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HOW TO PAY ZERO TAXES 2013
Your Guide to Every Tax Break the IRS Allows
By Jeff Schnepper
The McGraw-Hill Companies, Inc.Copyright © 2013The McGraw-Hill Companies, Inc.
All rights reserved.
"Our income tax system is overly complex. It distorts investment decisions and encourages people to put money into schemes to reduce their tax bills instead of into enterprises to create jobs and help our economy grow."
BILL BRADLEY, New Jersey senator (1984)
"The words of such an act as the Income Tax ... merely dance before my eyes in a meaningless procession: cross-reference, exception upon exception—couched in abstract terms that offer no handle to seize hold of—leave in my mind only a confused sense of some vitally important, but successfully concealed, purport, which it is my duty to extract, but which is within my power, if at all, only after the most inordinate expenditure of time. I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out the net, against all possible evasion; yet at times I cannot help recalling a saying of William James about certain passages of Hegel: that they were, no doubt, written with a passion of rationality; but that one cannot help wondering whether to the reader they have any significance save that the words are strung together with syntactical correctness...."
JUDGE LEARNED HAND, Thomas Walter Swan, 57 Yale L.J. 167, 169 .
Q: What's the difference between Obama's cabinet and a penitentiary?
A: One is filled with tax evaders, blackmailers, and threats to society. The other is for housing prisoners.
"I don't believe in a law to prevent a man from getting rich; it would do more harm than good."
"Politicians tax the middle class for the same reason some people rob banks. That's where the money is."
FORBES MAGAZINE May 11, 1992
"If our current tax strucure were a TV show, it would either be 'Foul-ups, Bleeps and Blunders,' or 'Gimme a Break.' If it were a movie, it would be 'Revenge of the Nerds' or maybe 'Take the Money and Run.' And if the IRS ever wants a theme song, mabye they'll get Sting to do 'Every breath you take, every move you make, I'll be watching you.'"
PRESIDENT REAGAN, in remarks to students at Northside High School, Atlanta, Georgia, June 6, 1985
WHAT'S NEW FOR 2012
I don't want to get on a rant here but our Congress has all the character of an egg yolk frying on the asphalt road behind my grandfather's barn on a hot summer day. Since when did having a three-digit IQ disqualify someone from running for office? Are our choices limited only to the left-hand leg of the bell curve? As we crawl out of a recession, I'm reminded of my 92-year-old mother-in-law's comment, "Recession? I lived through the depression of the 1930s and this is a depression." Does anybody think a sane business person would take the risk and invest and expand when the tax rules keep changing (maybe) and the cost of employee healthcare is subject to a new law that nobody understands and few agree upon.
As I write this, we approach what some call a fiscal cliff and others refer to as tax Armageddon. If Congress does nothing, we are facing the biggest tax increase in the history of the Internal Revenue Code. Between the expiration of the Bush tax cuts (which were extended in 2010 for 2 years through 2012 and the expiration of the "extenders," deductions will be lost, rates will increase, credits will disappear, and the marriage penalty will return in full force. The maximum tax on dividends will jump from 15 percent to as much as 43.4 percent! According to the Tax Policy Center, four out of five U.S. households would face an average of $3,701 more in taxes. Add mandated spending cuts to this tax hike and on January 1, 2013, we're scheduled to suffer an $8 trillion hit!
Here's the part that really gets me angry. Everybody agrees on what should be done. But nobody in Congress has the backbone to do anything until after the November elections. So once again politics is trumping economics and sanity. Once again hundreds of millions of dollars will be wasted on reprogramming IRS computers and tax preparation programs at the last minute. More of your tax money will be spent redoing IRS forms. It's hard to play the game if the rules keep changing. It's even harder if the rules change in December when the year is already up.
According to the Joint Committee on Taxation in March 2012, the prior cost of "kicking the can" down the road for tax cuts, extenders, estate tax, etc. through fiscal year 2012 is 967.7 billion in wasted dollars. Add to that decreased stability and the inability to properly budget into the future, and you have a framework for economic impotence.
Don't blame the IRS. Commissioner Doug Shulman has warned, "If Congress can't act by the end of the year, and even starts to think about retroactive legislation of things like the AMT, which have already expired, you could have a real disaster in the filing season, where there is total confusion, where some people are filing under one law and others under another."
What else happened since last year? Well, the IRS did have some issues:
The IRS delayed tax refunds early this filing season for 7.8 million tax returns because of fraud detection problems with its computer system.
It was revealed that the IRS paid $3.2 billion in erroneous American Opportunity Tax Credits during the first 5 months of 2010 to 2.1 million taxpayers.
The Service either failed to notify or incorrectly notified 61,427 tax payers about their need to start repaying the First-Time Home Buyer Credit.
The Tax Inspector General for Tax Administration (TIGTA) reported that the IRS failed to "securely operate its computer network...." The TIGTA also found that the IRS needed to gain tighter control over its wireless technology and improve security to protect data from computer attacker exploits. Weaknesses in the Internal Revenue Service's financial and tax processing systems continue to jeopardize the confidentiality, integrity, and availability of sensitive taxpayer information. No surprise that the number of fraudulent returns jumped to 2.2 million in 2011, up from just 457,369 in 2009.
Somebody got the math wrong. The IRS sent out 8.6 million math error notices, but almost 138,000 taxpayers disputed the computer-generated adjustments.
Tax returns that were incorrectly prepared by IRS volunteers, if filed, would have caused taxpayers to pay almost $10,000 more than they owed and would have kept them from receiving legitimate refunds of $4,000 according to a TIGTA study. Of the 36 returns audited, only 14 were prepared correctly.
Another TIGTA study found more than $697 million in wrongly claimed investment theft deductions causing a revenue hit to the Treasury of over $41 million.
The percentage of customer service phone calls that actually reached IRS representatives in fiscal year 2012 fell to 61 percent, down from 70.1 percent in 2011. That's what happens when Congress cuts the IRS budget by 2.5 percent, and the IRS responds by eliminating 3.1 percent of its full-time employees.
TIGTA also found the IRS's new e-file system "error prone" and still unable to ensure the accurate processing of individual tax returns.
There was some good news:
For 2011, the IRS scored a 73 percent on the American Customer Satisfaction Index survey, way up from only 32 percent in 1998.
The IRS was ranked third out of 15 large agencies in the Best Places to Work in the Federal Government survey for 2011, up from eighth place as r
Excerpted from HOW TO PAY ZERO TAXES 2013 by Jeff Schnepper. Copyright © 2013 by The McGraw-Hill Companies, Inc.. Excerpted by permission of The McGraw-Hill Companies, Inc..
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