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Giving up difficult tax breaks

By Kay Bell ·
Thursday, July 26, 2012
Posted: 9 am ET

Have you ever not taken a tax break because claiming it was just too darn difficult?

Some companies say they have.

Executives, particularly at small and medium-size companies, told The Wall Street Journal that many tax deductions for which they qualify are either too cumbersome or too confusing. In some cases, they say, the cost of obtaining the tax benefit is greater than the benefit itself.

Not only does that cost the taxpayers who forgo the tax credit or tax deduction, but it also could undercut the overall economy boosting impact of the tax breaks. The tax benefits cited by the frustrated business filers included tax breaks for hiring more workers, boosting energy efficiency and buying more equipment.

Those are all good things, for the tax-eligible companies and the people and other businesses that would benefit. And they apparently are benefits that are not being claimed and passed along.

Tax software, for both individuals and companies, has made tax-filing easier. But often it is not enough.

The tax break complaints of the business owners underscore why more businesses and individuals now use paid tax preparers. These filing experts are the ones who, we hope, are trained well enough to catch every tax break that we overlook and save us enough tax dollars to make hiring them worthwhile.

Complex filing isn't just a problem for you, me and small businesses. Remember the trouble that U.S. Treasury Secretary Timothy Giethner got into when he messed up his tax return in connection with payments made to household help? He used TurboTax, but that didn't keep him from making the mistake and paying for it not only in more tax dollars and penalties, but also in embarrassment during his confirmation hearing years later.

Heck, even the Internal Revenue Service commissioner has admitted that the current tax code is too difficult and that he hires a tax pro to fill out his returns.

That's why both Democrats and Republicans are focusing, at least in their speeches, on simplifying the tax code when they discuss any type of tax reform.

I'd be for simpler. I know how the small businesses feel. The first time that taxes brought me to tears was years ago, pre-software, when I was trying to figure out depreciation on some of my husband's small business equipment.

But we have to remember that simplifying the tax code is likely to not only get rid of complicated tax provisions, but also some tax breaks that we find are easy to claim on our returns.

What tax laws have driven you to tears or at least filing frustration? What tax breaks are you willing to give up in order to have a more simple tax code?

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1 Comment
August 29, 2012 at 3:11 pm

Thanks for the post Kay. As a small business owner, I too, have found myself giving up tax deductions I qualify for because they were too confusing and the cost of obtaining the benefit was greater than the benefit itself! After years of frustration caused by filing my own taxes, I decided to outsource my accounting and I am so glad I did. Hiring an accounting firm has not only relieved my filing frustrations but the associates at Tanner LLC have helped me to get the most out of my return and be the most effective and profitable business owner I can be.