1: Comity!
He was all, you can write off drumsticks, and reacted with confusion when I said, "No, it's fine. I really don't need to nickel and dime about it. I think I got a pretty fair shake as it is."
I'm clearly never going to be a rich person.
Taking deductions is of course not incompatible with being happy to pay one's nugget.
Dude, take what breaks you can within the limit of the law. Your nugget is what the law says it is.
Believe me, the big guys with enough money so that it matters are taking every dodge that they can.
I believe in a strong, good, well funded government, too, but government works precisely because it is not a charity. People shouldn't be in the business of making voluntary payments for public services like roads and parks. When I want to give to charity, I do so.
I predict with 85% certainty that Witt will disagree with this comment.
3-4: I entirely agree. I didn't want to go digging, though. Perhaps I'm just lazy, which makes sense.
Also, I am most definitely not a tax lawyer, so don't take this as being well-informed, but it seems to me that drumsticks for your profession would be completely and totally deductible, as would more expensive things, like, I guess, drums. Just a straight up expense, right? How much are drumsticks, anyway?
How much are drumsticks, anyway?
I buy Vater Manhattan 7As with a rounded tip, whose price tag has jumped from $10 to $20, locally. I break roughly one per show, for those doing the numbers at home. And my playing frequency is maybe down to 8 times per year?
I don't get it. My law partner is a tax specialist, having obtained an LLM in tax at Northwestern after obtaining his JD. Prior to returning to Iowa to open our practice, his job consisted of traveling around the country, meeting with high-level executives of Fortune 500 companies, and explaining to them how he could save them hundreds of millions of dollars in taxes. As he explains it, it's functionally no different than reading a script and trying to convince someone to purchase satellite cable: it's that easy! In the end, local government is probably better served if you do your best to avoid paying taxes, and instead focus on making sure multi-national corporations pay their taxes.
My financial advisor today emailed an article full of advice for "well-off folks" to avoid the coming "ObamaTax."
I find it creepy.
I feel the need to clarify that I am not well-off folks, as the article envisions its audience.
I was going to deduct my charitable donations once, but doing that required using some sort of complicated form that I would have had to pay someone to fill out, instead of the regular 1040A, so I skipped it.
Oh THAT kind of drumsticks. I am dumb.
I'm generally with Stanley and teo on the OP, though when it looked as though we weren't going to get an $8k credit we'd been expecting I was feeling a good deal grabbier. When MA had that stupid tax-lowering ballot question in 2008, I really enjoyed the fact that our friends at the election watch party all cheered when it was defeated.
For a while I refused to deduct charitable donations (on principle!) until my wife convinced me that was stupid.
I'm sorry to report that my only possible charitable giving is to the local NPR/BBC affiliate, and I don't bother to report it on my taxes.
You should take your deductions, Stanley, particularly if you've hired someone to prepare your taxes for you, and then give the money you save to charity.
You know what's super sweet? That B.O.B. lyric that's like, "baby you the whole package / plus you pay your taxes." Because nobody likes a tea partier.
15: Now you tell me. Charities bleed because of you.
I finished my 1040EZ several days ago easily once I finally sat down to do it, but I'm still struggling with my VA taxes. The form seems Kafkaesque. Lines that refer to lines in the federal return, but there's nothing in the federal return with that exact name and two or three things it could be! Lines that refer to half a dozen different state forms, and I can't possibly need to submit them all, do I?
I don't mind the taxes at all, it's the forms that drive me nuts. They aren't necessary. The government already takes a good chunk of the money from my paycheck and some part of the government or another already has almost all the information to calculate deductions themselves (not counting business expenses), so why don't they? My guess is, because small-government nuts in the government want to keep it running as inefficiently and painfully as possible, so more small-government nuts can get elected.
I'd be happier if the government took, hell, fully half of my paycheck and then left it up to me to apply for a refund. (That's an off-the-cuff figure since I'm dealing with it all right now, of course, but you get the idea.)
If you do 9-5 jobs in Britain you might never see a tax form in your working life. Is that not the case in the US?
18: I think it's a conspiracy funded by Quicken so that they can sell TurboTax. It really does make it a ton easier.
19: Most people see two tax forms a year, federal and state. If you earn a middle-class income or lower and don't seek out any esoteric programs or deductions, the federal form is a simple two-page thing. I seem to remember Vermont's form wasn't any harder than the federal form, although maybe that's just rose-tinted glasses, but Virginia's definitely is more complicated.
Most taxes come out of payroll. This is the first year I actually had to pay taxes instead of getting a refund when I sent in my form (although there was one year when I never did send in my tax return, but I figure I can't be in too much trouble for that because I was probably owed a refund rather than the reverse), and I guess depending on how my Virginia form looks when I finish it I still might wind up not owing anything.
It's a combination! H&R Block pays for lobbyists and Republicans don't want tax season to be less painful, so instead of a sensible system everyone has to stare at a giant folder of paperwork and make little gibbering sounds and fly their light planes into buildings and vote for Sarah Palin.
If you do 9-5 jobs in Britain you might never see a tax form in your working life. Is that not the case in the US?
The other problem in the US is that a lot of social policy is driven through the tax code. I can deduct my mortgage interest and this year I was able to deduct the sales tax on the car I bought. Basically there are all sorts of deductions and credits that are built into the tax code that make it harder to simplify. I would be fine with getting rid of them since I think their effect on society tends to be negative, but it would of cost me about $1500 dollars this year if they went away and my deductions aren't huge. You can imagine it can be a hard sell to get rid of them.
May I be so bold as to suggest that this clause:
because my return was a bit complicated, due to band-related income that was reported and declared
strongly implies that the joy at paying the nugget is fairly new.
Also, 27 is correct. I never got a return worth the effort from playing with deductions until I had a family and house.
I'm just happy to be done -- after this time -- paying taxes to places I don't actually live.
Me too. I claimed income in Iceland because I felt sorry for Bjork having to bail-out their bankers.
I'd like to reconsider my endorsement of 27 (and since I'm mostly talking to myself, why not?). When dealing with self-employment income, isn't a business expense is better than a deduction? Doesn't it come straight off the top and isn't something that will probably wash-out as being below the standard deduction?
Yes. Lots of stuff is deductible under Schedule C. Stanley needs performance clothing. He travels to his gigs. He breaks drumsticks, not just in performance but while practicing. Any expense associated with practicing is deductible. With some work, his band income would turn out to be negative.
If you earn a middle-class income or lower and don't seek out any esoteric programs or deductions, the federal form is a simple two-page thing.
This is highly misleading. The form is two pages, but the instructions on eligibility for and calculation of various deductions, credits, exclusions, etc. are pages and pages and pages and pages and pages. This is especially true if you have kids, have education expenses, own a home, have any business expenses, have moved, have medical expenses, have retirement savings, etc etc etc. (most of which I would not consider "esoteric programs or deductions", but I guess YMMV).
Any expense associated with practicing is deductible.
Certainly my mantra.
36: Yes, but all of the stuff* comes listed on nice, neat forms and TurboTax does the rest.
* (except medical and business expenses)
38: it's easy with TurboTax, agreed, but that wasn't the context of the quote in 36.
39: Well no, but I was using it last night. (I still can't find one check that I need for my income. It's only for $500 or so, but the IRS has been fucking with me lately, so I'm being careful.)
I just want North Carolina to give me the refund that I filed two and a half months ago already.
41: I don't remember NC forms being hard. I do remember the city of Durham being so persistent in asking for some kind of car tax that I sent them $30 bucks even after I'd already moved.
The NC forms can be a little frustrating, but TurboTax takes all the work out of it. Almost nobody has gotten a return from North Carolina yet, regardless of when they filed. Starting May 3, all returns start accruing 5% interest, so I expect I'll see the electronic deposit post on May 2nd.
I think that puts you ahead of what the Californians are getting. If I recall correctly, NC had a car tax based on the value of the car. In PA, after the sales tax, you pay the same tax regardless of how shitty of a car you drive. I found the NC way fairer, mostly because I drive shitty cars.
"I live here. I like it. I drive the roads. I take advantage of the beautiful natural parks. I'm happy to pay my nugget."
Good attitude. If everyone would think that way perhaps tax rates would be lower.
more H&R Block than Quicken, because the former makes its money on "refund anticipation loans", especially for people eligible for the Earned Income Tax Credit*, rather than from fees from preparing taxes
So why would H&R Block be so strongly opposed to pre-completed tax forms? They could still offer refund aniticipation loans.
Presumably, if you didn't need help completing the forms, you might be more open to shopping around for the refund anticipation loan.
I'm with you, Stanely. Nickel-and-diming on the deductions seems kind of jerky and, also, I'm lazy. But you know what, I did deduct a bunch of moving expenses this year because it was fucking expensive as hell, I moved to try to get a job, and also I'm unemployed and can use all the money I can get.
* Did you ever wonder why you see the most storefronts for tax preparation services in low-rent neighborhoods, where most of the local population has no federal income tax liability at all?
Your theory makes sense, although I'd assumed they needed to be in low-rent neighborhoods because they have no revenues for about 9.5 months out of every year.
Block isn't the lender. A RAL does mean that the taxpayer doesn't have to pay cash upfront for preparation.
I did deduct a bunch of moving expenses this year because it was fucking expensive as hell, I moved to try to get a job, and also I'm unemployed
Bad news: if you don't actually end up with a job (within a year, I believe, although I'd have to look at the rules), those expenses aren't deductible.
I don't get the "refund anticipation loan" thing. If you file electronically, you can have your refund (federal) in like a week. What's the point?
Oh, I've gotten plenty of jobs, no worries. They've just been temporary, unstable, no- benefits jobs. I'm hoping that within the next month or two I might actually get a real one.
52: Big Tony wants his money today, not next week.
52: I would guess that H&R Block is probably just screwing many people by exaggerating the time ("oh, it sometimes can be quick, but sometimes takes months"). Also, do recall that the target demographic here is the same one that frequents paycheck cash-advance places, at the same usurious rates. Cash in hand today, rather than a week from now, can be very important when you're cash-strapped.
WRT RALs, Judge Evans' opening paragraph is pretty classic.
I'm with you, Stanley. I particularly liked the fact that the Virginia Adjusted Gross Income is VAGI. I really wanted to find a reason it was Not Applicable so I could write a letter to the state claiming VAGI N/A.
Also Knecht's 23 is correct. Getting the intermediaries out of the picture would be a very good thing. Unfortunately tax breaks are one of the main ways politicians rewards their base or try to buy support. Simplicity is the enemy of corruption.
Unfortunately tax breaks are one of the main ways politicians rewards their base or try to buy support. Simplicity is the enemy of corruption.
True, but this has little to do with the feasibility of pre-completed forms.
Getting the intermediaries out of the picture would be a very good thing.
Not going to happen, except slowly. TurboTax took the fall because a man qualified to run the treasury apparently didn't, unlike millions of self-employed people, pay his own SS tax.
I think I may still be angry about the whole "bailout the big banks that fucked-up everything for the rest of us and still paid millions in bonuses" thing.
The thing which makes my blood boil are the reports of how many companies dodge taxes altogether, like Exxon.
still paid millionsbillions in bonuses
I think the Service likes preparers a lot: would you rather get 10 million electronic returns prepared by a professional (financed by a RAL), or 3 million done at home on a computer by people with little knowledge or interest in the Code, 5 million more done in pencil, and 2 million people who could get the EITC not filing at all?
Man, I owed like a thousand bucks in taxes this year because one of my jobs stopped taking taxes out of my paychecks early last year and I didn't notice. I usually open and glance at the stubs, but since I hadn't changed anything on my tax forms, it was just an error in the office somewhere. If I hadn't gotten various credits, the penalties would have been even worse. It's the first time I've not gotten a big refund. I do not usually mind paying taxes, but getting seriously screwed by employer error sucks a lot.
58: It does. Pre-completed forms are perfectly feasible from a technical standpoint, but politically a non-starter due to the corruption promoted by H&R Block and the like.
Also, goat's milk in coffee is horrible, as I just discovered while writing this comment.
Also if tax returns were automatic for most people, I imagine EITC would come automatically, and some of the people who get Refund Anticipation Loans are just upsold while having their taxes done.
Unfortunately tax breaks are one of the main ways politicians rewards their base or try to buy support. Simplicity is the enemy of corruption.
I've been told there used to be (maybe still is) an occasional practice where a Congressperson would call for such-and-such tax break, get support, and it would be sent to the tax expert, who would put it into legal language so strictured that very few people would actually be able to claim it, and the revenue impact would be minimized, without the Congressperson realizing. Of course I imagine that doesn't work when it's an industry lobby's cause as opposed to a politician's hobbyhorse.
66.2: Fuck you. I tried my best.
I even tried putting a frother attachment on my nipples.
64: No doubt the IRS prefers your first choice to your second, but there's a third choice: five million forms, because the other half doesn't need to be sent at all. 36 is fair enough, the current process isn't quite as simple as I made it sound, but on the other hand there's no reason the tax code needs to be so complicated.
I think the IRS would prefer the third choice to either of your two. Preparers have a vested interest in opposing the third choice (as do small-government nuts; like someone said, no doubt it's an alliance), so the Service is probably ambivalent about preparers.
I think the IRS still wants people to send in forms. They want you to sign (or electronically affirm) something saying "This is all my income" to make it easier to take enforcement action against people who don't report all of their income.
Which is not to say that the form couldn't come to you already completed with a box that says "Check here and sign" if you had no other income.
I saw a thing in the WSJ about 10 years ago, about how Republicans were hoping to recruit from the recent-immigrant, or maybe recent-citizen pool, once they saw just how awful it was to pay taxes...only to find out that those people often liked paying taxes, because it made them full members of society. (I presume liking taxes, in that sense, has its limits.)
68: Dude, I totes heart goats! Just not their milk in my coffee. Y'all's cheese is the shiznit.
73: I think that having things which remind citizens of their connection to the larger society is very good indeed. Paying taxes should be seen as stepping up and taking responsibility for your role in running the country, as should jury duty and voting.
Of course fascist that I am, I'd also like to see a direct labor tax, so...
74: My marketing guy said I needed something called a "brand extension." I'll fire him and go back to the old guy.
77: When you dig the moat for the lord of the manor every other Tuesday.
Automatic forms? So the Service knows whether you got married, had a kid, lost custody, hired a babysitter, had a medical catastrophe? Won the lottery. Won the Final Four pool at your local tavern?
Why am I feeling an increase in tachyons . . . ?
Won the Final Four pool at your local tavern?
I feel confident in saying that no one has ever claimed that income.
80: Like some other things that seem obviously impossible, that is in fact what they do in a lot of countries.
80
So the Service knows whether you got married,
Well, the city government already does.
had a kid,
Birth certificates get filed somewhere, right?
lost custody,
On the order of whom?
hired a babysitter, had a medical catastrophe? Won the lottery.
I said that only half as many forms would be needed, and even that is ex recto. OFE said that people who work normal 9-5 jobs don't need to file one. Presumably, these examples fall outside those limits. (It depends in part on exactly what kind of babysitter you mean.) And several people have said that stuff that now is deductible wouldn't be in a perfect world because the tax code shouldn't be used for so much social policy.
I totes heart goats!
I tote goat hearts.
91: Wrongly worded. You claim a deduction.
You declare income. Right?
OK, 80.2 was definitely not called for. I shouldn't be having this conversation in any event. See y'all later.
For what it's worth, I've been thinking about a tax situation that's related to the OP.
A few years back my brother and I bought property together (we bought a duplex, we each live in half). We have been handling the mortgage interest deduction in the most disadvantageous way possible. We split the interest paid in half, and each report half on our taxes, which means that we each end up having a deduction that almost exactly equals the standard deduction.
We would get a much better deal if we worked it so that one of us deducted the entire amount, the other one took the standard deduction, and the person who took the full deduction handed the other one half of the marginal value of the deduction.
The problem is that, psychologically, I am attached to the idea that ownership is split down the middle and I like having all of the various paper trails reflect that fact.
Am I being irrational? Should I be trying to figure out how to get the extra tax deduction, or is this a case in which it's fair for psychological comfort to trump economic interest.
Also, I have to say, I am opposed to the mortgage deduction. That doesn't change how I feel about the situation. I'm happy to take whatever deductions I'm offered, but going through this does make me feel additionally hostile to the mortgage deduction.
88: I'm not a lawyer, but I'm fairly confident that what you are proposing is called tax evasion unless one or the other of you is prepared to pay the whole mortgage.
Stanley, if you get your fucking taxes done before me, we're totes through. (I've been slowed down by the burden of knowing that every time I submit to secular authority Thomas Becket molests another kiddie in heaven who died because they're negligent parents had them in a forward-facing car seat.)
unless one or the other of you is prepared to pay the whole mortgage.
That's my sense as well. We could have one of us pay the whole mortgage (with the other one giving a "gift" to contribute). I think we can do that without complicating the idea that we share ownership equally, but I'm not sure. That is part of what gives me pause.
So it isn't purely a psychological objection.
But I'm sure that people do things like that all the time.
Farm families often set up trusts that own the shared property. That way if a sibling gambles, they can't bet the farm. Also, parents retain control until they explicitly choose to relinquish, and divorcing spouses leaving the property will never get anything.
Having paper trails reflect equal interest in the property sounds perfectly sensible for lots of reasons to me.
There are limits on the tax-free gift amount per year, above that amount the donor pays taxes. This is not tax advice. Look into the logistics of hust giving money, it's not that simple above some threshold.
There are limits on the tax-free gift amount per year, above that amount the donor pays taxes.
We would be well below that limit.
But, again, helpful advice. I do appreciate it.
We would be well below that limit.
There are rules for what a gift can be given for as well. It can't be in return for any services and such. I don't know if "rent" would count. It supposed to be a true gift.
91: Yes, people do things that like all the time. They also do things like claim income tax is unconstitutional because Ohio screwed-up on its application for admission to the union or because Willie Nelson's accountant told them they didn't have to.
You see how you put scare quotes around "gift". The IRS has heard of people calling things gifts when they aren't gifts. The IRS is very aware of the tendency within families to assign income to the person who pays the lowest rate and deductions to the person who pays the highest.
Given that mortgage interest is one of the things that banks directly report to the feds, if you both have your name on the mortgage or the title, I'd advise you make your first foray into tax evasion less obvious.
I'm not a tax lawyer, but unless there's something specific forbidding it, I don't see anything wrong with saying that all the interest is in your half, and his half all goes to principal.
Given that mortgage interest is one of the things that banks directly report to the feds, if you both have your name on the mortgage or the title, I'd advise you make your first foray into tax evasion less obvious.
Heh.
Of course, I'm not going to argue, because that's the direction in which my sentiments lie as well.
make your first foray into tax evasion less obvious
Yeah, start with building a still in the woods behind your property.
I don't see anything wrong with saying that all the interest is in your half, and his half all goes to principal.
The word from the one accountant we talked to is that you can't do this, but you can do something like the scenario in 91.
I have a friend who's building a still.
Or, at least, keeps talking about building a still. I don't know if he's started. I also doubt he's planning on selling the product.
100: I think what the accountant meant is that you can do something like the scenario in 91 and will not likely trigger an audit, and the setup might even pass muster in the event that you did trigger an audit, as long as everyone was able to stick to the prepared stript and say "gift" with a straight face and without making air quotes with their fingers. (This is what most accoutants usually mean when they say you "can do something like [x]", unfortunately.) The accountant almost certainly didn't mean that setup is technically letter-of-the-law compliant, or, if he did, he was mistaken.
100: Oh, if an accountant says no, then no. But even though I'm generally a happy tax payer (what's the Holmes line: something like "I enjoy paying taxes. With them I buy civilization.") deciding not to take the most legitimately advantageous tax position out of a sense of uprightness is kind of off -- it ends up making the tax system more regressive, if you see what I mean.
And what Brock said about accountants. Nothing against them, but they're mostly crooks (in the sense of not having a strong internal distinction between what's actually legal, and what 'everyone does and you're totally going to get away with.').
You're all convincing me that the takeaway from this conversation should be the following:
If you ever need an additional argument for the elimination of the mortgage interest deduction (in addition to the fact that it's unnecessary*) is that people who own cheap or shared property can't take advantage of it because it provides little or no benefit beyond the standard deduction.
* The one caveat. I know there is an argument for the deduction as a way to level the playing field between people who are buying rental properties (in which case interest is automatically deductible as a business expense) and people who are buying property to live in. I don't have an answer to that except to say that the deduction, as currently configured, is so much more valuable to rich people than anyone else that it's clearly messed up.
My general assumption, which may be incorrect, is that if it sounds like something Goldman does (i.e. shifting income and debt around to different entities), you aren't rich enough to have the law written so that it is legal. You may be poor enough that the IRS won't spend much time looking.
For some values of 'you', you are rich enough but I'm guessing that doesn't intersect much with the set of people who post tax questions here.
105: the mortgage-interest deduction is highly regressive--that's well known.
I know there is an argument for the deduction as a way to level the playing field between people who are buying rental properties (in which case interest is automatically deductible as a business expense) and people who are buying property to live in
I'm not sure why we would want to level that playing field, any more than we want to level the playing field between people who buy printers for their businesses and people who buy them for their home computers. (Likewise for any other conceivable business expense.)
105, 106: I assume the "right" way to rip off the government in this situation is to set up a corporation (or some kind of thing) to own the place and then rent it back to both of you. (And per MH, the IRS probably has ways to spot this for simple folk who do not have a lot of other business-y stuff that can make this look legit.)
I'm not sure why we would want to level that playing field
To promote home ownership, duh.
*shakes head*
109: that's not illegitimate, but where would the corporation get income against which to deduct the mortgage-interest expenses? The rent from Nick and his brother would presumably only serve to cover the mortgage.
(Nick and his brother could pay more than enough rent to cover the mortgage, so the corporation has profits, and then dividend the money to themselves, but that would trigger corporate level taxes, which would almost certainly result in a net loss. Maybe something like this could work with an LLC--I'd have to think about it.)
What about paying the whole mortgage alternate years, come to think?
Lots of you freakish "I wanna pay my taxes" liberals* probably heard the NPR story this morning about seriously rich people who are trying to get their taxes raised -- part of the Warren Buffet/Bill Gates Sr. group that's been lobbying for this for a while.
*Of which I am one, of course.
There was also an interview with a teabagger who, when informed that Obama had cut taxes for 95% of people, simply said flatout, "I don't believe it."
There was a fucking line on the tax form for the credit. I know we've lamented this before, but what do we do with people who are "unshackled from the facts" (Jon Stewart)?
There was also an interview with a teabagger who, when informed that Obama had cut taxes for 95% of people, simply said flatout, "I don't believe it."
Well, that's not unreasonable--who are you going to believe, some liberally-biased NPR reporter, or the fair and balanced folks at Fox News?
(I don't actually mean that as sarcasm. It's not unreasonable for people to believe things they've been told repeatedly from sources they believe to be trustworthy.)
Anyone going to shoot down 113? Offhand, I think it works in the sense of both being legal and maximizing the S brothers' deduction.
What about paying the whole mortgage alternate years, come to think?
That would probably work, but I don't know.
According to the accountant the person paying the mortgage gets to deduct the interest. So that seems like a safe way to do it, but it would feel very odd.
It's not unreasonable for people to believe things they've been told repeatedly from sources they believe to be trustworthy.
It's true. I just wish that she would at least say, "Prove it," instead of dismissing it out of hand. It's that whole lack of critical thinking thing. Sigh.
"I don't believe it."
Epistemic closure, as Julian Sanchez has written. I similarly was completely unable to convince several Facebook acquaintances that the health care bill didn't establish any sort of new government-run insurance company.
But then, about half the country doesn't believe in evolution. So.
they remember that the convenience and invisibility of payroll deduction made it politically possible for income taxes to rise to current levels.
To rise to current levels? Was this an example of extremely dry japery?
gets to deduct the interest
I first read this as "deduct the internet." None of us would ever pay taxes again!
113/116: if each brother has the cash flow to shoulder the entire mortgage burden on alternating years, this would probably work. (Note: this is not legal advice; I'm probably not licensed to give legal advice in your state; I'm certainly not licensed to give legal advice on the internet; I'm not really a tax lawyer, and I haven't looked closely at the question.) But can they afford to double their mortgage payments for a year? If one brother is contributing his half of the mortgage to the other brother 'under the table', that would almost certainly be deemed to be the same as each paying half the mortgage.
Holy crap, the top bracket was over 90% for nearly 20 years. How can we return to those days?
123: It's only a cashflow problem the first year. During the first year, the non-paying sibling banks the 1/2 mortgage payment he would have made each month, and then spends that fund down in the year when he's the payor. (and presumably they'd be doing this for the first year in 2011, so if they start now, the guy on the hook for the first year has seven months to save for the cashflow hit.
Admittedly, I don't see anyway to make the first-year cashflow problem fair. It evens out in terms of payments made in the last year, so long as we've got an even number of years in the mortgage, but the cashflow problem is all on brother # 1.
Holy crap, the top bracket was over 90% for nearly 20 years.
With lots and lots of deductions (and tax dodges by some) and lower taxes on investment income. I'm too busy right now (read: lazy) to find out the average effective rate. Still, those were good days.
They also do things like claim income tax is unconstitutional because Ohio screwed-up on its application for admission to the union or because Willie Nelson's accountant told them they didn't have to.
The one I heard from a raving tax-resistance activist was that tax forms don't have OMB numbers or somesuch, so they're not legal!!1!111!! His group even took this argument to court, but the mean old judge told them to get lost. :(
Allow me to be the first to say that our accountant is filing an extension. My tax troubles are over for the moment.
How can we return to those days?
With the two parties having evolved into a far-right and a center-right party, we probably can't get there without going McManus.
129: If your W-2 form doesn't have the number '6' on it in any of the boxes, you don't have to count that income in your taxes. Trust me.
126: Maybe splitting the years A B B A B A B A B A... would be fair? Brother A gets the cashflow hit the first year, but Brother B pays two years straight, and then they alternate through the end.
La la la la, I'm just going to go on structuring the S brothers' taxes for them to myself. I, of course, am not your lawyer, nor am I a lawyer in your state, nor am I much of a tax lawyer, at least not this kind of a tax lawyer. So don't take my advice without checking it out with a professional.
132: If you did a-b-b-a-a-b-b-a, you could have the octave part of a sonnet. You'd need a bigger house to do the sestet.
133: Unless your primary objective is to irritate rich people without regard to the consequences for the economy...
And to send the a huge portion of the nation's brain power into tax law or accounting.
136: Those are hard to get now. (I read that in a newspaper. If it isn't true, don't tell me so I don't buy a boat.)
La la la la, I'm just going to go on structuring the S brothers' taxes for them to myself. I, of course, am not your lawyer, nor am I a lawyer in your state, nor am I much of a tax lawyer, at least not this kind of a tax lawyer. So don't take my advice without checking it out with a professional.
I'm interested.
In this case the problem is simplified by the fact that we're currently in the middle of a year.
If I payed all of the mortgage through the end of this year (which I think I could manage) and we swapped after that, it would work out.
I'm just not sure what makes that scenario different than the "swap and pay the other one under the table" scenario. I understand that it avoids problems with gifts that might or might not be gifts, but I don't see how it is any different with regards to the handling of the mortgage.
I'm just not sure what makes that scenario different than the "swap and pay the other one under the table" scenario. I understand that it avoids problems with gifts that might or might not be gifts, but I don't see how it is any different with regards to the handling of the mortgage.
If you each put half the mortgage into an escrow account, and the escrow agent paid the bill at the end of the year, you'd clearly each be paying half the mortgage. If one brother gives half the mortgage payment to the other, who then pays the whole bill himself, that's effectively the same thing.
I would very strongly advise you to talk this over with a tax professional before deciding to do it.
I'm just not sure what makes that scenario different than the "swap and pay the other one under the table" scenario. I understand that it avoids problems with gifts that might or might not be gifts, but I don't see how it is any different with regards to the handling of the mortgage.
Tax law is an area where there really isn't a spirit-of-the-law as distinct from a letter of the law, so just because something seems to be fundamentally the same as something that would be tax evasion doesn't mean it's legally tax evasion.
What makes this distinct from the gift under the table (and do check it out with a pro before assuming it's all right, there could be some reason I haven't thought of that makes it uncool) is that for a lot of purposes, each tax year is a totally compartmentalized event, and you don't look outside the tax year to modify what happened within it.
So passing money back and forth under the table is cheating, because it happens in the same year that the mortgage payments happen. Alternating years, on the other hand, even though it has the same effect over the life of the mortgage, in each year one of you is for real paying all the money, and so is for real entitled to the whole deduction. If you think of each year as a totally separate thing, it works.
Here's what I can find online.
Alternate Deduction Years: Alternate the interest deduction between the two taxpayers every other year. For the years where the secondary payer, or person whose Social Security number is not listed on the Form 1098, is taking the interest deduction, the primary payer should issue a Form 1098 to the secondary payer. Complete Form 1098 using the information for the primary payer of the mortgage as the Recipient and the secondary payer as the Payer/Borrower. Report the mortgage interest paid per Form 1098 received from the bank in Box 1. File Form 1098 with the IRS so Social Security numbers match deductions taken.
Jointly Held Mortgages You are entitled to deduct only the interest that you paid, regardless of which person receives Form 1098 for the joint loan. The IRS provides specific instructions for deducting interest not reported to you on Form 1098 and for allocating interest among two or more borrowers. See the "How to Report" section of IRS Publication 936.
Co-borrowers who make payments to prevent foreclosure can deduct the interest paid, even if the interest was supposed to be paid by someone else. The editors of JK Lasser's Your Income Tax pass along this inside tip:
"The Tax Court has allowed a joint obligor to deduct his or her payment of another obligor's share of the mortgage interest if the payment is made to avoid the loss of property, and the payment is made with his or her separate funds." (page 328)
More than one borrower: If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Show how much of the interest each of you paid, and give the name and address of the person who received the form. Deduct your share of the interest on Schedule A (Form 1040), line 11, and print "See attached" next to the line. Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13.
Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Let each of the other borrowers know what his or her share is.
142: I've been assuming that you're each jointly and severally liable for the entire mortgage, and so technically you're under an obligation to pay the whole thing (if your brother doesn't cough up his share). If that's wrong, things get more complicated--even if the mortgage is on the whole property (i.e., even if you'd lose the whole property in foreclosure if either one of you failed to make loan payments), if you have separate loan obligations then this scheme wouldn't work.
NickS should also check out the idea in 111 if there are significant differences in marginal tax rates between the parties.
We're both in pretty similar financial situations but that is a good point.
I've been assuming that you're each jointly and severally liable for the entire mortgage,
I believe that's true.
How does that interact with the quoted bits in 142?
I receive the 1098 for the joint loan, and we have not filled out the paperwork as described in quotation 3 but, as I said, we're handling it in the least advantageous and simplest manner possible, so I'm not too worried about an audit.
I've been assuming that you're each jointly and severally liable for the entire mortgage, and so technically you're under an obligation to pay the whole thing (if your brother doesn't cough up his share).
Also, you're in it now, and I'm sure your brother and you are both financially stable and have a great personal relationship and all that, but IMO for other people making future plans, this is generally a very poor idea. Trusting anyone, even family, not to flake out on massive financial obligations generally leads to sorrow.
Trusting anyone, even family, not to flake out on massive financial obligations generally leads to sorrow.
I had the thought when we were getting ready to buy the house -- "I wonder whether this is more or less of a binding legal commitment than getting married would be?"
How does that interact with the quoted bits in 142?
There's nothing in 142 that makes me think the alternating-year scheme is inappropriate, but I'd still counsel that you talk to a tax professional about this before proceeding.
They can't each be jointly and severally liable for anything.
Trusting anyone, even family, not to flake out on massive financial obligations generally leads to sorrow.
I wouldn't phrase it as a matter of trust, exactly. Your brother may have no intention of "flaking out", ever, but if he loses his job and can't find another source of income, you're potentially going to be in a pickle. (Or vice-versa.) Which of course has the potential to seriously strain the relationship, entirely apart from the economics of the issue.
153: True. I'm thinking of a particular family situation I helped unfuck, and none of the people who flaked out in that case had any other realistic option -- they simply didn't have the money to meet their obligations.
154: Which is why the government takes its money before you get it.
And why bars that don't know you take your credit card before you can run a tab.
And why shoe-shine boys always have worn-out scuffed-up shoes.
I probably shouldn't admit this, but I generally put our 1040 together in an hour or so without a great deal of care for instruction-reading and such. It's not a complicated return (W-2 income, mortgage interest, state taxes, etc.), and I probably err mostly in the government's favor, but it's just not worth more time and headache than that to me. Maybe one of these years I'll bother with Turbo Tax.
158: Me too! I've used the free online fillable forms the last couple of years.
A surprising number of people I've talked to are unaware of this year's Making Work Pay Tax Credit. And this article suggests eligible people are failing to claim it.
That would seem like a failure of marketing (go tell it on the mountain; people fucking love tax "cuts") and a failure of implementation (making it easy) by the Obama Administration.
160: A co-worker of mine mentioned that this morning. I was confused and curious, but I've already mailed my federal return off, so my reaction was just "oh well".
I'll bet part of the reason it's not very well-known is that it's not available if you file the 1040-EZ.
160: What does it mean to say "the credit will typically be handled by their employers through automated withholding changes"? No matter what my employer withholds, I still have to compute how much tax I owe, and this credit didn't come up as far as I noticed.
I missed it the first time through on the 1040A, because it's in the section of credits where we're usually not elligible for anything. Cyrus, for $400 you might consider filing an amended return.
162; This confused me too. It just means that your employer might have been taking out less in the way of witholding last year in the hopes that you'd spend it and stimulate things, with the understanding that this credit would have you owing less in taxes now anyway.
Huh. This may explain why I ended up owing right around $400.
Another thing I think was foolish abou the Making Work Pay thing was that they did $400 when so many people have a vivid memory of getting $600 under the Bush Administration. It's just makes it way easy for people to think, "Well, obviously I get back more money when Republicans are in power", even though that's not exactly a fair comparison.
Oh. "Making work pay and government retiree credits. Attach Schedule M." I think my thought was something like "never heard of it, not a government retiree, moving on".
Since I filed (using the free online fillable forms) I've gotten two letters from the IRS telling me that I'm eligible for more credits than I claimed. One (for the EIC) told me to sign the form and mail it back to get the credit; the other said they had just given it to me and I didn't have to do anything.
Having just read about the EITC, I confess I really don't understand what it is or how it works.
I didn't either, which is why I didn't put it on my return, but apparently I was eligible.
tax forms don't have OMB numbers or somesuch
So, I checked and my memory isn't failing. They're wrong. My 1040EZ has one. OMB No. 1545-0074.
The form for deducting plastic surgery expenses is OBM No. 80085.
the mean old judge told them to get lost
Did the courtroom have an American flag with gold fringe?
Most people who can deducted their 80085 have something with gold fringe.
176 is funny because I referred my accountant to a stripper friend. I should have her ask him about that deduction.
176 is funny because I referred my accountant to a stripper friend.
I assume you mean that you referred a stripper friend to your accountant, but maybe not.
Oh, right. But maybe not! I should ask her.
163 et al.: Huh. Magic: an extra $400. Duh. Definitely worth an amended return. Thanks, all.
I think accountants are like dentists. They can deduct strippers because of the high suicide risk otherwise.
EITC is basically a negative income tax giving money in proportion to income to people at low income levels, phasing out at higher levels. It's designed to make it more attractive for unemployed or barely-employed people to work. However, it's mainly designed for people supporting families; for singletons it's fairly small (I got $169). It's a pretty substantial progressive income transfer (Wikipedia says $36 billion in 2004).
182: Thanks. Based on wikipedia's numbers, it looks like I need to pop out a few babies if I want to quailfy at my current earning level.
183: You pop out a baby, somebody will give you enough money just for the story.
When you enter income of less than $600 on Schedule C, TurboTax says "You go, big baller."
184: I hadn't even thought of that earnings potential. Who here will volunteer to sire my manbaby?
So is this the thread for dense-seeming tax-related questions? I have estate income taxes to file for my mom's estate (Form 1041). The estate's income is all of just over $1000 in stock dividends; some of these are broken out on the 1099s as dividends allocable to beneficiaries; others as allocable to the estate.
Now, my brother and I have certainly not actually split out these dividend payments between ourselves (the beneficiaries) and the estate: it just all goes into the pool of money from which we basically pay lawyer fees.
Further, we've had legal fees far in excess of this meager $1000. Those are deductions on the 1041. We have negative taxable income for the estate. We owe $0 in taxes as far as I'm concerned.
The question: have I done wrong in declining to fill out Schedule B of the 1041, "Income Distribution Deduction"? Which speaks of income which we were required to distribute to the beneficiaries (see reference above to those allocable dividends).
This seems frankly ridiculous. I've chosen not to fill that out at all and to show a negative income and therefore $0 taxes due. If I have to file an amended return later for this, I'll do so. Never worry, next year's estate income taxes will be done by a professional: there will actually be something to report then, but there really isn't now, as far as I can tell. Unless piling on further deductions adds to a net operating loss which we might carry forward next year.
Sorry for lengthiness, but this has been bugging the shit out of me. This isn't particularly time-sensitive at this point, as I'm going to file what I have and amend later.
187: IANYL, but that may be one where you need to get the estate's return right so as to keep your and your brothers' returns right. If the estate is entitled to an income distribution deduction, that would imply that the beneficiaries need to be reporting those amounts as taxable income. OTOH, what's written on a 1099 is not necessarily gospel.
More generally: the taxation of estates is not a good area to dabble in.
188. last: I know. Long story, but my brother was supposed to take care of this with my mom's accountant up in New England and sort of crapped out and dumped it on me at the last minute. It's a recurrent problem and I think I've learned my lesson.
Hey look Stanley, the President and First Lady overpaid their taxes but elected not to claim a refund.
Not responsive to Stanley's post. But you knew that.
Oh wait no, they applied that to next year's tax.
Your mom is responsive to Stanley's post, JP.
Just let 'em rip, neb; we'll always be here to clean up after you.
191: Barack Obama's income tax return really makes me want to be a worldwide best-selling author. I mean, really.
196: Yeah, at first I saw only the wages part and thought, damn, that's all including his presidential salary? He must have a shitty book deal.
Then I got to Business Income. Oh.
Sod off, yggles:
I don't mind paying my taxes, but liberals pretending to exult in it is a little weird and not very credible.