What do you mean the tax code is too complicated?!

[ATOMonkey]

I got this email at work.. Nothing overly complex about our income tax system at all. Unfortunately, this is just scratching the surface.

**New this Year** Box 12 Code DD: The IRS is requiring employers to display the cost of each employee’s medical benefits on the 2013 W-2s. This is informational only and not taxable.
Here are some expected frequently asked questions that may help you better understand the form.
Q: Why isn’t Box #1 the same as my salary?
A: Box #1 equals your total earnings, plus any imputed income such as life insurance, minus any pre-tax deductions, including 401k.
Q: What is imputed income?
A: Imputed income are taxable benefits to you such as group life insurance, grossed-up relocation expenses, and other company paid fees, such as legal fees, where applicable.
Q: Why don’t boxes 1, 3 and 5 match?
A: Box #1 is the federal taxable earnings, plus imputed income, minus pre-tax deductions, including 401k. Box #3 is the Social Security wages, including 401k, up to a maximum of $110100.00. Box #5 is the Medicare taxable wages, including 401k, with no maximum limit.

Q: Why are both the employee and the employer HSA contributions included in Box 12W?
A: (see below)

Box 12W reporting on tax return – Health Savings Accounts and Employer Contributions

Note: This is not related to the Health Care Flex Spending Accounts.
To clarify why both the Employer and Employee deductions (through our cafeteria plan) are reported in Box 12 with Code W, please see the instructions to IRS Form 8889. On page 3, Line 2, the last sentence states:
“Contributions to an employee’s account through a cafeteria plan are treated as employer contributions and are not included on line 2.”
Thus these employee deductions from our cafeteria plan would be reported on Line 9 (page 5 of Form 8889 instructions). Please note that neither the employee HSA contributions, nor the employer contributions are included in Boxes 1, 3 or 5.

Got it, clear as mud.

 

[AtTheMurph]

The reason they are putting that on there is so they can set the stage for taxing those benefits later (as they should be now!)

 

[ATOMonkey]

And the reason my income is computed 3 different ways prior to me ever filing a return is because....???

 

[IndyDave1776]

The reason they are putting that on there is so they can set the stage for taxing those benefits later (as they should be now!)

Why? Do you subscribe to the notion that this is the government's money even though the government graciously lets us keep some of it?

 

[chris46131]

And the reason my income is computed 3 different ways prior to me ever filing a return is because....???

So your brain will explode as you try to figure out how to keep a little more of your own money. And then they'll probably figure out a way to tax that too...

 

[Baditude]

The reason they are putting that on there is so they can set the stage for taxing those benefits later (as they should be now!)

But some people will be exempt

 

[BehindBlueI's]

This is why I pay a CPA. There is absolutely no way any single person understands the entire tax code, but at least I'm giving it my best shot at hiring a trained professional and someone who will stand by me should an audit come my way.

I've been a fan of "fair tax" for years. I would bet you dollars to doughnut holes (not really fair, as I love doughnut holes, but I digress) that almost no one actually pays the correct amount of taxes. Not through any fault of their own, or any attempt to avoid taxes, but simply because the rules are so complex people over or under pay through misunderstanding.

 

[Liberty1911]

...almost no one actually pays the correct amount of taxes. Not through any fault of their own, or any attempt to avoid taxes, but simply because the rules are so complex people over or under pay through misunderstanding.

Right because the only power that government actually has is to punish criminals. So, they make us all criminals at their whim.

The tax code is one of the most effective ways to do that.

 

[poptab]

They want to make everyone a violator so they can throw you in jail at their whim.

 

[jbombelli]

And the reason my income is computed 3 different ways prior to me ever filing a return is because....???

So it's harder for you to argue with them when they audit you, and say you owe them $22,155.17 in back taxes and an additional $31,215.95 in penalties and fees.