The American Dilemma and How We Can Fix It

Posts tagged ‘Tax Returns’

I DID THE MATH

And the answer is 92,690.  I checked my calculations several times and I am certain this is correct.

You may ask, “What was the question?”  So here it is:

“What is the grand total of all the numbered IRS forms which Mitt Romney and his wife Ann had to include in their 2011 Individual Income Tax Return in order to comply with the Internal Revenue Code for filing?”

Yes the Romneys, with the assistance of Price Waterhouse Coopers had to file fifteen separate forms, each bearing its special IRS identification number and if you add the numbers on the forms up you get 92,690.  (In addition there was an alphabet soup of other forms included).  The total number of pages for this return was 104.

I have to admit that my favorite was Form 8082.  It is entitled, “Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR).”  What in the name of all that is holy does that even mean?  Was this form invented by a psychopath whose real goal in life is to confuse us with his mind games?

But back to our subject …

While this number of pages might not have been sufficient to call for the downing of one of the ancient redwoods in the Pacific Northwest, I suspect the axe fell on at least one small birch or elm to provide the sacrifice and the paper to complete the return.

If you choose to review the return you will find out something we already knew.  Mr. and Mrs. Romney are successful people – at least as far as we measure success by the amount of money a person earns.  They reported an Adjusted Gross Income of $20,908,000 for year 2011 and paid Federal Income Tax in the amount of $3,227,000 on that.

I can hear the groans from the left of the auditorium.  That is only 15.4% of their income paid in tax.  That doesn’t seem fair when the average taxpayer pays at a higher effective tax rate.  Much could be said in favor of that point of view.  A flat tax would make it “fair” in an absolute sense for each of us.  We would all pay the same rate.

However, the problem with that is that paying 15% of your income as a minimum wage earner has a far more dramatic effect on your ability to live than it does for a person who earns millions per year.  (And I think we would get a lot of flak from CPA firms like Price Waterhouse Coopers, not to mention all the folks at IRS who suddenly would be out of a job).

There is one other item in the Romneys’ return that I would like to point out to my readers.  They voluntarily donated $4,020,680 to charity.  Their $3 Million payment in tax was compulsory.  Their donation of $4 Million was voluntary.  If you consider both of these in toto as a “payment to American society” – the percentage of their income which they handed over to others represents 34.6% of their income.

One of the allegations leveled against candidate-presumptive Romney is that as a wealthy man he has no concern for the ordinary person.  The amount of his and his wife’s charitable donations suggest otherwise.

I did the math.  Feel free to check my figures.

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HOW TO DO YOUR TAXES

Once upon a time, doing your taxes was a relatively easy thing. Picture this – the Holy Land two thousand years ago. Down the road come Joseph, Mary and Jesus when they meet the Roman tax collector.

The official pulls them off their donkey and says, “Where are you from? How many in your party?” (These are questions which all of us can easily answer).

Joseph says, “Nazareth. There are three of us.”

The tax collector says, “That will be three shekels. Move on.”

How things have changed. Those of us who are taxpayers in the United States now have to confront the 62,000 pages of the Internal Revenue Code. (I estimate that printing even one copy of the tax law will destroy one of the ancient redwoods in the Pacific Northwest).

Now granted, there isn’t one taxpayer who has to know every bit of this profound document. Even multi-national companies can ignore the sections of the code that pertain to individuals – and those of us who are individuals can ignore the parts that pertain to multi-national companies. Nonetheless, all of us must confront IRS’s use of Taxlish (that’s tax English) which is foreign to most of us.

But there’s a bright light on the horizon that will “simplify” our tax laws which have evolved after ever more dung has been flung on the dung pile for decades. Some have proposed a flat tax – something so simple that even a person with only a third grade knowledge of math could complete. Wouldn’t it be loverly?

Give up hope all ye who enter into this belief. It will never happen. There are far too many vested interests whose incomes are derived from the completion and processing of tax returns.

There are the accounting firms, the tax preparer services, the CPA’s, the tax lawyers, the tax lobbyists, the people who are employed by the IRS, the tax software companies and the paper companies that would lose their right to chop down more redwoods in the Pacific Northwest in order to produce additional copies of the law. (I forgot the manufacturers of ink whose products are used to print up the law – but most of those are overseas – so we don’t really care about them).

So having dashed your hopes that we will soon all be able to prepare our own returns easily and accurately, what choices do we have as we near that April 15th deadline?

Either we can choose to go it alone or use one of those services that open up for a few months a year in your local strip mall or get the latest nifty handy-dandy software that advertises the “accuracy” of it’s calculations (though they don’t guarantee that your return will be filed correctly). So let’s look at our options in detail.

GOING IT ALONE.

Well, you’re conscientious, you’ve gotten your booklet in the mail from IRS, you’ve gathered all the receipts and the stuff you wrote on the back of cocktail napkins, you’ve got your tensor lamp perfectly positioned over this mound of paperwork (the size of a small birch tree) and are ready to do your duty as a loyal taxpaying American. Your trusty legal-size pad of lined paper is to your right and your calculator is plugged into its outlet. Your pencils are in their nice little caddy – all neatly sharpened and ready for use.

Oops. You’ve hit a snag. There’s that sticky question, “Do you have or control a bank or investment account in a foreign country?” As it happens, you spend your summers in Taos, NM and as a matter of convenience you maintain a small bank account in that state. If you read my post, “How I learned geography” you might be worried that the person at the IRS who reviews your return might have once been the telephone operator who thought that New Mexico was in a foreign country. Should you check “Yes” or “No” in that box?

Faced with this conundrum, you decide to call the IRS help line so that you can accurately respond to this question. After a brief wait, one of our civil servants within that agency answers your call. Despite the fact that this person sounds like a succubus and your aorta is her target you explain your question. There is a momentary pause and the answer comes back, “No.” You thank her and hang up.

But wait – the IRS says that relying on the advice of their own employees does not guarantee that you have filed your return accurately. In fact, they make the statement that three out of four of the answers we taxpayers receive from their employees are wrong. So you call back three more times – thinking that in a republic the majority should rule – even if they are incorrect.

Bad news. It’s a tie – two “Yes” and two “No.” So you decide to ignore the question and file your return without answering it, hoping for the best. Such are the perils of going it on your own.

USING A TAX-SOFTWARE PROGRAM.

A few years ago you tried using one of those software packages so you could easily complete your return. It might have been co-incidence but as you were working through the program, your computer got infected by a nasty virus. So in addition to having to have to pay for the software you had to spend two hundred dollars to get your hard drive wiped clean and your operating system re-installed. Plus the hardware kept asking you the questions and didn’t allow you to ask any of it. Lesson learned – no more tax software preparation for you.

USING A “PROFESSIONAL PREPARER”.

You gather up all your documents, putting them in two banker’s boxes, load the station wagon and head over to the mall to a tax preparation service. As you walk in you think to yourself, “This will be good. I’m the only customer here.” (It’s early in the tax season). Not only are you the only customer – but there’s only one employee in the storefront.

This very mature lady has the most incredibly blonde hair put up in a bouffant style that is straight out of the 1950’s. Her French nails are at least two inches long and you wonder how she can possibly hold a pencil with those claws or write with them. The glitter coming from them is nothing short of dazzling.

As you walk in you notice that there is a cardboard placard on her desk that advertises that this firm will “Take a Second Look” at your previous return to see if you (or one of those inferior tax return-preparation services or software programs) had screwed up and not gotten you the full refund to which you were entitled. In fact, there are signs advertising this service all over the little office front. (Apparently, there’s money in correcting the mistakes of others as this service will take a percentage of this found money to which you were fully-entitled in the first place).

As you explain that you simply want to file this year’s return, Bouffant Betty looks a little disappointed – but begins to sell you on the idea that her firm can provide you with a quick “tax-refund anticipation check,” (at a modest charge) should you be entitled to a refund after she has professionally completed her computations.

After only a few minutes at her desk, you realize that your main goal is just getting the numbers put on the tax return – whether it is accurate or not. The overwhelming scent of her perfume, “Eau What A Beautiful Morning” is beginning to cause you to feel dizzy.

You ask BB (she said you should call her that), how long she thought it would take for her to do her work? Since you are very nicely organized, she says that it would only take about an hour – and so you go outside.

A few store fronts down from BB’s office you saw a store that sells cigarettes. Even though you don’t smoke, you decide to go in and buy a pack and take up the habit – just so you can get some fresh air into your lungs.

You smoke six cigarettes, feeling good about your decision to take up the habit. Whether or not your return is accurate, you have just contributed $1.01 to the Federal government in excise tax on your purchase. You’re helping make America a better place – and the light-headedness you’re experiencing from the cigarettes is a big improvement over the nausea you were feeling from the perfume.

Steeled with a nicotine buzz, you walk back into BB’s office. Ta da. She has done her duty and told you that you are entitled to a refund. (Sadly, it isn’t sufficient to cover the amount of her firm’s services). But you are happy to pay her and escape as quickly as possible with your newly prepared return and your two banker’s boxes of records. You need a smoke.

Yes, my fellow Americans – these are the choices we will all soon face. But I would like to offer the very simplest of suggestions that could make all our lives easy and eliminate the anxiety that we annually face as the tax filing deadline approaches.

(Drum roll).

We simply turn our entire income over to the Federal government as we earn it – and then they can refund to us the amount which they think we’re entitled to live on.

We seem to be headed in that direction anyway.

 

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