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Thursday, February 27, 2014

Can't File Your Tax Return: Blame ObamaCare, Not TurboTax

TurboTax (2013)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.

http://taxprof.typepad.com/taxprof_blog/2014/02/cant-file.html

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Comments

Please, are you really pegging that minimal net investment income tax as a valid criticism on Obama and one's ability to do their taxes? Never mind that thanks to Obama people can finally afford health care, unemployment is down, he saved Michigan's economy, raised our global acceptance rate, and a number of other things including steering us out of the economic mess started by Reagan and perpetuated by both Bushes.

Posted by: Seth Lavine | Feb 27, 2014 10:23:56 AM

in fairness to paul, this is a blog on which he reposts stuff other people have written elsewhere, in this case in the WSJ

Posted by: russ willis | Feb 27, 2014 12:24:29 PM

How many people meeting this threshold are wanting to file their income tax return 6 weeks before the due date?

Posted by: SW | Feb 28, 2014 5:45:52 AM

Maybe if the IRS had not been shutdown for a few weeks or if their budgets had not been slashed drastically, the IRS could have finalized the instructions sooner. I recall someone not named Obama pursuing the shutdown and the drastic cuts. Great reporting WSJ.

Posted by: Daniel Waters | Feb 28, 2014 6:29:00 AM

I have it on good authority that President Obama is responsible for the bad weather we've been having, as well.

Posted by: michael livingston | Feb 28, 2014 5:25:41 PM

Section 1401 was enacted in 2010. One would think three and a hafl years would be enough time to figure out the instructions for the form. Apparently those here critiquing the article only read the extract as the date of enactment is in the full article. But there is a clue in the excerpt as to the date, the mention of the "111th Congress."

Posted by: TexEcon | Mar 1, 2014 7:41:22 PM

@TexEcon, The article, according to the byline, puts the blame on Obamacare, yet as you astutely point out the law has been written for some time. So, it is quite fair to attack the messenger in this instance seeing as how the messenger proclaimed the wrong message. The IRS did not draft the final instructions for the form, but that is not the fault of Obamacare.

Posted by: Daniel Waters | Mar 3, 2014 5:04:55 AM