The FAQs that the IRS posts on its web site are a trap. If you file a tax return that relines on what the IRS’ FAQs say, the IRS can decide after the fact that it was wrong and therefore you filed an incorrect tax return.
I’m not making this up.
The Taxpayer Advocate thinks that situation is not fair. We’ll see if the IRS, or Congress, does anything about it.
Via TaxProf Blog.
ALL I KNOW IS, THEY NEED TO DO SOMETHING TO CLAMP DOWN ON FRAUDULENT TAX RETURNS BEING FILED TO CLAIM THE EARNED INCOME TAX CREDIT
Some genius writing in a major newspaper thinks that congressional efforts to cut down on the abuse of the earned income tax credit (EITC) will harm poor recipients and reduce tax collections. I’m not going to dignify it with a direct link, but I will link to the blog post about it that I saw.
Something has to be done to cut down on the rampant filing of fraudulent tax returns using stolen identities in order to claim the EITC. If you have a better idea than what has been proposed so far, let’s hear it.
I PREDICT THAT CONGRESS WON’T ELIMINATE PRE-TAX RETIREMENT PLAN CONTRIBUTIONS, EVEN THOUGH AN AFTER-TAX OPTION ALREADY EXISTS
At least one source has suggested that Congress is considering eliminating the ability to make pre-tax contributions to 401(k) retirement savings plans. At least one commentator has said that’s a bad idea. I agree that it’s a bad idea. I predict that the idea, if it is actually being considered, will go nowhere, as did the idea to tax withdrawals from college savings accounts.
Neither of the discussions linked above mentions, however, that taxpayers currently can choose to make after-tax contributions to employer-sponsored retirement savings plans, if their employer offers the option. It’s called the Roth 401(k). It’s the same idea as the Roth IRA. The employee is trading the ability to make contributions on a pre-tax basis (401(k), conventional IRA) for the ability to withdraw earnings tax-free (Roth 401(k), Roth IRA).
Does the Roth 401(k) produce a better net return than the conventional 401(k)? I don’t know. It probably depends on the individual taxpayer’s circumstances. I do know, however, that eliminating the ability to elect to contribute to a 401(k) plan on a pre-tax basis will be unpopular.
I was under the impression that individuals not saving enough for retirement is a big problem. Is Congress really going to take away what is probably the largest tax benefit currently offered for retirement savings? I doubt it.
You didn’t include the birthday check from your grandmother on your income tax return, so why would you have to include the money you receive from her estate? That question and a few others are answered in my latest Estate Planning Law Report. You’ll find it in the same place where it’s posted every month: in the publications section at deconcinimcdonald.com.
Your comments are welcome, as always.
According to a report linked to by Instapundit, taxes collected by the federal government on a per capita basis, and after adjusting for inflation, more than doubled between 1961 and 2016. Those figures are from the government itself (the Office of Management and Budget), not some partisan think tank.
So when people say that the income tax cuts in the 1980s are the cause of the federal debt, or that the government just can’t afford to lose the revenue that it receives from the federal estate tax, you might want to take it with a grain of salt.
The "objective ability to pay principle" as a theory of taxation? Great idea. Good luck applying it.
That sounds to me like the kind of idea that gets turned into a journal article when you tell a tax law professor to come up with something new to publish.
It was Sunday, April 23.
Via TaxProf Blog (but if you go there, ignore the propaganda from the Center on Budget and Policy Priorities about how working more than a quarter of the year to pay the cost of government is ok because the government does stuff that benefits the public, and remember that according to the Tax Foundation, Americans collectively spend more on taxes than on food, clothing, and housing combined).
It’s “the kind of reform taxpayers have long demanded….” Now that’s funny!
JUST IN TIME FOR TAX DAY, A REPORT BY SENATOR FLAKE ON INCOME TAX SPECIAL PROVISIONS THAT BENEFIT NARROW, FAVORED CONSTITUENCIES AT THE EXPENSE OF EVERYONE ELSE
Yet more examples (as if we needed any more) of why fundamental changes to the federal income tax are both so desperately needed and so unlikely to occur are found in a new report by Senator Flake, linked to at the TaxProf Blog.
The contents of this blog, this web site, and any writings by me that are linked here, are all my personal commentary. None of it is intended to be legal advice for your situation.