Simplified Tax Advantages
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The President’s Economic Recovery Advisory Board was created to provide the president with options for reforming and simpifying the tax system. Below are a few recommendations suggested by the advisory board: Combine family benefits into work and family credit Advantage: The advantage of combining the many credits that benefit families into only two credits would make it easier for individuals to understand and apply the credits. Combine the Earned Income Tax Credit, Child Tax Credit and Child Dependent Advantage: ExemptionThis would create a refundable credit that would be easier to understand and apply. The change would also standardize definitions, making it easier to apply the rules. Consolidate the Child Tax Credit and Dependent Exemption, and Repeal some Education Credits. Advantage: Minimize reporting requirements for third parties and minimize recordkeeping and simplify education benefits. Simplify and Consolidate Tax Incentives for Education Advantage: Standardize the definition of education expenses and minimize the number of options that taxpayers have to take advantage of education credit. Simplify the Kiddie Tax Advantage: The change would reduce the number of tax returned that currently result in little tax colletected. The recommendation would simplify the reporting requirements for parents Standardize the Earned Income Tax Credit and Additional Child Tax Credit Advantage: Standardize the eligibility rule and simplify the claculation fo benefits for various credits.
Simplify filing status determination Advantage: Eliminate the head of household filing status and minimize recording keeping for unmarried taxpayers. Eliminate the household maintenance test for Estranged Spouses Advantage: The change would eliminate the household test requirements and make compliance easier Simplify the Earned Income Tax Credit for Childless Workers Advantage: Would simplify when an individual would be able to claim Earned Income Credit based on the workers income and not the complex living arragnement. Consolidate Retirement Accounts and Standardize requirements Advantage: Standardizing the rules would reduce the cost of maintaining the plan and make It easier for workers to save and contribute to their retirement accounts. Integrate IRA and 401 type contibution limits and disallow nondecutible contributions Advantage: Would allow works to contribute to both an employer retirement plan and IRS at the same time, resulting in greater savings by individuals. The limits on contributions to retirement accounts would be removed. Provide the Saver’s Credit a Match Advantage: The creidt would incrase savings by individuals. Expand Automatic Enrollment in Retirement Savings Plans Advantage: This would allow payroll deductions to be used to invest in some type of retirement plan Reduce Retirement Account Leakage Advantage: Rule for tax free and penalty fee distributions for non emergency distributions would be reduced. Simplify Rules for Employer Sponsoring Plans Advantage: The plan would simply rules for Employer retirement plans. The Nondiscriminatory test would be simplified.