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Fantastic news! Now let's have the IRS start building out their free e-file program and IDEALLY put some pressure or at least summarize what parts of the tax c

Fantastic news! Now let's have the IRS start building out their free e-file program and IDEALLY put some pressure or at least summarize what parts of the tax code are the most complex so they can be simplified. A lot of the tax code complexity comes from congress messing with the logic of taxing folks on their income. And yes, simplifying the tax code would get rid of loopholes like deduction that can exceed the cost of the item placed into service (!) which make zero sense AND create tax vs gaap difference that have to be tracked over long periods of time. Another one to get rid of - phantom LIFO inventory unless the inventory is real.

sokoloff 7y ago
Do you have a reference for the deduction greater than basis loophole? I spent a few minutes looking for it on google and couldn’t find a reference. It does seem non-sensical on the face, but I’d like to read more.
- repsilat 7y ago
  One idea I though of in the past: if you have a very high income, your income tax rate can approach 50% (state+federal). If you donate appreciated assets to a DAF, and break the effects down by basis+gains, the numbers look like - 50ish% back after deducting the given unappreciated basis, - Selling the short-term gains would cost you half the profit, so the charitable deduction gets you roughly 100% of the after-tax profit from the trade back in your pocket. (Plus the upside of sending money to charity.) The math doesn't work out for long-term gains though, and obviously works best when the asset has appreciated strongly. Not sure about the legal treatment of partially-donated options spreads or other complex hedging tricks to manufacture these gains and offset them against a loss. Not tax advice etc, all just guesswork.
  - scottjg 7y ago
    my understanding was that the appreciated value of short-term capital gains aren't deductible as a donation. only the cost basis. that said, donating stock that has a long-term capital gain is still extremely tax advantageous.
- privateSFacct 7y ago
  Sure - look into something like a depletion deduction using the percentage method rather than cost method. This creates a complexity nightmare - as you end up with basis changes for s corp pass-thru's etc that are not tied to anything "real" - ie, no additional contribution of assets or payment of tax on accumulated gains. This all makes things very complicated from recordkeeping, reconciliation and auditing perspectives.
hiram112 7y ago
> ...put some pressure or at least summarize what parts of the tax code are the most complex so they can be simplified. Trump's tax plan did simplify things for the majority of W-2 workers on salary that used to itemize because they owned a mortgage. Now, most of them can file using the standard deduction. I don't have a mortgage but have sometimes itemized depending on moving and work expenses, various deductions, etc. Those are now gone, and my taxes are easier as I don't even bother keeping receipts and saving charitable gifts throughout the year. I come out a head, too, since the standard deduction was almost doubled.
m463 7y ago
Isn't that like being arrested and hoping the court will streamline your judgement, sentencing and incarceration. In other words: the government and the IRS should have checks and balances to income taxation, not (literal) carte blanche.
- colejohnson66 7y ago
  Even if the IRS has their own filing program, Intuit and H&R Block wouldn’t go out of business; People who want to make sure their getting the best would still use them, along with people just distrustful of the government.
AndrewKemendo 7y ago
The IRS is always hiring software engineers [1]. You could go there and help them do it. [1]https://www.jobs.irs.gov/careers?field_usajobs_category_ref_tid%5B%5D=26 https://www.jobs.irs.gov/careers?field_usajobs_category_ref_...

sokoloff 7y ago

Do you have a reference for the deduction greater than basis loophole? I spent a few minutes looking for it on google and couldn’t find a reference. It does seem non-sensical on the face, but I’d like to read more.

repsilat 7y ago
One idea I though of in the past: if you have a very high income, your income tax rate can approach 50% (state+federal). If you donate appreciated assets to a DAF, and break the effects down by basis+gains, the numbers look like - 50ish% back after deducting the given unappreciated basis, - Selling the short-term gains would cost you half the profit, so the charitable deduction gets you roughly 100% of the after-tax profit from the trade back in your pocket. (Plus the upside of sending money to charity.) The math doesn't work out for long-term gains though, and obviously works best when the asset has appreciated strongly. Not sure about the legal treatment of partially-donated options spreads or other complex hedging tricks to manufacture these gains and offset them against a loss. Not tax advice etc, all just guesswork.
- scottjg 7y ago
  my understanding was that the appreciated value of short-term capital gains aren't deductible as a donation. only the cost basis. that said, donating stock that has a long-term capital gain is still extremely tax advantageous.
privateSFacct 7y ago
Sure - look into something like a depletion deduction using the percentage method rather than cost method. This creates a complexity nightmare - as you end up with basis changes for s corp pass-thru's etc that are not tied to anything "real" - ie, no additional contribution of assets or payment of tax on accumulated gains. This all makes things very complicated from recordkeeping, reconciliation and auditing perspectives.

hiram112 7y ago

> ...put some pressure or at least summarize what parts of the tax code are the most complex so they can be simplified. Trump's tax plan did simplify things for the majority of W-2 workers on salary that used to itemize because they owned a mortgage. Now, most of them can file using the standard deduction. I don't have a mortgage but have sometimes itemized depending on moving and work expenses, various deductions, etc. Those are now gone, and my taxes are easier as I don't even bother keeping receipts and saving charitable gifts throughout the year. I come out a head, too, since the standard deduction was almost doubled.

m463 7y ago

Isn't that like being arrested and hoping the court will streamline your judgement, sentencing and incarceration. In other words: the government and the IRS should have checks and balances to income taxation, not (literal) carte blanche.

colejohnson66 7y ago
Even if the IRS has their own filing program, Intuit and H&R Block wouldn’t go out of business; People who want to make sure their getting the best would still use them, along with people just distrustful of the government.

AndrewKemendo 7y ago

The IRS is always hiring software engineers [1]. You could go there and help them do it. [1]https://www.jobs.irs.gov/careers?field_usajobs_category_ref_tid%5B%5D=26 https://www.jobs.irs.gov/careers?field_usajobs_category_ref_...