Tax forms an entries explained?

Is there a resource that summarizes the ideas behind various forms? Often, I have found myself filling out a complicated form or worksheet involving complicated algorithms that in the end gave a null result. If I knew what the form was really trying to do, I could immediately dismiss the exercise as a waste of time and effort.

For example, there is a big rigmarole in TurboTax to figure out what estimated tax payments should be. If I had SEVERE cash flow problems, I could see how I could temporarily save a few dollars. As it is, I would rather just send in a bit more than necessary to avoid the paperwork. Unfortunately, estimated tax calculations are relatively simple compared to many other calculations.

How does Congress go about telling IRS what to do when it comes to designing the forms. I presume Congress does not supply IRS with detailed flow charts. Are detailed flow charts available? Are equations Available?

It is getting to the point, for me, that preparing the forms is a greater pain than actually paying the taxes. In my case, the IRS gets just about all my tax information. I would gladly pay an extra couple or three hundred dollars if the IRS would propose a tax payment. Then I would except with minimal paperwork or go through the paperwork if the proposed payment appeared unreasonable.

Bill

Reply to
Salmon Egg
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  1. They yammer constantly about how the Code needs to be simpler.
  2. They pass increasingly complex laws.
  3. They complain that the IRS, charged with translating everything to an 8th grade level, is making it too hard on the taxpayer.

I was involved with legislative implementation for my last 5 years at the IRS and developed a deep sympathy for the people who worked in Tax Forms & Pubs. IMO they do an amazing job considering what they're given to work with. The biggest problem is that provisions must be made for EVERY filer even when just a relative handful are affected. (Example: fiscal year 1040 filers)

You gave the specific example of calculating estimated tax payments. It sounds to me like you can wean yourself from the software interview process. You already know how you want to figure your payments, so why in the world are you putting yourself through the process? Just arrange your payments and be done with it.

Most people have pretty simple tax lives. One of the goals of IRS's system modernization was a "send a bill/refund" process similar to what you suggested. The biggest barrier was that the IRS doesn't have the third-party information soon enough. Meanwhile, things have gotten so bad on the third-party front that their time to provide the information has been extended in hopes they can get it right the first time. I don't see a lot of hope for simplifying the process until the underlying law gets simpler.

Phil Marti VITA/TCE Volunteer Clarskburg, MD

Reply to
Phil Marti

I greatly appreciate your response. There has been little description of the job difficulty the workers developing the forms face. I would hate a job like that.

Coming from a technical background, a flow chart such as used by computer programmers would be helpful. It is not a matter of simple formulas or equations because of all the conditional branching. If there is one item that would simplify the forms for me, it would be to minimize the branching at various decision points.

My example of the estimated tax was given because of its simplicity. AMT is much more complicated and has kicked in only once for me. I got involved only once with OID, and it rankled me so much that I still gripe about it more than a decade later.

I hate TurboTax, For things like estimated tax. I want to use it just to have everything in one computer file to hold all the items going into my return. At this point in my life I am ready to make an approximation to a correct filing, let the IRS find my mistakes, and just pay whatever penalties may show up.

I despair of Congress ever simplifying the Code until there is a taxpayer revolt. One thing I think would help is if Congresspeople can be shamed into preparing their returns without professional help.

Bill

Reply to
Salmon Egg

Am I the only person that just takes my current year return, changes the numbers to reflect my estimate for next year and then enters the four quarterly payments at my EFTPS account? ... and ditto for my State's equivalent of EFTPS.

Reply to
Alan

If it were only as easy as actually having Congress TELL the IRS, or anyone for that matter, HOW to implement the laws they right.

No one, outside of tax pros, wants to hear this but here it is - the U. S. Tax Code is NOT about raising revenue, it is about social, political and economic engineering PERIOD, END OF PROJECT. Congress uses the tax code to fund various programs and to support various industries.

If you think you get to deduct your mortgage interest because Congress cares about you, you are sadly mistaken. Mortgage interest is deductible because allowing it bolsters the lending and construction industries. Charitable deductions are so the private sector will support some social programs so the government won't have to. The interesting thing about charity is that if WE give to charity privately we are supporting programs we favor, as opposed to having our extracted taxes go to support programs we don't favor. Either way, WE are supporting social welfare programs. Not that there is anything wrong in supporting them, but many among us feel WE should get to choose which programs we support.

I have never worked for the IRS, and in fact in my role as an Enrolled Agent I am often working AGAINST them in representing my clients. But for the most part I have nothing but the highest amount of respect for the people who work there. They are tasked with a daunting and almost impossible job - implementing laws that Congress passes without any real regard for how effective they may or may not be and with almost no concern for the burden associated with implementation.

For example, as a result of President Obama's health care bill the provision existed that would increase the burden of issuing 1099s to everyone and anyone whom you paid more than $600 to. Think about that - the long haul truck driver who buys 150 gallons of fuel at a time for $4.00 a gallon will spend $600 on a fill up. So he needs to get the truck stop to fill in a W-9 so he can send them a 1099 at the end of the year. AND he has to do that for EVERY place he spends more than $600, even if he spends it in increments (buying just $12 worth of gas a week for his car to do his banking is more than $600 a year).

And to oversee the specific health care related provisions of the bill, the IRS has or will hire roughly 16,000 new employees who will be tasked with overseeing 307 MILLION American individuals. This is roughly 19,000 Americans for EACH of the 16,000 new employees. AND that is before we factor in compliance oversight for the EMPLOYERS!

Now factor in that a Congressman's ability to get elected is based on his ability to serve his constituents, and his ability to do that is based on his ability to spend - by building roads, or relocating military bases, or some other such project - and his ability to spend is directly tied to his ability to generate income (READ THAT TAX - you and I work for our money, but Congress gets theirs by taxing US!) and very soon you'll come to realize that tax simplification is NOT in our future, at least not any time soon. Maybe when John Luce Picard and The Enterprise arrive we'll have a simpler system, but not till then.

Many of us in the tax field joke regularly about the "tax preparers and accountants permanent employment acts" that seem to get passed every year or two. Every time Congress says they are making things simpler, they get more complicated.

So don't lose sleep trying to figure out WHY a particular forms asks for things that make no sense. Just sleep, sleep my pretty, and ignore the man behind the curtain.

Gene E. Utterback, EA, RFC, ABA

Reply to
Gene E. Utterback, EA, RFC, AB

This is true for the masses, but for the wealthy - well, the tax laws ARE designed to raise revenue. That is why the high income folks pay the overwhelming majority of the taxes.

I don't think this was the OP's question. I

It was not "why are the tax laws, and thus the tax forms, written this way?" It was "why can't the tax forms indicate what this form's calculations are trying to achieve as a bottom line, so I can determine if I need to bother filling it out?" I would add my own question: "why don' the tax forms indicate what this form's calculations are trying to achieve as a bottom line, so I could consider the possibility of tax planning?"

Reply to
Pico Rico

This isn't remotely true when you consider payroll taxes, which are heavily regressive.

Steve

Reply to
Steve Pope

Not by the time you include things like Earned Income and other credits. The two lowest quintiles actually have a negative income tax.

Reply to
Kurt Ullman

you are correct, but regardless of any argument about ANY taxes being regressive, the high income people still pay the vast majority of the tax revenue.

Reply to
Pico Rico

The wealthy have the vast majority of the wealth and earn the vast majority of the income. The top 5% have half of all the wealth and the top 1% has more than one-third of all the wealth.

In 2006 the top 1% earned more than 20% of all income earned that year, and the top 20% earned more than 60% of all income.

Counting all of the taxes that people pay, including income tax, sales taxes, property taxes and payroll taxes, among others, the top

1% of income earners, who average over $1 million a year, pay a smaller percentage of their incomes to taxes than the 9% just below them.
Reply to
Stuart A. Bronstein

Thank you for pointing out the balancing side of the story. It's amazing how many times someone claims either "the rich are getting richer" or "the rich pay most of the taxes" without putting the two facts together.

Don't forget the other "tax", inflation -- I have the notion that inflation is a more regressive tax, since high-wealth individuals have more assets that keep up with inflation, while low-wealth individuals have more expenses that are affected by inflation.

-Mark B.

Reply to
Mark Bole

On the other hand, inflation benefits persons who are in debt and penalizes persons with positive net worth. So it penalizes savers as opposed to spenders at all income levels.

Steve

Reply to
Steve Pope

Yes. Most IRS forms have instructions which start with a "Purpose of Form" statement. It won't walk you through the steps to figure out if the form applies to you -- that's what the form is for.

I could rephrase your request like this: Is there a resource to become an "instant expert"?

If you are doing this with paper and pencil, you are contributing significantly to your problem.

I think you are making a false assumption here.

Reply to
Mark Bole

I recall some forms that used to say something like "if your AGI is less than x, don't fill out this form".

I haven't seen forms like that for a while, and have spent a lot of time filling and figuring, figuring and filling, only to find out, at the very end, the result is "you don't need to file this form".

Reply to
Pico Rico

This, of course, brings to mind Will Roger's commentary on the observation that the only things that are certain are death and taxes:

"The only difference between death and taxes is that death doesn't get worse every time Congress meets."

Reply to
Tom Russ

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