April 18, 2017 is getting closer.

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2 years 2 months ago #2190 by Oldbooks1
I used to know this stuff very well but it has been a long time since I actually used and will need to dig into what the current rules are.

The issue used to be complicated by the date on which one became a Permanent Resident in a given year and the Substantial Presence, and Closer Connection Test.

The rules for income tax purposes were different than for estate purposes.

That was literally a disaster for anyone who was not a US citizen--it did not matter whether you were a Permanent Resident or not .

The way it used to work was the exemption for a spouse who was not a US citizen was limited to $50,000.

I know some people who got caught up in that mess. Take for example a case where one was married to a US citizen and that person died. If the other spouse was a US citizen then the unlimited marital deduction applied. However, if not, even if the surviving spouse was a Permanent Resident then anything above $50,000 was taxed.

The last time I had a reason to look into this was 4 years ago and at that point the standard advice was still to have a revocable trust if one were not a US citizen but married to one. The problem was (and may still be) only for the not-citizen spouse and was addressed with the standard A/B trust technique.

Let me look it up when I get some time and give an update.

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2 years 2 months ago #2193 by Oldbooks1
Here is the type of problem I had in mind. Obviously the numbers have changed since I last looked at it.

www.marketwatch.com/story/estate-planning-with-a-non-citizen-spouse-2014-02-19


It looks as if the QDOT is the suggested vehicle these days.

www.americanbar.org/content/dam/aba/publishing/rpte_ereport/2013/2_april/te_weyenberg.authcheckdam.pdf

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2 years 2 months ago #2194 by UltimateGladiator

Oldbooks1 wrote: Here is the type of problem I had in mind. Obviously the numbers have changed since I last looked at it.

www.marketwatch.com/story/estate-planning-with-a-non-citizen-spouse-2014-02-19


Yes it isn't as big a deal any more as there is a $5.5m exemption that does apply as also mentioned in this article. I doubt I will come close to that in my lifetime!

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2 years 2 months ago #2380 by Chelle
When I lived in Pennsylvania, the tax form was one side of a postcard. How much did you make? Please multiply that by 0.02 (or something like that), and make sure you paid us that much.

My federal taxes are as thick as a phone book and I have to pay a CPA $1500/yr to do them. I'm a pretty smart business person with an engineering degree and who was only two classes short of a math degree, and not only am I incapable of doing my own taxes-- I don't even understand my taxes after someone else does them for me.

That's ridiculous.

And when I hear, "You didn't build this," I want to scream out that I'm still in business DESPITE the government, not because of it. [/rant]
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2 years 2 months ago #2405 by Oldbooks1
What you say is absolutely correct--taxes are very complicated and make no sense on the surface.

By that I mean , if somebody were tasked with producing a tax system from scratch, there is nobody on earth who would come up with this mess.

So why does it happen that way?

The answer is simple--lobbyists.

Take traders for instance who perform countless trades every year and who have managed to set a special deal all for themselves. If they trade in futures (which they all do) there is a special rate that applies. Even if you hold a position for an instant the 60/40 rule applies where 60% of any profit is taxed at long term capital gains rates and the rest at 40%. Not only is this unfair it also makes no sense whatever.

Every "group" in the nation has arranged for similar "breaks" for its members. At the state level the 'special" treatment can be also very complicated.

Properly coding all of this results in forms nobody except CPA, tax attorneys, and Enrolled Agents are able to follow.

Even if an intrepid soul could make it all the way through the standard system, it would be a very rare bird indeed who could make head or tail of the AMT--it is beyond incomprehensible.

I do not think the problem is really the "government" as such but rather our fellow citizens who feel they have a special "case" for preferential treatment.

Once you are a member of a reasonably sized group who "feels" that way, you will always find a sympathetic politician (or a rival candidate) who will listen. Some day that person's vote will be important to party leaders to get a piece of legislation passed and in return....

That is why we have this mess and also why it is so hard to fix it.

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2 years 2 months ago #2406 by JTSR71
Replied by JTSR71 on topic April 18, 2017 is getting closer.
Yes it's the people's fault but it's also the fault of the system of federal representation and government that we live by. The founding father's of course never envisioned how the country would develop while the system stayed the same. As with healthcare, as a country, we're probably not mature enough to fix it.

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2 years 2 months ago #2409 by Oldbooks1
I think it is just the butcher, the baker and the candlestick maker all doing their own thing.

What is the last thing anyone wants?

To be in a market where you are simply a price taker which is exactly what Joe Taxpayer is.

So if you are smart you get together with your buddies and arrange for a special 10 year average rule if you are a farmer, a special treatment of earnings if you are a fisherman, partial exemption or lower rates of taxation on pension income if you are a public sector employee (even though most private sector workers to not even get pensions anymore), 1031 Exchanges if you are a dealer in property, additional allowances if you are a senior citizen (although wealth is disproportionately concentrated in that group) etc, etc.

Naturally, your friendly "representative" will find time to listen to your concerns, after all the citizens as a whole seem generally uninterested in these specifics and only want overall taxes lowered (while simultaneously wanting more services and the debt reduced of course:) ).

In taxes, going the extra mile and organizing does work--you end up with a group discount on the regular price which once enacted is almost impossible to rescind.:)

The US tax system is a great example of what happens when everybody looks out for his/her own best interests and government is involved in the mix.

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2 years 2 months ago #2674 by Oldbooks1
I had lunch yesterday with a friend who had just filed his taxes. He noted that in the case of both the Federal and State returns he received an notification that the returns had been accepted far more rapidly than in earlier years.

Then he started complaining about the fact that the total paid was higher than the previous year.

I asked if his after tax income for 2016 was higher than in 2015 and if so why was he unhappy?

The response I got was yes it was higher but that one should not be expected to be logical then talking about taxes.

So the valuable take away was not merely is there is a problem with the insanity of the tax system, there would seem to be an issue with the sanity of at least some taxpayers as well. :)

As a punishment for my stupidity in introducing logic into the discussion, I ended up with the bill for both lunches.!

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2 years 1 month ago - 2 years 1 month ago #4824 by Oldbooks1
If you are still working on getting your annual report for Uncle Sam (and his many needy state and local relatives) ready for tomorrow, there is a bright spot in the darkness, assuming you like free cookies.

www.greatamericancookies.com/press/great-american-cookies-files-away-tax-day-stress-with-one-free-cookie-for-all-customers/

Other "tax day" specials below:

dealnews.com/features/tax-day-freebies/

A just-released survey provides a glimpse into how strongly taxpayers feel about taxes as well as how uninformed they are about the realities of the Federal tax system.

In probably the only area in which there is a strong national consensus, 90% believe taxes are "too complicated." The fact that this means representative government is working exactly as intended appears to be less well understood.

:

www.npr.org/2017/04/17/523960808/we-asked-people-what-they-know-about-taxes-see-if-you-know-the-answers

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2 years 1 month ago #4829 by JTSR71
Replied by JTSR71 on topic April 18, 2017 is getting closer.

Oldbooks1 wrote: In probably the only area in which there is a strong national consensus, 90% believe taxes are "too complicated." The fact that this means representative government is working exactly as intended appears to be less well understood.


It would be interesting to find out whether other similarly representative governments have similarly complex tax systems.

Of course, the US is somewhat unique in terms of the size and scope that federal government and representation has.

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