There Is No Such Thing As Tax Simplification!

By: Wayne M. Davies

I'm a little upset right now, so please bear with me. I
don't get upset very often - you can always tell because
smoke starts coming right out of the top of my bald head! -
but I'm here to tell ya', this one really has me both
laughing and crying at the same time!

Recently the IRS came out with this press release:

IRS Increases Interest/Dividend Threshold
Source: Associated Press
Publication date: 2002-09-26

WASHINGTON (AP) - More than 15 million taxpayers will be
able to skip filing a separate IRS form for interest and
dividend income next year under a move announced by the tax
agency Thursday.

Beginning with 2002 returns due next April, most taxpayers
won't have to file the separate schedule with their 1040
forms if their interest and dividend income is $1,500 or
less. That replaces the current threshold of $400, which has
been in place since 1974.

Taxpayers who file 1040 forms use Schedule B to list
interest and dividend payments. Under the new rules,
millions of taxpayers will simply report their interest and
dividend income without filing the separate forms.

Charles Rossotti, the Internal Revenue Service commissioner,
estimated that 15 million taxpayers will be no longer have
to file the extra form.

"We will continue our efforts to reduce the burden on
taxpayers and simplify the tax code," said Pam Olson, acting
assistant Treasury secretary for tax policy. END OF PRESS
RELEASE

Now, aren't you just thrilled to hear that the IRS, in it's
infinite wisdom and undying compassion for the American
taxpayer, has decided to make life easier for you by
changing the rules regarding the filing requirements for one
tax form know as Schedule B? Give me a break!

In case you were just dying to know, Schedule B is a form
that you must file with your personal tax return if your
total interest and/or dividend income exceeds $400. Now,
you only have to file Schedule B if your investment income
exceeds $1,500.

By the way, no matter how much investment income you have,
ALL taxable investment income must be reported on your tax
return.

The issue here is whether or not you have to
provide a detailed itemized listing of your investment
income.

Example: Let's say you have $1,000 of interest income.
Under the new rules, you can just put the $1,000 right on
Page 1 of Form 1040. And that's it.

But if you have $2,000 of interest income, you have to
complete a separate form (Schedule B) and list each source
of that interest income, i.e. the name of each bank account
or other financial institution and how much interest or
dividend income you earned from each source.

So because of this simple rule change, about 15 million
people will not have to file Schedule B.

And because the IRS has removed this one form from the tax
returns of 15 million people, an IRS official has the nerve
to make this pronouncement:

"We will continue our efforts to reduce the burden on
taxpayers and simplify the tax code."

Can you believe it? This lady, and I mean no disrespect
here toward Ms. Olson - I'm sure she's a hard-working
government employee who does a great job, but this lady, in
my humble opinion, has her head in the sand, as do virtually
all politicians and other government authorities who have
created the ungodly monster know as the Internal Revenue
Code.

The IRS changes one little rule that removes one form from
only 15% of all returns filed - and this gives the IRS the
right to think that they are reducing the burden on
taxpayers??? (Keep in mind that there are over 100 million
tax returns filed every year. So, if this Schedule B rule
change affects 15 million people, that's a measly 15% of all
tax returns filed.)

C'mon - what is wrong with this picture? Do you get my
point?

Taking away one lousy form from a small percentage of tax
returns filed - how is that reducing the burden on
taxpayers? It's not! It's a drop in the bucket. It's
peanuts. It doesn't even come close to making an impact on
the incredible burden that taxpayers have each year on April
15.

Furthermore, how does this one little change "simplify the
tax code"? I am appalled that a government official would
even use the phrase "simplify the tax code". We have never
had tax simplification. Never. Never ever! Since 1913,
when the tax code was first implemented, there has been
nothing but tax complications, never tax simplifications.

The rules only get more and more complicated. Tax laws only
get more and more complex. The Tax Code just gets bigger
and bigger. Don't let the politicians' hype fool you.
Never for a minute should you believe the government when
they say that they are trying to "simplify the tax code."

So, what's the average taxpayer to do? If the tax rules just
get more complicated, how are you supposed to make any
sense out of all this mess?

You only have 2 options, as I see it. One I offer tongue-in-
cheek, the other is "words-to-live-by."

OPTION #1: Become a Tax Professional and prepare hundreds of
tax returns every year. That's the only way I know for you
to become sufficiently knowledgeable in the crazy world of
U.S. taxation. Obviously, this is not a viable option for
99.9% of the population. But you get the point.

OPTION #2: Hook up with a Tax Professional.
Find someone else who does tax returns for a living. Not
your "family tax preparer", you knowBusiness Management Articles, Uncle Fred who likes
doing returns and so offers to do yours for free. But an
experienced tax person who does hundreds of returns every
year and can help you make sense out of the most nonsensical
collection of rules on the planet.

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