Saturday, April 19, 2014

There Has To Be A Better Way

Donald Rumsfeld Says He Has 'Absolutely No Idea' If He Paid His Taxes Properly

He's not the only one.

I know a lot of people file their own taxes but you don't have to be too sophisticated before your finances are more sophisticated than you are. Things can get complicated in a hurry. Fortunately, there's help.

Or is there?
And at the heart of the issue is the need for tax simplification, says David Williams, chief tax officer at Intuit, maker of TurboTax software. "I could give you 20 different definitions of modified adjusted gross income," Williams says. "There are a lot of opportunities for tax simplification that stop short of eliminating the tax return." 
Audit: 17 of 19 paid tax preparers got it wrong (USA Today)
Why stop short? Let's get rid of it - the tax return. There's no need for it. Most people efile so we're halfway there. In fact, if you don't file a return the IRS is happy to prepare a tax return for you (for free!) and they'll send you a delightful little letter telling you how it all worked out.

They do that by using the information they already have: your W2, your interest and dividend income, your capital gains, and the amount of mortgage interest you paid. So why do we need to file a tax return at all?

Because the IRS doesn't get your charitable contributions, your real estate taxes paid, and other deductions, for example, but that could change, don't you think? Especially, since you might pay those things with a credit card and already do online banking. Every payment you make is electronic in some fashion.

Here's my latest gazillion dollar enterprise: eTax. It would be great if the government could figure this out. Even better, if I could and then sell it to the government. Or you. I don't care which. It's still worth a gazillion dollars.

Simply sign up. . . . (hahahaha)

Seriously, once the kinks are worked out, it'll be great.

The idea is you sign up (it would be elective, initially), the government sends you an email with the calculation of your tax return and you either accept it or reject it. There has to be a huge number of people who would just accept it. I'm sitting in a room with someone right now who does that already by not filing a tax return to get the refund he's owed. Sounds crazy but he just doesn't want to trouble himself with it.

The fact is, there are a lot of people who do that and for that reason alone eTax would work. There has to be a way to connect other transactions to the grid. Some would be easier than others - like major charitable organizations. If you donate to United Way with a credit card, that would register as a charitable contribution with the IRS, for example.

Assuming it could ever get done, it would put H&R Block out of business. My firm too, eventually. But it makes sense. The reporting requirements of financial institutions is getting ever more sophisticated which might be burdensome until the computer code is written, tested, and works. (This year's reporting of capital gains was much easier due to regulations concerning basis reporting in earlier years.) It can happen.

Just saying.

No comments: