Michael Lodge - listen to my Podcasts and my IHeart Radio podcast.
The Congress and the Senate are talking about tax reform, or they call it real tax reform. Here is the problem - with every line of the tax return is a tax deduction with a lobbyist attached to it, and with every lobbyist is a Congressman attached to the lobbyist, and there lies the problem. The other issue is that with every tax deduction creates a situation of a potential IRS audit. So, we have two big negatives.
The question is will there be really a true tax reform - and the answer is probably not. Even now Speaker Paul Ryan is talking about simplifying the reporting process to a one-page tax return at postcard size - but still keeping mortgage interest and charitable deductions. So once again it is still an audit situation waiting to happen because the IRS looks at both of those and send out random audit letters to taxpayers on those two tax deductions. I know based on experience. I had a call yesterday from a tax client that sent me his audit letter and those two items were being audited. Don't we want to get to a situation where we are audit free of the IRS? The answer is yes!
What I would propose is that the W-2 form be the new tax return for every single tax payer, forget the married filing jointly, single, separate and so forth. Each person working should file a W-2, taxed at an appropriate rate based on wages, no deductions, and you are done. Simple and easy and no audit ability by the IRS. Eliminate the deductions and you eliminate audits and questions by the IRS. Beside the point everyone is on an even playing field based on lower tax rates and higher tax rates for those really up in the millionaire range. The more you simplify it the more you reduce risk and problems to the American people by the IRS and April 15th is gone because your employer filed your W-2.
If you are self-employed you should file a new small business tax return, or a C Corp. Do away with all of the LLCs, Partnerships, S Corps and everything else. If you are getting dividends then the taxes should be paid and reported on a 1099-Div form. You still have a need for business returns because operating a business includes all income and expenses that are associated with the business, but the business tax rates should be lowered so that business can compete. However, the Congress needs to write strong language on the protection of the company against lawsuits and manage the tort situation.
If you keep in the deductions of mortgage interest and charitable deductions it keeps the door open for Americans to be audited by the IRS or to be in greater trouble by making a mistake and leading to criminal prosecution by the IRS. So many Americans right now sign their tax returns "Under Penalty and Perjury" that places them immediately in a legal position with the IRS. Americans have no idea what they are signing because the tax returns of today are many pages in length and confuses everyone, they don't know what is actually is in the tax return and how one mistake can put them in trouble. More and more people are getting audit letters examining their tax returns. Let the tax deductions go away and just a simplified tax reporting system put in place and it ends the audit issues.
I know this sounds simplified but my point is that if we do not simplify the do tax reform we as American taxpayers will always be faxed with complicated tax issues from a complicated tax code. We need tax reform, all of us do, but we need to simplify it and get rid of thousands and thousands of pages of tax code that creates more problems for Americans every single tax season.