Tax Day is always a bitch. And I believe the Democrats have never fully gotten this. I'm not about to join one of those silly rightwing "tea parties" in protest of taxes. (Are the yahoos participating in these events willing to burn--or eschew later--their Medicare cards?) Nor am I advocating a simplistic flat tax that will result in big breaks for the well-to-do. But the tax system is convoluted, unfair, and totally exasperating. Many people--if not all--who interact with the IRS end up with good reasons for hating government. Years ago, I was involved in an audit during which the auditor refused to accept explanations for legitimate deductions with this argument: "I don't believe it." The result: pay $7000 in fees and penalties or take the IRS to court (which would have led to legal bills of $3000 to $5000, and perhaps more). I was forced to make the logical choice and write a check for $7000 that the government did not deserve. The system did not seem rational or functional--that is, functional for the taxpayer.
That's not only my complaint. Because I am fortunate to earn money for freelance work in addition to my salary, each year I have to pay estimated taxes in quarterly lumps to cover this outside earning. The problem for my accountant each year is guessing how much estimated taxes I will owe. At the start of the year, I have no way of knowing what gigs I will get. Thus, I cannot calculate how much I will have to pay in taxes on freelance earnings. A rational approach would be for me to earn what I earn and then pay the IRS the appropriate amount of taxes at the end of the year. But the IRS insists on quarterly payments that reflect the total amount owed. In order not to end up being penalized, I have to overestimate these payments. I am no tax rebel, but I do believe that a citizen should not have to pay more money to the government than he or she might owe. This is exasperating. And another thing: you don't have to be an advocate of a regressive flat tax that helps the well-to-do to ask, why can't the tax code be simple enough so that taxes can be easily calculated (using, say, a three-page form) without professional assistance?
This year, there's another problem--for me and my accountant.
She tells me that it is especially difficult to figure out my estimated taxes because of...Congress. The House and the Senate passed a patch for the Alternative Minimum Tax last year, which stopped the AMT--which was designed to prevent corporations and wealthy folks from using deductions to escape paying any taxes--from hitting upper middle-class (or lower upper-class) households. But there's no telling if this patch will be continued for this year. Apparently, I am within reach of the greedy hands of the dreaded AMT. My accountant says that a new patch could mean a difference of several thousand dollars in tax liability for me. This is tax liability that I am supposed to cover with my estimated payments that I have to start paying today. So, she asks, "What should I do?" If she assumes a patch, I pay a smaller amount of estimated taxes. If she or assumes the patch dies, I pay more. In the former case, I could end up--if she guesses wrong--paying too little and then being penalized. In the latter case, I could end up--if she guesses wrong--paying the IRS more than I need to. The big point is this: the amount of money I send to the IRS should not be based on the best guess of an accountant.
Those are my personal gripes. But I'm guessing there are millions of Americans who have their own. These are not people dumping tea bags into their backyard pools to decry taxes. They are folks who would like to see a system that works better and that is responsive to the needs of citizens. Over the years, Democrats have yielded the tax simplification issue (and IRS-bashing) to Republicans and conservatives, and Republicans have scored many political points by denouncing taxes, the unwieldy tax code, and the tax collectors. Right now anger over taxes is not a potent weapon for the Republicans, but you never know when tax-cut fever will strike.
On Wednesday morning, Obama was scheduled to talk about restoring fairness to the tax code and providing tax relief to working families. But the Ds tend not to identify with the frustration that people have with the entire tax system. They would be smart to voice reasonable and progressive complaints with that system. (Kevin Drum has an excellent analysis of tax rates here.) And it would be even smarter for them to propose not just patches but fixes that would make the system more--get this!--taxpayer-friendly.
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Comments
And the Democrats could use it as an opportunity to make the federal tax system more progressive -- after years of seeing the Republicans skew tax cuts and tax advantages toward the wealthy.
Posted by: Antidote
| April 15, 2009 2:25 PM
Mr. Corn,
Some of the "yahoos participating in these events" served their country while the likes of you were willing to burn the American flag!
For someone in your income bracket, I understand that it is hard to see what is required of us commoners. However, you should be aware that the vast majority of Middle Class Americans routinely have more taken out of their paychecks than the government ultimately requires via INVOLUNTARY payroll deductions - so stop your upper-class whining. Ask someone out of work how much time THEY have to spend on quarterly taxes!
And by the way, skipping out on paying $7,000.00 makes you eligible for a position in the Obama Treasury Department. Give Tim a call.
Posted by: denmac
| April 15, 2009 3:16 PM
Learn to read, Denmac. David said that he paid the $7,000.
Posted by: Antidote
| April 15, 2009 5:56 PM
DC,
"And I believe the Democrats have never fully gotten this."
Versus
"Many people--if not all--who interact with the IRS end up with good reasons for hating government."
Are you thinking democrats end up with less interaction with the IRS?
Either way it seems contradictory.
Nobody likes the IRS - R or D or I or undeclared. Especially if they interact beyond receiving a refund.
You should be proud of your work and happy to pay whatsoever is legal and remember they will call you a liar to your face - the $7k SUX but that is a given.
"the amount of money I send to the IRS should not be based on the best guess of an accountant."
Not sure who would be a better guesser but you take your best shot - make certain you're covered? Wait for a refund of your overpayment like the rest of us working chumps?
Seems you have an embarrassment of riches my friend, more options than some of us and for all of that more taxes than a bunch of your loyal readers. There is a balance in there somewhere.
Posted by: capt
| April 15, 2009 10:24 PM
Everybody should be talking about how many mega-dollar corporations pay little or no taxes - some make a tidy sum in government subsidy while avoiding taxes on their mountains of profit.
As long as the party of "no" and "no way" have any power at all you can rest assured no real fix for AMT will pass. Hope for a better larger majority and some real challenges to the DINO's in '10 and '12.
Posted by: capt
| April 15, 2009 10:37 PM
Two points to make.
1. This country allows the rich to buy legislation that benefits them at the expense of the middle class and poor. I am told this is legal so long as no one clearly says, "Here's a hundred thousand for your next campaign and by the way I need this bill passed."
2. One of my school mates graduated first in his class from college and was recruited by the IRS. After 6 mnonths he was packing groceries at the supermarket we had both worked in during high school. He had left the IRS in disgust. The people working there were so bad he could not stand being around them. He gave up his CPA license and decided he would have nothing more to do with the IRS or the tax code.
Posted by: kalpal
| April 16, 2009 8:26 AM
P.S. It is far easier to get a Republican to pass legislation that harms the bottom 95% than it is to get a Democrat to do it.
So far as I can recall the GOP never does anything that is good for the bottom 95% if it can help it. Their big customers reside firmly in the top 1% and they would rather die than make those overprivileged jerks pay even a single penny in taxes. (America's royalty should be exempted from taxes entirely so long as they support the GOP.)
Posted by: kalpal
| April 16, 2009 8:30 AM
David made a valid point. I just helped a dear friend with his tax return; he's ill and unable to do it himself. He had approx 10k in W2 salary, quite a lot in disability pay (for 6 mons), and a lump sum for freelance work giving total pretax income of approx 50k. His out-of-pocket medical expenses were almost 20k. For 2009, he expects 1 more lump sum for freelance work, unknown salary & disability (will disability run out & what part will be taxable? can he return to his W2 job?). In trying to estimate his quarterly tax estimates, I made a wild guess & decided better for him to overpay than risk the stress of an IRS audit. But there must be a better way than guessing about future non-W2 income. My friend's situation is unusual, but I bet there's a sizable number of taxpayers with unusual situations, and not all of them have high earnings.
Posted by: Nano T
| April 16, 2009 9:21 AM
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