Yesterday, I attended the first of a few tax classes in preparation for the coming up tax season. It’s something we have to do every year and it never comes as any shock…to me that is. For some reason, it always seems to “sneak” up on a few people. How this happens will always be a mystery to me. The system never ends. You’re born, you’re given a Social Security number, and you get ready to pay taxes till that number becomes listed in the American death index. It’s sad but true.
It never fails that the more I learn about taxes, the more I wonder why something was developed the way it was. For instance, did you know that there are limits to the amount you can contribute to your retirement savings? If you have an IRA, and you are under the age of 50, the most you can contribute in a tax year (till April) is $5,000. If you are over the age of 50, your amount is $6,000. If you have a Traditional and a Roth IRA, your contributions combined can not exceed $5,000 or $6,000. The benefit you get on a Traditional IRA is that it is not taxed at the beginning, but rather at the end when you withdraw it later in life where as the benefit of a Roth IRA is that it is after-tax when contributed and so it is not taxed to the individual when withdrawn. The limits were put into place so that people would not be able to “take advantage” of the tax benefits in either situation. YES, let me take advantage of a tax situation….sigh.
Another thing to consider, and this only deals at the present time with straight couples. If you participate in a retirement plan and you are married to a spouse that does not, there are further complications, limits, and less than/greater than rules that apply.
Why does our tax preparation in the US have to be so complicated? The tax system works just like a retail store. Congress acts as the General Manager of the country. They make decisions dealing with the whole “store” and then leave it up to department managers to oversee their respective areas to make sure those rules are enacted. The department managers are the IRS. Do you think Congress is going to take the time to come up with some mathematical equation to figure out how much you can pay into a retirement account and then make the document or program for this to be figured? I would think not. They have more important things to do like filibuster, argue, and talk to people who give them jackets, tickets, vacations, and whatever else makes their tough lives easier. That’s why when you send tax correspondence to the IRS, you more than likely are not sending it to Washington, D.C. You are sending it to one of the many branches of the IRS scattered across this country.
“Oh, but the Fair Tax, if enacted, would do away with the IRS!”
Lets look back at how the IRS is held responsible for collecting taxes after they have created the difficult, and sometimes terribly stupid, equations to figure out those taxes. Do you think Congress is going to take over the collection of anything but money to help their campaigns? NO! The Fair Tax, as wonderful as some aspects of it sound, would never do away with the ever growing beast of the IRS. They will always be around to make sure money is collected to try to run this country. And to be honest, I am glad we have the IRS to do that. I would hate to see what would become of the system if it were left to anyone else.
Not only is our tax preparation so complicated, but the system behind it can many times be seen as….well, ass backwards. I won’t go into the many ways that it is, but I will say these few thing….
1) A corporation is a business with many people working to make it function. It does not have a soul, a heartbeat, and it does not reproduce another living being. Therefore, a corporation should never in any circumstance be considered a person or individual.
2) Just because there is a group of people sitting together with someone standing in front, waving his/her hands or screaming about how the rest should live their life, does not mean that group, running as a business, should be exempt from paying their fair share of taxes. I watched a program a few weeks ago that explained that in the US, it is terribly easy to create a church, religion, or body of believers and register with the government as a tax-free entity. I attend church and I see the great work that is done for those less fortunate. But I have also known, and seen, where groups become selfish and want to “grow” and begin to, in my opinion, take advantage of the tax-free status. We’d all like to grow, but if we do, we are aware that we will fork out taxes as a repercussion. It’s a tit-for-tat situation.
3) Do not make taxes complicated because there are people out there that will search until they find a loop hole (and there always is) that they can jump through. Granted, the IRS has become increasingly better at finding scum that jump through these holes and prosecute them. I don’t think they are finding as many as they should and when they do, they aren’t getting what is rightfully owed and the rest of us aren’t seeing the money we had to pay to replace what they didn’t pay.
I will stop here for the time being. I am sure I will find something else as the classes go on that will jump onto my nerves. And believe me, a list of three things does not cover the list that continuously grows in my mind.