Let's appreciate the "observation" that the Internal Revenue Code is so complex and convoluted that nobody can definitively understand it. In other words, whatever tax return you file can be "proven" to constitute fraud and perjury at the whim of the IRS...
"Well, it's a system so utterly complex and ultimately inexplicable that half the time the tax professionals themselves aren't sure what the rules are - a system that even Albert Einstein is said to have admitted he couldn't begin to fathom. You know, it's said that his hair didn't look that way until after he experienced his first tax form." - Ronald Reagan, 1985.
Every year since 1987 Money magazine runs a contest in which 50 tax preparers complete the federal income tax return for the exact same scenario of one hypothetical family. In 1988 there were ten correct returns, in 1989 two, in 1990 one, and in 1991 zero. For the 1991 tax year the "target tax" was $26,619 - the tax amount for a correct tax return. Not one of the professional tax preparers got it right. At the low extreme, one tax preparer calculated the tax due as $16,219. She spent 25 hours on the account and charged a fee of $750. At the high extreme, another professional tax preparer calculated the tax due as $46,564. It took him 40 hours and he charged $3,000.
The contestants presumably considered themselves as expert tax preparers, and did their utmost to win first prize. They consisted mostly of professional CPAs and former IRS agents. So, if you take your documentation and files to two "professional tax preparers," one might calculate your taxes due as $16,000+, and the other over $46,000!
Which version is correct? Or, to ask it another way, which return keeps you out of prison? Which one allows you to keep what you rightfully earned? But, above all Americans, is this system acceptable?
So, when in doubt, deduct!
1 comment:
All true, and demands a revision of the system to eliminate 3/4 of this bloated agency. The Tax Code fails to define "income" (the courts correctly define it as 'profit or gain', meaning the IRS treats your labor has having no value and thus whaatever you make on it is 100% taxable, but obviously that premise is wrong), and successful court cases have been won against the IRS where the Code has been used to define who is and who is not liable to 'volunteer' so-called "icome" taxes.
A national sales tax to replace the income tax would be a great step, and damning of the politicians' spending habits whenever the rate has to be adjusted upward. At the minimum, a flat tax would also help.
But if the Republicans with a President and a majority in Congress failed to effect any change, what immediate hope is there? Ex-communist countries have realized the benefits of flat tax structures, why can't the U.S.?
Post a Comment