Do not try this at home

I managed to get my taxes filed on Monday. Thank god for TurboTax. And Wesley Snipes.

Let this be a tax season warning

Shocker of shockers! Richard Hatch thinks prison sucks. Maybe he should have thought of that before he decided to not pay his taxes.

More on the AMT

Here's a bit from Ruth Marcus's interesting article about one of my favorite topics: The AMT:

. . . The AMT, as you may have had the misfortune of discovering, is hitting growing numbers of taxpayers who are further down the income scale. That's because (1) the level at which it takes effect isn't adjusted for inflation, so more taxpayers find themselves covered over time and (2) the Bush tax cuts lowered regular income tax rates, sweeping additional taxpayers into the alternative system.

Figures compiled by the Urban Institute-Brookings Institution Tax Policy Center demonstrate the AMT's dramatic effect. If nothing is done to fix the AMT and the Bush tax cuts are extended as he wants, 89 percent of married families with two or more children and incomes between $75,000 and $100,000 will be hit by the AMT by 2010 -- compared with less than 1 percent in 2006. By 2017, almost half of all taxpayers -- 53 million -- will owe the AMT. The tax will hit two-thirds of those making between $75,000 and $100,000 and 90 percent of those making $100,000 or more.

Looked at another way, what the Bush tax cuts give to taxpayers, the AMT grabs back. By 2012, if it isn't changed, the AMT would take back almost one-third of the Bush tax cuts. As the accompanying chart shows, it would take back more than half of the tax cut for people making between $100,000 and $200,000.

In fact, in an irony that only a tax geek could love, the AMT has been transformed from its original purpose, a means of assuring that the wealthiest pay at least some taxes, into a way of underwriting tax cuts for the wealthiest. Because the AMT hits fewer of those with the highest incomes, the rather comfortable end up subsidizing Bush's tax cuts for the super-rich. . . .

Academy of Motion Picture Arts and Sciences and Internal Revenue Service join forces to battle extravagant celebrity culture

It's official: Thanks to the IRS, celebrities will no longer be getting those fancy Academy Award gift baskets.

Accordingly, Ed Norton made this pithy comment:

He said, "A lot of us have talked to the Academy Awards producers about this and I think they're actually going to scuttle the gift baskets and that kind of stuff. I mean the gift baskets, worth amounts of money that a low income family could live on for a year, (are given to) people who have so much already. It gets depressing. You sit there, going, 'This is an embarrassment.'"

Note to self: (1) Find Ed Norton. (2) Give him a kiss.

Fixing the AMT

Remember back when I said that the alternative minimum tax sucks? Before I started saying crazy shit like if it were the only tax system, it might be okay, since it would be kinda like a flat tax?

Lucky for us, the Post reports that the Democrats were listening.

Rep. Charles B. Rangel (D-N.Y.), the presumptive chairman of the tax-writing House Ways and Means Committee, this week put fixing the AMT at the top of his agenda, calling it far more urgent than dealing with President Bush's request to extend the 2001 and 2003 tax cuts, which are scheduled to expire in 2010.

Here's some background:

The complex and expensive tax was designed to prevent the super-rich from using deductions, credits and other shelters to avoid paying the Internal Revenue Service. But because of rising incomes, the tax is expected to expand to more than 30 million taxpayers in 2010 from 3.8 million mostly well-off households in 2006.

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In simple terms, the AMT is sort of a flat tax with two brackets, 26 and 28 percent, and fewer deductions. Credits for dependents, medical expenses, and state and local taxes are all disallowed. Instead, taxpayers get a single big deduction, called the AMT exemption, which is set this year at $62,550 for married couples and $42,500 for singles. Taxpayers must compute their taxes both ways and pay whichever is higher.

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By 2010, "the AMT will become the de facto tax system for filers in the $200,000 to $500,000 income range, 94 percent of whom will face the tax," according to a report by the Tax Policy Center. About half of tax filers making $75,000 to $100,000 will have to pay the tax, including 89 percent of married couples in that income bracket who have at least two children.

In the past, Congress has patched the AMT one year at a time, primarily by increasing the exemption amount. Next year, to hold the number of affected taxpayers steady at about 4 million, the patch would cost about $50 billion, according to the Joint Committee on Taxation.

Unfortunately, the article doesn't mention how the Democrats have any sort of cohesive plan to fix this problem.

When did wanting to pay less tax become a criminal offense?

Some people are all up in arms, accusing U2 of cheating on their taxes becuase they moved their publishing company's headquarters out of Ireland and to the Netherlands to take advantage of lower tax rates.

These people are out of their friggin' minds.

Folks, this is not cheating on taxes. Not even close. It's a fundamentally sound, albeit tax-motivated, business decision. Or, as the Edge called it, "tax-efficient."

Companies do this every single day. Heck, it's why I continue to live in Virginia instead of Maryland or D.C.

Wesley Snipes and Michelle Williams's dad

What do Wesley Snipes and Michelle Williams's dad have in common? They're both allegedly tax cheats.

From yesterday's Post:

The U.S. Internal Revenue Service wants to question Williams _ a resident of the Virgin Islands _ about a possible $1.5 million in unpaid taxes from book royalties and earnings from international seminars he conducted between 1990 and 2001.

And from Tuesday's edition:

The indictment said Snipes conspired with American Rights Litigators' founder Eddie Ray Kahn and tax preparer Douglas P. Rosile Sr. to file false refund claims based on a bogus argument that only income from foreign sources was subject to taxation.

Check out The Smoking Gun to read the entire indictment.


Folks, to clarify, this is not even close to the weirdest anti-tax argument that I've seen. There are whole websites devoted to them -- heck, the IRS even publishes some of them on their website. But the one consistent thing about all these arguments is that they're dumb. And people should know better.

If it looks too good to be true, it probably is.

How I Learned to Stop Thinking and Love the AMT

I have previously said that the Alternative Minimum Tax sucks. For the record:

The alternative minimum tax (or AMT) is an extra tax some people have to pay on top of the regular income tax. The original idea behind this tax was to prevent people with very high incomes from using special tax benefits to pay little or no tax. But for various reasons the AMT reaches more people each year, including some people who don't have very high income and some people who don't have lots of special tax benefits.

And, as Slate noted:

[L]ast spring, Robert Carroll, deputy assistant secretary at Treasury, testified that the AMT was set to spread rapidly. It is designed to ensnare the prosperous middle—people whose income places them in the 25 percent tax bracket. (The AMT imposes a tax ranging from 26 percent to 28 percent on income.) Even with the patches, about 3.8 million taxpayers, including 13 percent of those with incomes between $100,000 and $200,000, would pay the AMT for tax year 2005, Carroll said.

Despite opinion to the contrary, I haven't quite changed my mind. But this caught my attention:

As Post business reporter Albert B. Crenshaw has noted, the AMT "approaches a modern-day flat tax." It imposes a uniform rate of 26 percent up to $175,000 in income, and above that 28 percent.
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If we wait long enough, and with some continuing degree of inflation, the AMT flat tax eventually will apply to most taxpayers. The AMT will, in effect, have become the federal income tax system. And unlike most other important policy changes, this is one in which Congress need do nothing, although at some point it would probably be desirable to modify details of the current AMT that limit its effectiveness as a flat tax.

While I'm not opposed to a flat tax -- and certainly it's a better idea than our current screwed-up system where the middle class ostensibly pays the biggest share of the tax burden -- I'm not altogether convinced that a flat tax is the best idea. I guess I'm still liberal enough to believe that we need a more progressive tax system.

Plus, if the tax code were simpler, there'd be less need for tax lawyers. And that would really suck.