I bought the preview version of TaxACT 2010 this year, because I wanted to run a few "what if" scenarios to decide if I should advance or postpone income, est tax payments etc. What a shock I got when I saw a 30% jump in my tax owed due to AMT.Comparing Form 6251 for year 2009 and 2010, I noticed the huge difference in allowed AMT exemption. Congress has been passing annual "patches" to avoid the "millionaire" tax from falling on the middle class. It hasn't done so yet for 2010, so TaxACT is using the "unpatched" exemption amount.And I am solidly in the middle class, very far away from the top two brackets. Most of my itemized deductions are for property and state income tax (in a high income tax city/state). The only other itemized deduction I have is for charitable contributions.As far as I am concerned "patching" AMT again (hopefully permanently) so that it is a real "millionaire's" tax again is my top tax legislative priority.
I had the same issue. I have a tax spreadsheet but wanted to run it through TaxAct to see how accurate I was. The AMT skewed it enough to be useless. I decided to err on the side of caution and send another estimated payment to the IRS.-Steph
While I do not find issue with your facts, what you have written is a great example of how Congress has screwed up the tax system. They insist on tinkering to "fix" unjust items. Like the so called marriage penalty - "fixing" that item sort of goes against the idea of graduated income tax. Taxing millionaires was OK 20 years ago, but certainly not "small" business people such as the "family farmer" -- I marvel at "family farmers" who get hundreds of thousands of dollars for not farming land.It is time to make a simple tax system with no loop holes and no Congressionally directed expenditures.GordonAtlanta
It is time to make a simple tax system with no loop holes and no Congressionally directed expenditures.Not exactly what I wanted, but close enough. I've been waiting for someone to bring up flat tax, and it's almost time for my nap, so you'll do.AMT is basically the flat tax system many people are in love with. A generous personal exemption, extremely limited preferences/deductions, and only two brackets.Like Mama said, be careful what you wish for.PhilRule Your Retirement Home Fool
I doubt if the IRS is any happier with the last minute annual patches than taxpayers. It's just idiotic that no matter which party is in control Congress can't pass a permanent fix or repeal the AMT. But I have a bigger gripe (since I'm not subject to AMT) with the tax on Social Security benefits. I understand the justification for taxing them but the income limits need to be indexed. That tax now catches almost anyone not living in poverty and it was never intended to do that.
Not exactly what I wanted, but close enough. I've been waiting for someone to bring up flat tax, and it's almost time for my nap, so you'll do. I Heart Phil. I learn a lot from you, and I'm always smiling to read your responses. That's a great combination on Tax Boards.Best wishes,Linda
Phil your preferred simple system may be the flat tax. There are others including the VAT and a graduated income tax system with zero deductions are two examples.There are two problems from my view point with the current system.#1 The tax system is used for political/social purposes (e.g. home mortgage tax deduction to stimulate home ownership)#2 The rich and/or powerful will get the system altered to further their personal interests. For examples look at any bill passed by Congress - it is called Pork.GordonAtlanta
#1 The tax system is used for political/social purposes ...#2 The rich and/or powerful will get the system altered to further their personal interests... And you think that won't happen with a VAT or a system with zero deductions? It would be trivial for politicians to start fiddling with either system to accomplish some bit of social engineering, or to kowtow to the rich and/or powerful.What items will be exempt from the VAT? Will there be different VAT rates on different items? How graduated are the tax rates? Will there be different tax rates on different kinds of income? Will there be some kind of standard deduction or a zero tax bracket? There are no deductions - well, except for X. ... And Y. ... And half of Z. ... But you only get Y if your income is under/over this amount.--Peter <== who prefers the devil he knows to the devil he doesn't know.
AMT is basically the flat tax system many people are in love with. A generous personal exemption, extremely limited preferences/deductions, and only two brackets.Great minds think alike. While you're at it, could you also mention that corporate income taxation is essentially a flat tax as well?-synchronicity, used to work for a Fortune 500 company that paid that flat 35% and yet had two entire departments of people doing tax compliance and tax planning
Peter you are asking essentially is is possible for a tax system to be corrupted. Yes it can be.But if we started with a VAT of X%, on everything or a graduated income tax system in which all income regardless of source was taxed at whatever the rate structure was - we would be better off than we are now in my view. In my view, the only people who benefit for the current system are tax accounts, lobbyists, politicians who get paid off and other crooks.GordonAtlanta
#1 The tax system is used for political/social purposes (e.g. home mortgage tax deduction to stimulate home ownership)I do not think that is what it is for. I think it is a subsidy for the banks (as if they needed it). Because as much as you save by getting a tax deduction, by as much do you find the price of the house has increased. The only benefit is to the banks that get interest on that amount for the life of the mortgage.Follow the money.
What items will be exempt from the VAT? Will there be...?And just to add to the a VAT's inherent complexity: since it's a Value Added tax, what about the shipping leg(s)--will transport get taxed along the production and sales chain? On every leg, or just whenever transport mode changes? Since the transport will be interstate, each state will draw off a taste, too, in varying amounts. And what about the portion of the chain that occurs in foreign countries: will we get tax credits for taxes paid in those jurisdictions? Or just price increases to cover the taxes the producers/sellers are paying to those foreign jurisdictions? On top of the price increases the producers/sellers already are charging to cover the domestic taxes paid at every step.VATs, as Peter has indicated, will very quickly become even more Byzantine, and vulnerable to cheating, than an income tax.Eric Hines
Since the transport will be interstate, each state will draw off a taste, too, in varying amounts. Not necessarily. The states are free to keep their existing income taxes even if the Federal government goes to a VAT.So we could end up having to deal with both tax systems at the same time.Yikes!--Peter
Phil, you are so right on, as usual. You totally rock!!
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