Each year, the average American doing her own taxes spends 13 hours just on pretax planning, gathering records and such -- and that's before filling out the first line of her tax return. That adds up to about 6 billion hours being wasted annually, and it's one of the many reasons why U.S. Rep. Dave Camp (R-Mich), chairman of the House Ways and Means Committee, and Sen. Max Baucus (D-Mont.), the chairman of the Senate Finance Committee, came together Thursday to launch a new online platform where people can suggest the changes they want to see in the tax code.
Through TaxReform.gov, the congressmen hope to start a discussion between lawmakers and everyday folks about the difficulties they have with the system, and use their suggestions to devise a modern new tax code. Previous attempts to modify the tax code have only added more layers of complexity to it, as well as building in loopholes that allow corporations and the wealthy to evade taxes.
Because of their roles as the heads of the two congressional committees that germinate tax law, any genuine change in the tax code will start with (or at the very least, near) Baucus and Camp, and they want the public to help them make it happen. "We are dedicated to writing bills in an open and transparent fashion. No cutting deals behind closed doors," they state on their website.
A perfect tax system might be too ambitious a goal for the imperfect world of politics, but Baucus and Camp hope to simplify it and make it more fair for American families. If you'd like to help them, they're waiting for your input.
Nearly 25 percent of all income taxes go to pay for defense. Of that amount, salaries and benefits for members of the armed services make up roughly a quarter, while most of the remainder goes toward equipment and supplies as well as weapons, construction, and research and development.
About 22.5 percent of income tax revenue goes toward health care programs. The two big expenditures are for Medicare and Medicaid, but additional amounts go toward health research, food safety, and public health services and disease control. These amounts don't include the dedicated Medicare taxes that workers have withheld from their pay.
The government spends roughly 17 percent of income tax revenue on various programs that provide money for those in need, including retirement benefits for federal employees, food and nutritional assistance, and Supplemental Security Income. The Earned Income Tax Credit and the Child Tax Credit are also funded from income tax revenue.
About 4.5 percent of spending goes to pay for various benefits for veterans. Income and housing support represent not quite half of the spending in this category, with health-care expenditures nearly as high. The remainder goes for education, training, and other benefits for former military personnel.
The majority of the 3.3 percent of income tax revenue spent on education and job training goes toward funding education through the high-school level. College financial aid, along with employment training for those with disabilities and more general job training and employment services for the broader public, take up the remainder.
Just over 2 percent of income tax revenue goes to support the nation's immigration and law enforcement programs. These expenses help fund the nation's court system, as well as federal law enforcement agencies and the federal service that implements U.S. immigration policy.
About 2 percent of revenue from income taxes is spent on various expenses related to the natural resources of the nation. About a third of that money goes toward water and land management, with the remainder funding environmental protection initiatives as well as management of the nation's energy assets and conservation efforts.
Money going toward international initiatives makes up about 1.7 percent of total income tax revenue. About half of that amount is spent on humanitarian and economic-development assistance, while the remainder is split among the costs of maintaining embassies and diplomatic missions, and providing security assistance overseas.
Just over 1 percent of income taxes go toward science-related programs. More than half of that amount goes to NASA, but additional recipients include the National Science Foundation as well as various national laboratories and other research facilities.
Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.
Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.
Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.
Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.
When you're a driver for a ride-sharing company such as Uber, Lyft, Sidecar, or other car sharing service, the most important thing to understand about your taxes is that you are probably not an employee of Uber, Lyft or Sidecar. Drivers for these companies are usually independent contractors, a fact that has tax implications, both at filing time and year-round.