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Ted Smith's
"Real World" Personal Strategy
How The Legislative Process Creates Tax Cheats
You may have seen the news that Capitol Hill is stuffed with people who owe back taxes. But that's not what I'm talking about here.
[That article is here: http://www.washingtonpost.com/wp-dyn/content/article/2010/09/16/AR2010091601770.html ]

Rather, I'm pointing a finger at the actions taken by Congress which hurt our voluntary tax payment system.

Now, of course, the truth is that we don't have the choice to not file or not pay what the tax laws say we owe. That's why the IRS audits returns and has all sorts of mechanisms (liens, refund offsets) to encourage us to file by each April 15, and to do so correctly.

But even with payroll deductions, etc. we U.S. taxpayers are trusted to fill out the forms, ensure the correct amount was withheld and let the IRS know what our true final bill was. That's called tax filing. And if we discover that we owe the U.S. Treasury, then our system, as it stands now, relies on us to send in the necessary payments. This, of course, is what we spend much of our time on around here--helping YOU do this ethically, but ensuring you're not overpaying.

But Congress seems to encourage tax cheating.

They do this--probably unintentionally--by tinkering with our tax laws so much. They change them, sometimes slightly, sometimes quite a bit, and they do so constantly. What's worse is the procrastination in the House and Senate. I see this all the time. As a regular course of business.

And these delays in tax changes -- or the decision to make some laws retroactive months later (extenders, estate tax, etc.) -- totally screw up basic tax planning, sometimes negating options that could have been used to legally lower a tax bill.

(Which, incidentally, is why I have to pay so much attention to what's happening in the legislation. I do this so you don't have to!)

So some people cheat. And, unfortunately, they feel justified in doing so.

Last week, I saw a blog comment by a tax-filer which opened my eyes:

I did take the original tax credit and ... felt cheated when the revised 2009 credit was passed. This is especially true since I closed just 11 days too soon to take the revised credit. So I will dutifully pay back the $500 credit on my 2010 tax return, but I will also find a way to skim $500 (read: cheat) somewhere else on the return (not hard to do since I'm self-employed and can easily "forget" to report some income) and will continue to so for the next 15 years

That person was talking specifically about the first-time homebuyer tax credit and the many ways Congress fiddled with it after its creation in 2008. But there are plenty other tax laws with similar histories that tick off filers enough so that they look for ways of getting payback when they fill out their 1040s.

Now I'm not condoning this taxpayer's or anyone else's decision to "even up" the tax code where a person might find it unfair. Life is unfair and taxes are a huge part of life.

But Congress can do a lot to prevent such "they hurt me so I'll hurt the tax system right back" attitudes by doing its tax-writing job in a more rational and professional manner.

Until it does, then Capitol Hill is going to keep creating tax cheats.

But here's where the hope comes in...
For my clients and contacts, you can rest assured that we are paying attention...and will be on top of even the procrastinating legislators. We'll make sure you don't make moves that you'll regret after the fact.

And the best way to help us help YOU, is by giving us a call to talk things through this fall:
417-581-2900

I'm personally dedicated to the success of your family--your peace of mind, Ted! Can other tax professionals say that?

Warmly,

Ted Smith