Home Tax Planning The size of taxes are upon us – The Leader

The size of taxes are upon us – The Leader

11 min read
0
55

THE DINING ROOM TABLE – Like millions of other Americans, I am spending hours trying to figure of my federal income taxes for 2018. Actually, my wife – the daughter of a CPA – is doing the heavy lifting. My job is to advise with suggestions like: “Can’t we deduct these taxes from our income?” And: “The dog ate our receipts, but just trust us.” And: “Maybe, like our President, we can just hide them.” One study by the I.R.S. found it takes the average American taxpayer 13 hours to comply with the tax code, but this includes four hours devoted to actually completing the forms. Record-keeping takes an additional six hours and tax planning two more, and an extra hour is thrown in for miscellaneous tasks, like figuring out to low-ball your income and inflate your deductions. All told, Americans spend over $168 billion to comply and 6 billion hours. Another study found that total preparation times vary from five hours for a 1040-EZ to 16 hours for a standard 1040 form (69 percent of all taxpayers). However long it takes you, if you pay one single dollar in federal income taxes, you pay more than Amazon.

We have often heard on hate radio, “Half of Americans pay no taxes.” That makes us mad and a bit self-pitying. If only it were true and we were in that non-paying half. According to the Tax Policy Center, 43.3 percent of American households – not half — pay no federal income tax. Get it? No federal income tax. There are other taxes, such as taxes on property, cigarettes, gas, liquor, Social Security and state and local taxes. Everyone pays taxes. A quick example: Texas is one of seven states that has no income tax, but is currently debating a $251-billion budget for the next two years. Where do you think that money came from? Not from income taxes. (Incidentally, New York collected $2,249 per capita in individual state income taxes during the 2017 fiscal year, according to data from the Tax Foundation. Connecticut was second, at $2,218, followed by Massachusetts’ $2,146.) So the next time you hear some knuckle-draggers repeat the half-of-Americans, etc., ask what planet they live on.

But there are ways to cut or even avoid federal income taxes. Presidential candidate Sen. Elizabeth Warren likes to claim, constantly, that GE pays “zero” in taxes. The company does pay payroll taxes and local and state taxes. And GE says it also pays federal income taxes. How much? GE isn’t saying. Nor is it required to. Amazon, however, is an even better story. Another presidential candidate, Sen. Bernie Sanders, claims that Amazon.com, despite taking in $5.6 billion in profit in 2017, paid no federal corporate income taxes for that year. While Amazon’s tax filings are not public, its SEC filing for 2017 shows that the company used the tax code expertly (and legally) so well that the company anticipated a $137-million tax refund – yes, refund — from the federal government. No wonder Jeff Bezos is the richest person in the world – until his divorce goes through, then he’ll probably be tied as richest with his ex-wife. If, like Amazon, you expect money back (good luck), the wait time for your federal income tax refund depends upon your filing method. A traditional filing, where you mail back your income tax return, could take several weeks. If you file electronically (e-file), it could take 10 to 14 days.

Here’s some good news for all you wannbe tax cheats: follow the lead of porn star Stormy Daniels’ lawyer, Michael Avenatti. The feds say he has not filed a federal income tax return since 2010, and he has not paid federal income taxes since 2008, yet lives “extravagantly.” You wonder how many other Avenattis there are, probably quite a few. Why? For the past decade Congressional Republicans have been cutting the I.R.S.’s budget, which has been warning that it doesn’t have enough manpower (or womanpower) to catch tax cheats. At a congressional hearing in 2015, Rep. Mike Kelly, a Pennsylvania Republican, scolded the head of the I.R.S. for talking publicly about the agency’s need for more auditors. “Those comments are better kept internally.” In other words, “Don’t tell the public that they can cheat on their taxes because we keep cutting your budget.” Then the Congressmen cut the budget.

According to press reports, the government’s most recent estimate, back in 2010, is that Americans fail to pay more than $400 billion in taxes each year. That’s enough money to reduce the annual federal deficit almost by half. What you bet that number has increased in the last nine years? ProPublica reported last year that I.R.S. audits declined by 42 percent between 2010 and 2017. The I.R.S. has especially pulled back from scrutinizing people like Michael Avenatti who do not file tax returns; new investigations fell from 2.4 million in 2011 to just 362,000 in 2017. The number of I.R.S. auditors has been reduced by one-third since 2011. The government employs fewer people to chase deadbeats than at any time since the 1950s.This is pennywise and pound foolish, since the I.R.S. has estimated that each additional dollar spent on tax enforcement would yield $4 in federal revenue. The annoying thing is that you and I, or our grandchildren, have to pay what the deadbeats don’t pay. A few years ago the House Committee on Doing Stupid Things heard from a sobbing witness who said a friend of his had committed suicide after being hounded by the I.RS. for not paying his taxes. Turns out the witness owed $30 million in back taxes.

Finally, if you are thinking of being a tax dodge, remember a quote from that famed Chicago businessman, Al Capone, who said: “They can’t collect legal taxes from illegal money.” But also remember that Capone did not go to prison for murder, kidnapping, extortion or bad breath, but for federal income tax evasion.

Ashby is taxed at ashby2@comcast.net

<!–

–>

Let’s block ads! (Why?)


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also

Which Pot Stocks Have the Highest Gross Margin? – Motley Fool

What a difference a few months make. After ending the fourth quarter of 2018 on a sour not…