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.
The Affordable Care Act put in place significant tax-related programs that impact Medicare and Medicaid, such as increased Medicare taxes on earned and unearned income for high-wage earners, and Medicaid changes that increase the number of insured individuals. Establishing whether you are affected by the ACA-imposed taxes, or are eligible for certain health programs that fall under the Centers for Medicare and Medicaid Services, is determined by filing your income tax.
There?s a fine line between looking to save money on your taxes and taking deductions that will raise eyebrows at the Internal Revenue Service. Some taxpayers are tripped up by expenses that they assume are tax deductions, but don?t qualify under IRS guidelines. Here are a dozen items that can lead to unpleasant surprises in case of an audit.
The Affordable Care Act (ACA), also referred to as Obamacare, affects how millions of Americans will prepare their taxes in the new year. The law now includes penalties for all who haven?t obtained health insurance -- and those penalties are expected to be paid at tax time. The ACA also provides tax credits to help people pay for insurance, and you can claim those credits when you file your taxes. The Internal Revenue Service (IRS) has introduced a number of tax forms to accommodate the ACA.
The Affordable Care Act, also known as Obamacare, requires most Americans to have health insurance that meets a government standard known as "minimum essential coverage," or MEC. Whether your insurance qualifies as MEC depends not on the plan itself, but on how you obtained your coverage.
In 2014 the Affordable Health Care Act, also known as Obamacare, introduced three new tax forms relevant to individuals, employers and health insurance providers. They are forms 1095-A, 1095-B and 1095-C. These forms help determine if you need to comply with the new shared responsibility payment, the fee you might have to pay if you don't have health insurance. For individuals who bought insurance through the health care marketplace, this information will help to determine whether you are able to receive an additional premium tax credit or have to pay some back.