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your money, your taxes and your financial plan.
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Next year being an election year, Congress may need to take up meaningful tax
legislation this year. The American
Institute of Certified Public Accountants would like to see these laws fixed. They're
the 10 biggest tax headaches:
- Earned Income Tax Credit. The credit has been changed 13 times since
1976. The AICPA calls it one of the most error-prone provisions in the tax code.
- Individual Alternative Minimum Tax. The number of taxpayers subject to
the AMT is rising fast. It now affects taxpayers with incomes as low as $60,000, and many
of these taxpayers were not intended as targets of this tax.
- Individual Capital Gains Tax. The Taxpayer Relief Act of 1997 added
complexity to both capital gains tax rates and holding periods.
- Marriage Penalty. The Internal Revenue Code has over 60 provisions
where tax liability depends on whether a taxpayer is married or single.
- Phase-Outs Based on Income Level. The numerous (and differing) dollar
ranges of income are based not only on what you made, but also on a variety of ways to
measure what you made, the AICPA says.
- Health Insurance Premium Deduction. Used by the self-employed, the
calculation for this deduction is scheduled to change every year until 2007.
- Kiddie Tax. This provision taxes the unearned income of children under
the age of 14 at the parents' tax bracket. It's become a very complicated calculation.
- Individual Estimated Tax Safe Harbor. Under the current law, some
taxpayers will calculate estimated taxes on a percentage that is set to rise, remain
steady, jump, and then drop over the next six years.
- Employee vs. Independent Contractor. The rules relating to the
classification of a worker as an employee or independent contractor are complicated.
- Half Year Requirements. Only the tax law celebrates a person's
half-birthday. Where else will you find concerns about whether someone is 59½ or 70½?
Check the AICPA
web site for details, and see our tax guide to
help you understand these provisions.
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