Tuesday, June 16, 2009

"You Try It" - On Simplifying the Tax Code

Tonight I spoke with my father-in-law, Paul, about taxes. We were talking about Annie's and my questions for an accountant about the caregivers we have for Helen. There are at least three categories. One considers people employees, in which case you have to file all sorts of paperwork. Another treats workers as independent contractors, in which case you often have to file a 1099 form. In a third case, people who help you out can be independent contractors who do not require 1099's. Then there is the matter of whether you paid the person less than 1,500 dollars in a year, because if so, you generally do not have to file anything, etc.

We were lucky to figure out that miraculously we've been doing things right, but by accident. You would think that this is a fairly simple matter. I do not pretend that an individual cannot figure it out on his or her own. At the same time, there are some complicated scenarios in which even sophisticated books and tax software ends an answer with: "Hire a tax accountant."

Paul's suggestion is that Congress ought to pass a law requiring that all congresspersons do their own taxes. That way, they would be forced to deal with the system that you and I use and worry about. If they were to do that, he contends, the code might finally get simplified. He's probably right.

I think the problem is that there are so many incredibly different ways one can earn money. Given that, and given the complicated and varied reasons that inspire laws, I'm not sure how to avoid the way things are. One would think that the kinds of software "wizards" that help you install programs and that guide you through H & R Block or other companies' tax software could be designed for the IRS. Surely this would be a huge operation. Then again, so is any large conversion, such as the change over from analog television to digital. Of course the latter is smaller, but we frequently plan large transitions. If we can buy stamps online, pay custom postage and pay our taxes online, why not figure out what we owe online too?

The main pushback I see to this suggestion is from the companies that have designed tax software. Even they can't solve one of Paul's tax questions, though. The main argument that I can see for private software companies for taxes is that it is in their interest to entice you with a product that truly maximizes your deductions/minimizes your tax requirements. The skeptic would suggest reasonably that the government might not be as dedicated to minimizing your tax burden. Well, at least we might envision an answer system for complicated tax questions that rivals Microsoft's KnowledgeBase Web site, for instance. These are just initial ideas that my conversation with Paul inspired.

No comments:

Post a Comment