February 13, 2010
'Tis the Tax SeasonBy Cindy Simpson
Yes, it's that time of year when most of us begin the arduous task of completing our 2009 income tax returns. I just received a tax-planning memo from my accountant highlighting the new tax credits available under the American Recovery and Reinvestment Act of 2009.
Along with a listing and description of these credits, such as First Time Homebuyer, Energy Efficiency and Renewable Energy, and Alternative or Electric Drive Motor Vehicle, my CPA added this comment:
Ah yes, the Tax Code: the Progressive's tool -- or should I say weapon? -- of choice.
Most of these new credits are given for buying stuff. We're supposed to buy stuff to help boost the economy, right? That's supposedly what the Stimulus was for, all $787 billion of it. You just need to make sure you spend your own money on the right stuff, like an electric car, energy efficient water heater, or new insulation. Don't worry if the cost of that expensive new energy-efficient item minus your tax credit and future savings on energy bills means a payback that won't be realized until well past your life expectancy. Tighten your belt, and don't blow your money on a boat or a trip to Las Vegas.
Not only have the tax codes become a "body of social policy," but they have also become so complex that even the head of the Treasury Department needed his hand held by Turbo-Tax when he filled out his own tax return. Apparently, though, even that software program wasn't helpful enough.
The latest figures I could obtain from a quick Google search put the Code at a staggering 8,500 to 10,000 pages, in very fine print, and excluding related IRS regulations and guidance. I am sure that the many creative minds reading this can offer a more descriptive title than "Internal Revenue Code" for this weighty tome.
Back in 2008, an intern with the Tax Foundation calculated that it would fit on eighty rolls of toilet paper. Now, there's an innovative idea. Dual Purpose -- use it to complete your return, and then reuse it in the powder room. Environmentally friendly and energy-saving! Would that qualify for a tax credit?
CPAs and tax preparers arguably profit as the laws become more complex, but the government plans to control even this business pursuit, with the IRS placing minimum testing requirements on the non-professionals. If you think the CPA exam, LSAT, MCAT, GMAT, etc. are tough, the ACAT exam will have to cover thousands of pages of intricate rules and regulations.
Many parents of college-aged kids add the FAFSA, or the Free Application for Federal Student Aid, to their growing stack of forms to complete, and they fill it in using their prepared income tax returns. Other college supplemental financial aid applications are also based on tax returns, such as the CSS/Financial Aid PROFILE, but, frustratingly, they usually have deadlines well in advance of the returns themselves. Most include a question such as: "How much are you willing to contribute towards the cost of education?"
I propose a similar question, just below the "Tax Due" line on the tax return, posed in patriotic terms so taxpayers will feel more generous. Vice President Biden could help pitch that one. The line could be called "Alternative Patriotic Tax" -- APT for short.
Speaking of acronyms, don't you love all the technical jargon thrown around this time of year? K-1s, 1099s, W-2s, AGI, NOL, RMD. That's RMD, "Required Minimum Distribution," and not WMD, and it has to do with IRAs. (If you forgot to take your RMD before December 31, you may be SOL.) It is so confusing. Once a friend of mine ranted on about having to pay the AMT (Alternative Minimum Tax), and all the while I was wondering why she didn't just go find a bank, like mine, that charges no service fees for its ATMs. And what about the poor guy who was dying and got UPS instead of CPR?
Which reminds me of HCR (the 2,000 pages of Health Care Reform) -- and if the latest version passes, it will add even more complexity to the tax returns, requiring citizens to use them to report details of their health insurance. If these questions are near the end of the return, it would probably help drum up business for insurers and health care providers, since by the time one gets to that point of the form, he'll be feeling rather ill.
If you are feeling really dizzy by now and you are a successful small business-owner wondering if your estate will be subject to the death taxes, you'll be happy to know that the Senate is considering giving you an option to prepay them at a reduced rate. So if you are too sick to know any better but not ready to die yet, you can go ahead and pay them now, and be comforted that you are doing your part to help with the deficit when the country needs it most. You will probably, however, have to sell your business and let your employees go to come up with enough cash, but at least you can get that done while you're still alive rather than leaving the job to those you leave behind.
Feeling patriotic yet?
Go and sharpen those pencils. Bring out the box of check stubs. Pour a drink. Hug an accountant.
Don't procrastinate. I'd better not see you on the local news standing in line at the post office on April 15.
And remember, "'Tis the tax season." Be jolly.