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Tax filing scramble amid reports rich pay less
April 18, 2011 / 1:30 PM / 7 years ago

Tax filing scramble amid reports rich pay less

WASHINGTON (Reuters) - Taxpayers scrambled to meet Monday’s deadline for filing income tax returns amid reports that the richest of the rich are paying less to the Internal Revenue Service.

<p>A woman walks out of an Internal Revenue Service office in New York April 18, 2011.The Internal Revenue Service had announced that taxpayers have until April 18, 2011 to file their 2010 returns and pay their tax bills because of a holiday on April 15. REUTERS/Lucas Jackson</p>

Submitting online from the comfort of home or at the U.S. Post Office, taxpayers turned over the complicated forms that tally up either the joyful news that a refund is due or painful reality that even more money is due.

Watchdog groups, meanwhile, found the richest Americans are paying a smaller share of the pot than in years past. According to 2008 IRS data analyzed by the Tax Foundation, the top 1 percent of earners paid 38 percent of all federal individual income taxes, a decline from 2007 when the same group paid more than 40 percent.

Citizens for Tax Justice, which looks at all taxes paid including federal, state and local taxes, said that in 2010 the top 1 percent of earners will pay 21.5 percent of taxes. The group said that top 1 percent earned just over 20 percent of total income.

“It doesn’t make things any easier for a working stiff like me,” said David Desmarais, 37, of Stanford, Connecticut, a hotel desk clerk who mailed his tax return at the enormous main post office in New York City. “I work really hard to earn what I do, so tax day is never fun.”

Another taxpayer, bank teller Linda Blanchard, 28, said wealthier Americans do not feel same sting she does seeing her paycheck eaten away by tax dollars.

“It still hurts to be doing this. I‘m sure they are able to part with that money easier,” said Blanchard, who lives in suburban Harrison, New York.

From everyday taxpayers to the most famous celebrities, Tax Day forces all Americans to look back at how their life has added up over the previous year.

President Barack Obama and wife Michelle made significantly less money last year than in 2009, reporting an adjusted gross income of $1,728,096 and paying federal taxes of $435,770, according to their joint tax return. That’s down from income of $5,505,409 in 2009.

Vice President Joe Biden and wife Jill reported adjusted gross income of $379,178 in 2010 and paid $86,626 in federal taxes, the White House said.

Among the experts who used Tax Day as a platform to call for tax reform was U.S. economist Arthur Laffer, who penned an opinion piece in the Wall Street Journal calling for a simple flat-rate tax with no deductions.

The practice of whittling down a tax obligation through deductions is so complicated that “tax compliance” has grown into a $431 billion annual industry, employing more people than Wal-Mart, United Parcel Service, McDonald‘s, International Business Machines and Citigroup combined, he said.

Americans’ quest for deductions and the IRS’s efforts to verify them ends up costing taxpayers 30 cents for every $1 paid in taxes, said Laffer.

For those who still haven’t finished their tax returns as the clock ticks down to the midnight filing deadline, the IRS offered these tips to avoid common mistakes:

** File electronically. Because the e-file and IRS Free File software makes calculations, it flags common errors and prompts taxpayers for missing information.

** Mail it to the right address, if doing a paper return. "Where to file" information can be found on the IRS site -- www.irs.gov -- or in the printed instructions. Getting it right avoids delays in processing and can speed up delivery of refunds.

** Attach forms like W-2s and others that show tax withholding, and other necessary forms and schedules, to the front of your return.

** Check just one filing status and make sure you’ve checked the right exemption boxes.

** Double check that you’ve entered the correct Social Security number or numbers and double check all figures. The IRS says math mistakes remain common on paper returns.

** Double check the routing and account numbers for getting any refund directly deposited into your bank account.

** Can’t meet the deadline for filling out a return? Don’t panic. You can request an extension by using Free File or Form 4868 and avoid late filing penalties. See the IRS site for more details. But remember the IRS still wants any taxes owed paid by the Monday deadline.

The IRS said that as of early April around 99 million individual income tax returns had already been received, about the same as for the comparable period last year.

The number of refunds totaled about 81 million, up from 80 million the previous year, with the total value of the refunds at around $234 billion both years.

Reporting by Jerry Norton in Washington, Bernd Debusmann Jr. in New York and Lauren Keiper in Boston; Editing by Barbara Goldberg and Greg McCune

Our Standards:The Thomson Reuters Trust Principles.
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