Why Allow Joint Tax Returns?

[Polk]

The ONLY legitimate rationale is to allow a caregiver to forgo additional income in order to provide additional care and supervision of children. Should the law should be changed to allow joint tax filing only when claiming dependent children?

Personally I think there should be no deductions for children and everyone should file an income tax return singly.

Lower the tax rate for everyone and get rid of all deductions and tax credits.

Keep It Simple Stupid.

Would you subject all income to this tax?

 

[Politico]

What tax?

 

[Skull Pilot]

Let me guess......Because you don't qualify?

Qualify for what?

This might be hard for you to understand but I don't believe I should force other people to pay for my lifestyle choices.

I own a home and am planning to build a second and I have no problem with getting rid of the mortgage deduction. I don't believe people should be forced to pay more in taxes simply because they don't own a home.

If you have kids you most likely use more government services than people without kids why should other people be forced to pay higher taxes simply because they don't have kids?

Lower the rate, get rid of all the deductions exceptions and exemptions as well as all the bullshit tax credits for buying cars etc.

Reduce the complexity of the tax code, reduce the size of the IRS and save the taxpayers some money.

That's really big of you since mortgage interest is at record lows.

Since they don't make enough to itemize, some (if not most) homeowners don't qualify for the mortgage tax deduction.

Interest on a mortgage is deductible. There is no itemization needed

I haven't visited a National Park in decades, but I'm not so self-centered to not want part of my taxes so others may enjoy.

What do National Parks have to do with anything. Last time I was at one I had to pay to get in,pay for backpacking permits etc. If you think only people with kids go to national parks you are sadly mistaken.

 

[Skull Pilot]

The ONLY legitimate rationale is to allow a caregiver to forgo additional income in order to provide additional care and supervision of children. Should the law should be changed to allow joint tax filing only when claiming dependent children?

Personally I think there should be no deductions for children and everyone should file an income tax return singly.

Lower the tax rate for everyone and get rid of all deductions and tax credits.

Keep It Simple Stupid.

Would you subject all income to this tax?

There should be no classes of income. All income whether it be from capital gains, earned, or whatever should be treated exactly the same and taxed at the same rate.

 

[editec]

Interest on a mortgage is deductible. There is no itemization needed

Wrong.

How to Deduct Mortgage Interest

Mortgage interest is an itemized tax deduction. To deduct your mortgage interest, you must file a Schedule A along with a Form 1040 tax return. Your lender should provide you with a Form 1098 that details how much interest your paid on your mortgage loan during the tax year. Enter the amount reported in Form 1098 on Line 10 of your Schedule A. If you prepaid your January mortgage in December, or if you paid other interest not reported on Form 1098, enter that additional amount on Line 11 of Schedule A.

 

[mudwhistle]

No. Allowing joint tax returns raises the taxable income for the purpose of tax increase structure. An individual making $150,000 a year is taxed at a different rate than an individual making $200,000 a year. A married couple where one makes $150,000 and one making $50,000 a year will each pay taxes at a lower rate than one person making $250,000 a year. Join them and tax the whole at the higher rate. It's called the marriage penalty.

The Tax Act passed in January made the marriage penalty relief provisions permanent for all taxpayers with incomes under $250,000. In practice this means that most married couples with incomes under that amount pay the same whether they file jointly or separately. Standard professional grade software automatically calculates the difference and in 95%+ of the returns in our practice the difference is under $25.

The only significant tax avoidance reason for filing separately is when one spouse has a smaller amount of income (and therefore is in a lower bracket), and major deductions limited by a percentage of AGI (medical expenses, casualty losses, and certain miscellaneous itemized deductions, primarily business and investment expenses).

But most people don't realize that the finances actually have to be kept separate, this includes separate bank accounts, separate checks to pay the household bills. Separate contributions for major purchases. Failure to keep adequate records could subject a married couple to income tax evasion and perjury charges as they might have filed taxes separately, but the money was always commingled.

I think you are over the top here. Businesses (including Schedule C's are required to maintain sufficient books and records to substantiate their income and expenses. Individuals must maintain sufficient records to document any deduction, loss, credit, or other tax-favored treatment they claim. There is no overall requirement to keep any other records. The normal consequence of not keeping records is to allow the IRS to use "indirect" methods of reconstructing income and to disallow favored tax benefits.
Conmingling monies makes proof harder, but there is no requirement that business finances be kept separate from personal, nor that taxpayers filing jointly maintain separate records.

Perjury and presenting the IRS with alter or forged documents is certainly a no-no. But failure to keep adequate records, no matter how egregious, will only subject a taxpayer to a Code Section 6662 (a) or (b) penalty (20% or 40% of the understated tax). Tax crimes bearing the possibility of jail time require overt acts and a high standard of proof.

There are two relief provisions that generate a lot of business for us. "Injured spouse relief" allows a taxpayer on a joint return to receive a refund based on a "shadow return" of what items of income, deductions, and witholdings are attributable to them when their spouse is subject to a refund intercept program. "Innocent spouse relief" mitigates the joint liability principle when it would be inequitable to hold the spouse responsible on a joint return for erroneous items of the other spouse.

Questions?

What tax act passed in January?

Where's the link?

 

[Skull Pilot]

Interest on a mortgage is deductible. There is no itemization needed

Wrong.

How to Deduct Mortgage Interest

Mortgage interest is an itemized tax deduction. To deduct your mortgage interest, you must file a Schedule A along with a Form 1040 tax return. Your lender should provide you with a Form 1098 that details how much interest your paid on your mortgage loan during the tax year. Enter the amount reported in Form 1098 on Line 10 of your Schedule A. If you prepaid your January mortgage in December, or if you paid other interest not reported on Form 1098, enter that additional amount on Line 11 of Schedule A.

Semantics.

It's an extra form just like a 1099R, Misc etc.

 

[BillyV]

Interest on a mortgage is deductible. There is no itemization needed

Wrong.

How to Deduct Mortgage Interest

Mortgage interest is an itemized tax deduction. To deduct your mortgage interest, you must file a Schedule A along with a Form 1040 tax return. Your lender should provide you with a Form 1098 that details how much interest your paid on your mortgage loan during the tax year. Enter the amount reported in Form 1098 on Line 10 of your Schedule A. If you prepaid your January mortgage in December, or if you paid other interest not reported on Form 1098, enter that additional amount on Line 11 of Schedule A.

Semantics.

It's an extra form just like a 1099R, Misc etc.

That is somewhat misleading. Yes, there is an extra form, but there's more to the story. The tax code gives everyone a "standard deduction"; an amount you get regardless of whether you have deductions like mortgage interest or taxes. For 2012 the standard deduction for joint filers is $11,400. Unless you have deductions in excess of that $11,400, you receive no benefit from them. So for instance, if you have a $150,000 mortgage at, say, 4%, you will pay about $6,000 in interest. You also probably have deductible property taxes; say $3,000. Unless you have some other deductible items, you would take the $11,400 already given and you get zero benefit from the mortgage deduction. Even if you have other deductions, you only get a benefit to the extent they exceed the $11,400. I'd be willing to bet that more than half of homeowners get no benefit from their mortgage interest deduction.
Anyway, it's not "unfair" to others to get a mortgage deduction. Renters get a benefit from the fact that their landlords are able to deduct mortgage interest as a business expense, theoretically lowering the amount the landlord needs to charge to make a profit.

 

[oldfart]

Married should get joint. The rest should not.

If someone is handing out joints for marrieds, where's the line?

 

[oldfart]

Actually, married couples where one earner has a higher income and one has a lower income pay a lower tax rate than they would individually. It's where you have two earners making similar amounts that the current code results in higher taxes.

You are correct, with a clarification. The tax LIABILITY for two earner families is not affected by how the income is earned by each taxpayer. But because the withholding tables have the standard deduction and exemptions built into them (i.e. they assume that the only income is the income they are withholding on, ignoring a spouse's income, second job, or any other income like Social Security or dividends received) the more even the distribution of income between spouses and the higher the income, the more will be underwitheld. So this returns are more likely to owe money, but the liability is no higher.

 

[BillyV]

Actually, married couples where one earner has a higher income and one has a lower income pay a lower tax rate than they would individually. It's where you have two earners making similar amounts that the current code results in higher taxes.

You are correct, with a clarification. The tax LIABILITY for two earner families is not affected by how the income is earned by each taxpayer. But because the withholding tables have the standard deduction and exemptions built into them (i.e. they assume that the only income is the income they are withholding on, ignoring a spouse's income, second job, or any other income like Social Security or dividends received) the more even the distribution of income between spouses and the higher the income, the more will be underwitheld. So this returns are more likely to owe money, but the liability is no higher.

I don't think I agree with that. The tax liability of joint filers is reduced from two single filers if there is a disparity in income, due to the expanded rate schedules which benefit the higher earner. If a single guy making $100,000 per year with no other special tax attributes marries a non-working spouse (for simplicity), his taxes are immediately reduced by about 22% ($18,700 reduced to $14,600), not including the additional standard deduction and personal exemption.

 

[oldfart]

The Tax Act passed in January made the marriage penalty relief provisions permanent for all taxpayers with incomes under $250,000.

What tax act passed in January?

Where's the link?

Officially it is the American Tax Relief Act of 2012 (Pub L. 112-240 ) and was passed January 3, 2012. I get it through my reporting service which is not a usable link. (I actually read the text of tax laws). I didn't find any short description on the IRS website (Internal Revenue Service). Wikipedia does have a nice article at: American Taxpayer Relief Act of 2012 - Wikipedia, the free encyclopedia

 

[oldfart]

Actually, married couples where one earner has a higher income and one has a lower income pay a lower tax rate than they would individually. It's where you have two earners making similar amounts that the current code results in higher taxes.

You are correct, with a clarification. The tax LIABILITY for two earner families is not affected by how the income is earned by each taxpayer. But because the withholding tables have the standard deduction and exemptions built into them (i.e. they assume that the only income is the income they are withholding on, ignoring a spouse's income, second job, or any other income like Social Security or dividends received) the more even the distribution of income between spouses and the higher the income, the more will be underwitheld. So this returns are more likely to owe money, but the liability is no higher.

I don't think I agree with that. The tax liability of joint filers is reduced from two single filers if there is a disparity in income, due to the expanded rate schedules which benefit the higher earner. If a single guy making $100,000 per year with no other special tax attributes marries a non-working spouse (for simplicity), his taxes are immediately reduced by about 22% ($18,700 reduced to $14,600), not including the additional standard deduction and personal exemption.

I see your reasoning and would agree. Let me clarify my clarification. As in your example a single taxpayer who marries a spouse with no income would benefit from the fact that the tax rate bands are twice as wide on a married joint return as on a single or married separate return. Additionally such a taxpayer would see a further reduction due to the doubled standard deduction and the additional personal exemption. If such a taxpayer has only wage income which is withheld upon, and files a new Form W-4, the amount of reduction in withholding will match the decrease in tax liability and the amount of refund or balance due will remain the same. Agreed so far?

Now suppose the spouse has income. My intended point is that as the joint income gets larger and as it is split more equally between spouses, the standard withholding tables will increase withholding slower than tax liability increases. If the spouse made $10,000 in wages, the tax and withholding on that would be minor, but the extra tax liability on the $10,000 income would be substantial. A refund could well turn into a balance due return.

I get grilled on this in every basic preparer course and preparers who do any significant number of returns see it every tax season. But to get a real train wreck you need some income not subject to withholding!

 

[BillyV]

You are correct, with a clarification. The tax LIABILITY for two earner families is not affected by how the income is earned by each taxpayer. But because the withholding tables have the standard deduction and exemptions built into them (i.e. they assume that the only income is the income they are withholding on, ignoring a spouse's income, second job, or any other income like Social Security or dividends received) the more even the distribution of income between spouses and the higher the income, the more will be underwitheld. So this returns are more likely to owe money, but the liability is no higher.

I don't think I agree with that. The tax liability of joint filers is reduced from two single filers if there is a disparity in income, due to the expanded rate schedules which benefit the higher earner. If a single guy making $100,000 per year with no other special tax attributes marries a non-working spouse (for simplicity), his taxes are immediately reduced by about 22% ($18,700 reduced to $14,600), not including the additional standard deduction and personal exemption.

I see your reasoning and would agree. Let me clarify my clarification. As in your example a single taxpayer who marries a spouse with no income would benefit from the fact that the tax rate bands are twice as wide on a married joint return as on a single or married separate return. Additionally such a taxpayer would see a further reduction due to the doubled standard deduction and the additional personal exemption. If such a taxpayer has only wage income which is withheld upon, and files a new Form W-4, the amount of reduction in withholding will match the decrease in tax liability and the amount of refund or balance due will remain the same. Agreed so far?

Now suppose the spouse has income. My intended point is that as the joint income gets larger and as it is split more equally between spouses, the standard withholding tables will increase withholding slower than tax liability increases. If the spouse made $10,000 in wages, the tax and withholding on that would be minor, but the extra tax liability on the $10,000 income would be substantial. A refund could well turn into a balance due return.

I get grilled on this in every basic preparer course and preparers who do any significant number of returns see it every tax season. But to get a real train wreck you need some income not subject to withholding!

I understood your point, I just wanted to draw the line between tax liability, which is the total amount IRS expects to get, and amount due, which is the amount owed with the return after subtracting amounts withheld. And I agree, it sucks for both the preparer and the taxpayer when there is an unexpected "amount due".

 

[OnePercenter]

Qualify for what?

This might be hard for you to understand but I don't believe I should force other people to pay for my lifestyle choices.

I own a home and am planning to build a second and I have no problem with getting rid of the mortgage deduction. I don't believe people should be forced to pay more in taxes simply because they don't own a home.

If you have kids you most likely use more government services than people without kids why should other people be forced to pay higher taxes simply because they don't have kids?

Lower the rate, get rid of all the deductions exceptions and exemptions as well as all the bullshit tax credits for buying cars etc.

Reduce the complexity of the tax code, reduce the size of the IRS and save the taxpayers some money.

That's really big of you since mortgage interest is at record lows.

Since they don't make enough to itemize, some (if not most) homeowners don't qualify for the mortgage tax deduction.

Interest on a mortgage is deductible. There is no itemization needed

I haven't visited a National Park in decades, but I'm not so self-centered to not want part of my taxes so others may enjoy.

What do National Parks have to do with anything. Last time I was at one I had to pay to get in,pay for backpacking permits etc. If you think only people with kids go to national parks you are sadly mistaken.

So you can take your personal deduction and ALSO take your mortgage interest deduction? Interesting......

 

[boedicca]

I see your reasoning and would agree. Let me clarify my clarification. As in your example a single taxpayer who marries a spouse with no income would benefit from the fact that the tax rate bands are twice as wide on a married joint return as on a single or married separate return. Additionally such a taxpayer would see a further reduction due to the doubled standard deduction and the additional personal exemption. If such a taxpayer has only wage income which is withheld upon, and files a new Form W-4, the amount of reduction in withholding will match the decrease in tax liability and the amount of refund or balance due will remain the same. Agreed so far?

The part emboldened above is a fallacy. Married filing jointly is not just double the singles table. Married people are counted as only a fraction of a single...much like slaves were prior to Abolition.

 

[OnePercenter]

Qualify for what?

This might be hard for you to understand but I don't believe I should force other people to pay for my lifestyle choices.

I own a home and am planning to build a second and I have no problem with getting rid of the mortgage deduction. I don't believe people should be forced to pay more in taxes simply because they don't own a home.

If you have kids you most likely use more government services than people without kids why should other people be forced to pay higher taxes simply because they don't have kids?

Lower the rate, get rid of all the deductions exceptions and exemptions as well as all the bullshit tax credits for buying cars etc.

Reduce the complexity of the tax code, reduce the size of the IRS and save the taxpayers some money.

That's really big of you since mortgage interest is at record lows.

Since they don't make enough to itemize, some (if not most) homeowners don't qualify for the mortgage tax deduction.

Interest on a mortgage is deductible. There is no itemization needed

I haven't visited a National Park in decades, but I'm not so self-centered to not want part of my taxes so others may enjoy.

What do National Parks have to do with anything. Last time I was at one I had to pay to get in,pay for backpacking permits etc. If you think only people with kids go to national parks you are sadly mistaken.

The mention of National Parks was to illustrate your self-centeredness.

If you think that entrance and permit fees come anywhere close to the actual costs your sadly mistaken.

What do kids have to do with my post?

 

[Skull Pilot]

That's really big of you since mortgage interest is at record lows.

Since they don't make enough to itemize, some (if not most) homeowners don't qualify for the mortgage tax deduction.

Interest on a mortgage is deductible. There is no itemization needed

I haven't visited a National Park in decades, but I'm not so self-centered to not want part of my taxes so others may enjoy.

What do National Parks have to do with anything. Last time I was at one I had to pay to get in,pay for backpacking permits etc. If you think only people with kids go to national parks you are sadly mistaken.

The mention of National Parks was to illustrate your self-centeredness.

If you think that entrance and permit fees come anywhere close to the actual costs your sadly mistaken.

What do kids have to do with my post?

I didn't mention kids in response to parks idiot.

I said there should be no deduction for kids. If you want to have kids go ahead but just because a person doesn't have kids is no reason to force them to pay higher taxes. Just as choosing not to own a home is no reason to force people to pay higher taxes.

What on earth is so hard to understand about that?

And if fees charged by National parks don't cover costs maybe it's time to raise them.

 

[PaulS1950]

I think that the taxes should be more fair between businesses and people. Businesses only pay taxes on net income while individuals are charged taxes on gross income. Either charge taxes on gross for all or on net for all. I am in the business of living and all my "living" expenses should be tax deductable just like business expenses are deductable for businesses.

 

[Skull Pilot]

I think that the taxes should be more fair between businesses and people. Businesses only pay taxes on net income while individuals are charged taxes on gross income. Either charge taxes on gross for all or on net for all. I am in the business of living and all my "living" expenses should be tax deductable just like business expenses are deductable for businesses.

When you sell your labor there is no expense associated.

if I sell a product I get taxed on the money I make selling that product.

If I pay $10 and sell it for $20 I only made 10 why should I be taxed on 20?