The big but not so beautiful bill continues to increase the unfairness and complexity of the Tax Code.
As I said in an earlier post, the deduction for tip income and overtime pay is just plain stupid and makes no logical sense. Tip income and overtime pay is earned W-2 income. Why should these types of W-2 income be deductible (exempt from federal income tax) and not other W-2 income. Why do waitresses, for example, deserve a deduction not available to secretaries or clerks? Truly unfair.
FYI – I have always said the $300 above the line educator deduction is also unfair. Why just teachers and not also police, fire fighters, EMTs, nurses, and other municipal employees who also incur unreimbursed out of pocket expenses.
“No tax on tips” and “no tax on overtime pay” were basically election-year “gimmicks” used by Trump to buy votes. To be honest, I am surprised that these promises are actually being honored via legislation – Trump has already been elected President and cannot run again.
At least making the “no tax on tips” and “no tax on overtime pay” deductions at the 1040 level and not reductions at the payroll tax filing level does not screw applicable employees out of eventual Social Security benefits and apparently does not affect the available Earned Income Credit.
The reduction of gambling losses available for deduction against gambling winnings to 90% of the total losses also makes no logical sense. It will increase the amount of “non-income” being taxed by casual casino and lottery gamblers and increase the unfairness of how gambling activity is taxed (see my post “TAXES AIN’T FAIR”).
Much of the complexity in the Tax Code comes from the erroneous distribution of government social welfare benefits through the tax return and the variety of phase-outs and reductions of deductions and credits based on AGI or Modified AGI (MAGI). The OBBA contains continuation of and additions to these areas of complexity – especially with many additional AGI/MAGI phase-outs and calculations.
It will clearly take tax professionals more time to prepare returns, and they will need more extensive education on and research of the new items, for 2025 and beyond, and will therefore increase the cost of tax preparation as well as the potential for error and fraud.
TTFN
No comments:
Post a Comment