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Home / Articles / · Archive / News & Columns /  Brilliant Deductions
News & Columns

Brilliant Deductions

Get creative with Schedule A this year, and you might enjoy some tax relief.

By John Rasmuson
Posted // June 11,2007 -

The deadline for filing income-tax returns is upon us. By the time I drop mine in the mailbox, my frustration, having raged for a week, will have subsided for another year.



Figuring my tax bill is an annual ordeal for me. I don’t so much mind writing a check to the Treasury as I do figuring exactly how much I have to fork over. The complexity of the 1040 makes it damned near impossible for ordinary citizens to make their way through a maze of capital gains, earned income credit, alternative minimum tax and other arcana.



“Burdensome” is how Federal Reserve Chairman Ben Bernanke characterizes the U.S. tax code. Some IRS consultants, pondering the $300 billion in owed-but-not-paid taxes each year, cite the burden of compliance as one reason for the growing “tax gap.” It’s easy to envisage a legion of fellow sufferers simply throwing in the towel at midnight on April 15.



So why put myself through the ordeal year after year when I could hire H&R Block instead?



First of all, it is hard for me to pay someone to do something I can do myself. For better or worse, I have an irrepressible, do-it-yourself instinct. Toilet innards, balky lawnmowers, three-way switches'I’ve tackled them all. I take on leaking faucets with vise grips, trees with a chainsaw, 1040 forms with a pencil and calculator. TurboTax is for wimps.



Instinct aside, I find the frustration of income-tax preparation almost as purgative as confession. The cleansed mind is able to contemplate the breadth of the forest after having spent 11 or 12 months muddling about in the trees. One year, I was stunned to discover that we had paid more to our English setter’s veterinarian than we had to the pediatrician who cared for our two kids. However, the trips to the pediatrician were deductible expenses on Schedule A; the dog’s were not.



Schedule A is the form in which the less-is-more rule does not apply. Instead, you are invited to contrive a list of expenses that add up to at least $5,150 for singles, double for couples. The more the better. This is where your brother-in-law brags about his creative write-offs. A friend of mine, an author of books about the Chesapeake Bay, asked an accountant if he could write off a boat. “Put down anything you can claim with a straight face,” the accountant replied. I subsequently put the advice to a test. I listed a NordicTrack as a business expense. The IRS either allowed it or ignored it, probably the latter. I never had to look an agent in the eye.



Truth be told, Schedule A is geared toward the well-to-do. If Wal-Mart is your store of choice, chances are you won’t be itemizing deductions on Schedule A. Only about one third of taxpayers earning $50,000 can muster enough deductions to make it work. Elimination of the form was recommended by the tax-reform commission appointed'and then ignored'by President George W. Bush. The tax code would be “simpler and fairer” without Schedule A, it said.



It is on Schedule A that you get back some of the money you give to your church and mortgage holder. People like me, who are conversant with the 29-line form willy-nilly, understand that $1,000 in tithing might buy only $150 in tax relief, double if you’re in Daddy Warbucks’ tax bracket. The same is true for mortgage interest, state taxes and car-donation deals. Say you decide to unload your aging car. You figure it is worth less than $1,000, but your brother-in-law insists you would be money ahead with the $1,500 tax write-off you get by donating the car to one of the charities that advertise in the newspaper. So instead of selling your car on Craig’s List for $700, you get $225 in tax relief, assuming you make $50,000 and have at least $5,000 in qualifying deductions on Schedule A. If you don’t, you get zilch.



It’s a similar case when it comes to paying someone to do your taxes. Sure the fee is tax deductible, as advertised. Sure you can claim the fee on Schedule A. But, for every dollar you spend, you’ll get only pennies in return.



As I said, I don’t mind writing the check. I have done well by the federal government, and I don’t mind contributing my share to the Treasury. Lord knows, there are wars to pay for. Still, I don’t want to hand over one dollar more than the law requires. I know a guy who is an airline pilot. He lives in New Hampshire because there is no state income tax, and he takes pleasure from battling the IRS every year. If he isn’t called in to defend every line of his Schedule A, he concludes grumpily that he has overpaid his taxes.



Understanding the nuances of Schedule A won’t make you rich, but it will make you smarter than the average citizen, smart enough to recognize the specious argument in tax-reform debate. You might even decide that a full and happy life is possible without Schedule A, especially if the tradeoff is equitable and fiscally sound. If everyone were smarter'and if every congressman were required to calculate his own taxes using a pencil and calculator'I think we would have a simplified tax code before the last troops leave Baghdad.



This year’s 1040 carries the remarkable assertion by IRS Commissioner Mark Everson that “paying taxes is a unifying experience fundamental to democracy and the rule of law.” Until the citizenry is smart enough to demand a simplified tax code, the only unifying experience is a yearly dose of frustration.



John Rasmuson is a writer and do-it-yourselfer who resides in Salt Lake City.

 
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