Thursday, February 27, 2014
Wall Street Journal: 8960 or Fight! Can't File Your Taxes? Blame ObamaCare, by James Taranto:
Some TurboTax customers are mad at Intuit, maker of the popular tax-prep software, because they've finished their returns but are unable to file. Their anger is misplaced. They should blame the Internal Revenue Service, along with the 111th Congress and President Obama for enacting and signing the tax increase with which TurboTax can't yet comply. (They could also blame George W. Bush if they're in a jocose frame of mind.)
At issue is ObamaCare's new 3.8% "net investment income tax." It took effect Jan. 1, 2013, so that taxpayers are encountering it just now as they prepare their returns for last year. In effect, it applies the Medicare payroll tax to interest, dividends and capital gains.
But it doesn't apply to all such income. If your modified adjusted gross income is under $200,000 (or $250,000 for a married couple), you don't pay the tax at all. Further, if your modified AGI is above the threshold but your noninvestment income is below it, the tax is applied on the difference between your total income and the threshold. ...
It's a no-win for Intuit and for impatient TurboTax users. By preventing the filing of returns that include an 8960 until the IRS releases the final instructions, the company was protecting its customers from the risk of misfiling--and itself from the backlash that would surely ensue if many filers end up having to amend their returns as a result. The company still ended up with a backlash, its response to which could yield another backlash if the final instructions turn out to be different enough from the draft that a large number of users have to amend their returns.