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The Taxman Cometh: What's In Store this Tax Season

Tax season is officially upon us!

To kick things off, here is a quick state of the tax union...

Just in time for tax season comes an admission from IRS Commissioner Douglas Shulman that even he uses tax prep help because the tax code is too complex!

60% of us are already paying a pro to do our taxes and another 20% feel the need to use tax preparation software to get returns done.

Washington announced that the IRS would start testing and regulating paid tax preparers. But not in time for this year's taxes.

Meanwhile the IRS taxpayer hotline is trying to reach a 71% correct response quota for answering confused taxpayer queries. Just fancy that...71%...if you tried that success ratio on your boss, you wouldn't need to file taxes because you'd be out of work and broke!

What a sorry state!

So while Congress fiddles with a health care bill most Americans don't want, here are the tax changes currently in store for all of us due to Congressional inattention.

1. Middle class taxpayers with as little as $75,000 in income this year may find themselves hit by the Alternative Minimum Tax because Congress hasn't had time to fix this ever growing sinkhole.

2. The tax deduction for state and local taxes goes away.

3. If you have a student in college, you are losing the federal tax deduction for college tuition and fees.

4. Small business owners lose the 50% write-off for big purchase items needed to grow their businesses; and the research and development tax credit is also suspended.

About the only good news/bad news that has come about with a new year is that if you're wealthy and want to leave a big estate to your heirs, die now! For the moment, the estate tax has gone away for 2010 but it will revert back to a 55% rate of taxation next year if Congress continues to do nothing.

Unfortunately, Congress has promised that, once they achieve a health care bill, they will go back and retroactively do away with the 0% estate tax rate. This begs the question of what about all those people who will have died before a change is made?

Answer: a boon to tax lawyers who will begin filing law suits against the IRS on behalf of the deceased's heirs.

The Congress also claims it will fix all these expiring tax breaks.

Here's a concept. MAKE THE TAX BREAKS PERMANENT! This constant fiddling and changing of tax law on an annual basis not only brings taxpayer confusion. It comes with a real economic cost to the economy.

Now that we have become aware that even the IRS head can't fill out his tax forms properly and dying wealthy people are being held in Limbo on the whims of an out-of-touch Congress, it's time to revolt and demand a flat, simple and yes, even understandable tax for all.

In our Dolans.com survey, an overwhelming 81% of you said you support a flat tax!

Until someone in Washington has the backbone to implement real tax reform, stick with us at Dolans.com for all the advice you need to survive the tax season.

To get you started, check out:

Read More In: Taxes

Ken and Daria Dolan have hosted their own national radio program for 22 years, anchored their own television shows on CNN, authored six books on money matters, served as money contributors on CBS This Morning and have now launched a comprehensive web site and free e-letter at Dolans.com.


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Survey Says

Discussion:    Add a Comment | Comments 1-4 of 4 | Latest Comment

February 1, 2010 10:42 PM updated: February 1, 2010 10:43 PM

Tax season is already here. So we got to do our things to make for this season. If you are trying to store money away, either for savings in and of themselves, or a huge purchase (such as down payment for a home) or for retirement or other investment funds, financial procrastination will be your Achilles ' heel. The longer you are contributing to a savings or retirement fund, and the more you do so, the more you end up with in the end, and a solid plan is key to financial planning. It will add up to more than a payday loans worth over time. 10 fewer years of IRA contributions can mean thousands less you have available upon retirement.

February 5, 2010 10:19 AM

The biggest thing wrong with a flat tax is that the rich will benefit once again because it has to do with disposable income. Let's say the flat tax was 20%. Twenty percent of my $55,000 yearly income affects my disposable income in a far greater way than 20% of a $2,000,000 income.

April 23, 2010 2:38 AM

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Discussion:    Add a Comment | Comments 1-4 of 4 | Latest Comment

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