When it comes to highly unpleasant experiences, filing taxes is probably up there with root canals — which is why people put off doing them.
But tax season is here, and in an effort to alleviate some of the “taxing” aspects of the season, ASU News turned to Adam Chodorow.
Chodorow is a Jack E. Brown Professor of Law at Arizona State University's Sandra Day O'Connor College of Law. His research and teaching interests lie in tax and business law.
And his number one recommendation: File your tax returns!
Question: Given all that you know as a lawyer specializing in tax law, do you do your own taxes?
Answer: My wife has an MBA and used to do the family taxes. When I got my graduate degree in tax law (a legal master's), she handed me the records and has never looked back. While I love teaching tax law, I can’t say that I love doing my taxes. I know some tax professors who still use paper and pencil to do their taxes. I’m pretty sure they’re masochists. I use one of the commercially available programs.
Q: Are there a lot of new tax laws and regulations that go into effect each year?
A: Congress constantly tinkers with the tax code, so you always need to pay attention to make sure nothing has changed. In addition, they have largely used the reconciliation process to pass tax bills to avoid the filibuster. As a result, they have had to make most of their changes temporary. That is why many of the tax cuts from the 2017 Tax Cuts and Jobs Act expire this year. It leads to constantly changing rules and confusion for taxpayers, as well as difficulty planning.
Q: Are there any important federal tax laws that people need to be aware of when filing taxes for 2024?
A: There weren’t a lot of changes last year to the tax laws. Next year may be a totally different story. However, a number of figures are adjusted annually for inflation. For instance, the amount you can contribute to an IRA in 2024 increased $500 from 2023 to $7,000 — $8,000 for folks over 50. The standard deduction amount increased as well.
Q: What about Arizona state taxes?
A: Arizona state taxes largely mirror the federal tax code. There are a number of differences, but most are unusual. The most important difference may be medical expenses. For the federal income tax, you can only deduct medical expenses to the extent they exceed 7.5% of your adjusted gross income, or AGI. Medical expenses are fully deductible against Arizona state income taxes.
Q: What is the difference between tax laws and regulations?
A: Tax laws are passed by Congress and signed into law by the president, becoming part of the Internal Revenue Code. Regulations are issued by the Treasury Department — the IRS is part of the Treasury Department — and typically explain how the laws work and address any ambiguities. Sometimes, Congress leaves it to the IRS to determine the specific tax rules to implement the law. The Internal Revenue Code always trumps the regulations if there is a conflict.
The Supreme Court recently eliminated the Chevron doctrine, under which courts deferred to the executive branch when construing certain statutes. Thus, it is not clear how binding the tax regulations might be or whether courts will take it upon themselves to interpret the law.
Q: How can ignorance of tax laws impact taxpayers?
A: There is a Latin saying in the law, "ignorantia juris neminem excusat," which translates to “ignorance of the law is no excuse.” For instance, while Bitcoin might be used like currency, the IRS treats it as property. Thus, if you buy a Bitcoin for $100 and spend it when it is worth $110, you actually have to report a $10 gain. Most people don’t know this rule, but failure to report the gain could get you in trouble.
Q: Given the complexity of tax laws and regulations, do you think it would be preferable for people to hire an accountant or would software programs like TurboTax or H&R Block suffice?
A: If you have a simple return, let’s say you earn wages and maybe have an investment or two that generates a 1099, the programs work extremely well. They are actually designed to work for more complex situations, as well, including owning rental property and operating a business. I would encourage people to try using the programs. However, if you’re nervous or if you have an unusual situation, you might want to hire an accountant. Ninety-nine percent of the people should be able to use the programs.
Q: What if someone owes taxes but can’t pay them right now? Should they still file a return?
A: Yes! There are two main kinds of penalties the IRS imposes: Failure to file and failure to pay. Even if you can’t pay the tax you owe, you should file your return. This will reduce the penalties and interest you owe.
Q: Is there anything people can do now about next year’s taxes?
A: Look to see whether you withheld enough taxes to cover your bill. If not, increase your withholding to make sure you don’t have to pay a penalty for under withholding. If you got a big refund, consider reducing your withholding.
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