Friday, January 25, 2013

Taxpayer Advocate Reports That Taxes Are Too Complicated

In the Taxpayer Advocate 2012 Annual Report to Congress, Nina Olson states that it takes U.S. taxpayers more than 6.1 billion hours to complete all the tax filings required by the tax system.

Think about this for a moment. It takes more than 3 million full-time employees to administer the U.S. tax system.

I am one, of course. Still, ... good grief!

Here are other observations:

  • Individual taxpayers find return preparation so overwhelming that about 59 percent now pay preparers to do it for them. Among unincorporated business taxpayers, the figure rises to about 71 percent."
  • According to a tally compiled by a leading publisher of tax information, there have been approximately 4,680 changes to the tax code since 2001, an average of more than one a day."
  • From FY 2004 to FY 2012, the number of calls the IRS received from taxpayers ...increased from 71 million to 108 million, yet the number of calls answered ... declined from 36 million to 31 million."
  •  ... among  the callers who got through, the average time ... waiting on hold increased from just over 2½ minutes in FY 2004 to nearly 17 minutes in FY 2012."
  • The IRS receives more than ten million letters from taxpayers each year responding to IRS adjustment notices. ... the IRS ... cannot timely process nearly half of its pending correspondence...."
  • In 2012, TAS conducted a statistically representative national survey of over 3,300 ... sole proprietors. Only 16 percent said they believe the tax laws are fair. Only 12 percent said they believe taxpayers pay their fair share of taxes."

 Here is one that gave me pause:
  • ·        We believe it is important to increase taxpayer awareness of the connection between taxes paid and benefits received. We have recommended that Congress direct the IRS to provide all taxpayers with a “taxpayer receipt” showing how their tax dollars are being spent. This “taxpayer receipt” ... should be provided directly to each taxpayer in connection with the filing of a tax return.”

 And you knew this one was coming:

  • In each of the last two fiscal years, the IRS budget has been reduced, and it appears the IRS budget will be cut further in the current year. The continued underfunding of the IRS poses one of the greatest long-term risks to tax administration today.”

My Take? I believe that the IRS is underfunded, and that such underfunding represents a risk. I point out, however, that the underfunding is greatly attributable to governmental overreach, although it may be fair to say that the President and Congress have left the overreach on the IRS’s doorstep. 

And a receipt?! No thank you. I am aware of how my money is spent. That is a big part of the problem.

I have very much come to like Nina Olson. No one in Washington will listen to this report, however. Not this crowd. Not this year.

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