IF SOMEONE HAD SET OUT deliberately to sabotage tax reform, increase taxes, provide an unbelievable bonanza to tax accountants and lawyers and assure that no one, absolutely no one, avoids struggling over a tax return, he couldn't have done better than the Internal Revenue Service.
The least cynical among us never believed for a moment that tax reform, despite the claims of its authors, would bring greater simplicity. But few could have suspected the nightmare the IRS has dreamed up in revising Form W- 4.Until now, Form W-4 has been something the least endowed could handle with ease. It called for us to list ourselves and our spouses, our other dependents, any special allowances - being blind or over 65, for instance - and toting up the numbers. These were the number of exemptions permitted before our employers withheld income tax from our pay.
That's still there, but now we're being asked additionally to list adjustments to income, such things as reimbursed business expenses, alimony payments, deductible business and investment losses, penalty for early withdrawal of savings and qualified contributions to an IRA or Keogh plan.
The explanation of the last is enlightening. "If either you or your spouse, if applicable, have an IRA and are covered by an employer's pension plan, your 1987 IRA deduction may be reduced or eliminated if you adjusted gross income is at least $40,000. ($25,000 if single or $0 if married, filing separately.) Get Publication 590 Individual Retirement Arrangements (IRAs) for details."
That's only one of the many joys of this exercise. The most difficult perhaps is estimating your total income, especially if you have non-wage income.
What it means is that everyone, even the 6 million removed by the tax reform act from the tax rolls, will be involved in filing something much more complicated than the 1040 Easy, or whatever it is now called.
A good guess is that 100 million or more taxpayers will make some heinous error, for which a fine of $500 is chargeable - a tax increase large enough to pay off a sizable portion of the federal deficit.