With the federal income tax return deadline just days away, consulation around what might constitute a better theory of taxation has ratcheted up. Among the topics bunted back and forth is the "Fair Tax" proposal, an idea first introduced in 1999, which would radically turn the way in which individuals and businesses are taxed. Like any other registered tax return preparer working on profit of American taxpayers, the enrolled agent should be a part of this conversation, if only to gauge the sentiments of the habitancy enrolled agents serve year after year. While some enrolled agent continuing study and tax Cpe courses reference these reformist ideas, the subject is one that receives surprisingly slight attention in Rtrp circles. With the 2012 Presidential election around the corner, and the Republican Party enjoying a stronger position in both Houses of Congress, the idea of Fair Tax is far from a dead issue.
Below is a snapshot of the main tenets of Fair Tax Proposal.
Irs 1040 Es
What Is It?
The FairTax is a proposed turn to the federal government tax laws intended to replace all federal taxes on personal and corporate income with a singular broad national consumption on retail sales.
What Does It Entail?
Spending is Taxed -- Nothing Else
If implemented, the Fair Tax proposal would repeal all Federal income taxes -- essentially all the major boxes on the 1040: personal, estate, gift, capital gains, alternative minimum, social Security, Medicare, self-employment and corporate taxes. In return, the Federal government would begin collecting income from sales of new goods and services.
According to the proponents of the proposal, who've studied what a "fair" tax would look like, a national sales tax of 23% could reasonably replace the need for any of above taxes, and still allow the Federal government to procure the same number of revenue. This arrangement would give taxpayers an unprecedented number of latitude: because they'd be given their entire paychecks, the number spent or saved would rest entirely with them.
The Wealthy Aren't Penalized
Under the current income tax system, taxpayers who earn more are taxed more, important many to argule that the wealthy are unfairly taxed. The Fair Tax proposal would effectively end this age-old consider by giving taxpayers the choice of how much they are taxed by choosing how much to spend. One key assumption behind the proposal is that if (a) taxpayers already have plenty of extra money after meeting their budgetary needs and (b) they're taking home an entire paychecks, then they'll buy the items that they want.
Revenue-Neutral
Substituting Federal income taxes with a 23% Fair Tax is, agreeing to proponents, a good way to ensure that all base services being be paid as usual.
Household finances estimated through the Fair Tax Calculator brought the following results:
40% more spendable income ,984 more purchasing power ,114 less federal taxes
These are modest differences, proponents point out, that only substantiate the idea that fair tax is "revenue neutral" and not some project to stop Government services.
Essential Goods and Services are Tax-free
In the same way that many of the supermarkets have eliminated sales tax, there are significant staples, under the Fair Tax plan, for which taxpayers would get reimbursed. The novelty here is that taxpayers would receive a what is called a "prebate," essentially a rebate before it categorically happens.
Stay Tuned
The jury is still out on whether or not the fair tax is a suitable alternative to the current system. Beyond the pros and cons to the taxpayer, there are categorically other implications to tax preparers like enrolled agents, Cpas and other Rtrps that must be added to the discussion. Given the relative simplicity of theory of taxation proposed under this new arrangement, tax professionals may well need to look for other avenues of work. The consider is likely to continue, especially with Republicans gaining a foothold in both Houses of government, and enrolled agents should join it.
Irs Circular 230 Disclosure
Pursuant to the requirements of the Internal income assistance Circular 230, we notify you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other someone under the Internal income Code, or (b) promoting, marketing or recommending to an additional one someone any transaction or matter addressed in this communication.
lowest price Enrolled Agents Should Weigh in on the Basics of the Fair Tax
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