a primary one in New York to do the work and another specialty firm in L.A. to double check what has been done. Having served in my previous job I don't want to take any risk of embarrassment by filing my taxes incorrectly."
Guess I'm in good company, but what a statement that is about the ridiculous complexity of our tax system.
Readers here will know that the AMT(Alternative Minimum Tax or is it, I'm confused, Alternative Maximum Tax) is frequently mentioned as an abuse of taxpayers. If one lives in a state with high income taxes and high property taxes(hand raised here) it is absolutely and almost immorally punitive. It hits the middle class(even a few at income levels not much more than $100,000) like a hammer in those states and with its weird logic has no impact on those making income above around $$750,000 when last checked. It just chews through the middle and upper middle class, a law that was originally designed years ago to make sure that the really really wealthy were paying their fair share of taxes and not hiding all of their wealth in trusts and munis. Those really wealthy folks are now not even touched by this law.
Politicians of both parties just let the law ride, Clinton did, Bush did, Obama does, because it raises money for the government from a class that "has no reason to complain." If one looks at where the real political campaign money comes from, especially now, one could also say "and has no real political power as well." "Slimeball phony politicians all" one can think as our accountant shows how much that law added to the fair calculated rate of the return this year, more than last year.
Enough on AMT. It is an annual rite here.
Footnote: a primary aspect of AMT is that it essentially eliminates all deductibility of state and local income and property taxes on Schedule A. So unless you have a boatload of mortage interest, really disasterously poor health, or sell a kidney for charity, there is no way to offset being vulnerable to AMT. There is of course a threshold of income that is required to reach that vulnerability, but it is a threshold that is not so high considering the money one needs to live in this state. Ah, we also have an 8.6% sales tax.
posted by John Borden at 9:16 AM
1 Comments:
AMT is just the forewarning of what will happen with Medicare and Social Security. Those in the so called "middle class" who have paid in for years of underforming returns, mainly in Social Security, will be denied payment under an examination of their assets. All planning out the window. The government will take the money, like with AMT, to fund their takeover of our system of free enterprise.
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