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May 2015 Brief: Volume 22, Number 15

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Paying Income Taxes Can Be Taxing

 

by Amy K. Frantz

 

 

We all face the obvious burden of the amount of income taxes we must pay to the federal government each year on April 15. But there is also the burden of the act of paying those taxes. From the time and effort required to fill out and file all the necessary Internal Revenue Service (IRS) forms, taxpayers are facing an increasing burden above and beyond the actual taxes paid.

 

“A Complex Problem: The Compliance Burdens of the Tax Code,” by Michael Tasselmyer is National Taxpayers Union Foundation’s (NTUF) annual look at the costs of paying federal income taxes, from the cost of various tax preparation assistance to the hours spent complying with the ever more complex federal tax code. As Tasselmyer states:

 

…the Tax Code has grown astonishingly complex. Its annual enforcement and compliance costs require tens of billions of hours, hundreds of billions of dollars, and thousands of federal employees. The sheer complexity of the Code has spawned a multibillion-dollar industry, made up of professionals who spend years training in order to help individuals and businesses navigate the system (and frequently, even that is not enough to ensure accurate filings). Hardly a day goes by during the lead up to Tax Day that we don’t hear of a security breach or technical issue that compromises the sensitive, personal information taxpayers send to the Internal Revenue Service each year in April. And when that does happen, taxpayers must confront a daunting, weeks- or even months-long bureaucratic process through a system that is becoming increasingly overwhelmed and unable to offer assistance when needed.[1]

 

The NTUF report indicates that while the number of lines on the federal 1040 form has been relatively stable of late, steady at 77 lines from 2010 to 2013 and then jumping to 79 lines for 2014, the number of pages in the instruction booklet has grown from 179 pages in 2010 to 209 pages for 2014. Apparently we need 30 more pages of instructions to help us fill out our federal tax form than we did just four years ago! Not surprising, perhaps, if you consider all the changes made to the Internal Revenue Code (IRC), if not the form. “Since 2004, the [National Taxpayer] Advocate reports that there have been 4,107 changes to the IRC, an average of more than one every single day.”[2]

 

The increasing length of the instructions required to complete our federal taxes may be leading us to look for alternative methods of filing our taxes. “In 2013 over 94 percent of filers paid someone or used software to help prepare their returns….the tax preparation industry generated over $10 billion in revenue in 2014 and was comprised of 318,926 employees across 111,568 businesses.”[3]

 

The growing tax complexity has led to growing fees when it comes to professional assistance in paying our taxes. The average fee charged by H&R block in 1980 was $27.36. By 2010 that average fee was $187.93, and last year the average fee was $215.06.[4] That amount will undoubtedly grow in 2015, as President Barack Obama’s Patient Protection and Affordable Care Act has turned the IRS and the federal tax code into its enforcer, requiring taxpayers to affirm that they obtained health insurance or pay a penalty as part of their tax filing.

 

However, if you need assistance in understanding the tax code and forms to file, it may be worth it to pay for professional help, because you are not likely to get it on your own from the IRS. According to Paul Jacob’s “Common Sense” column, “only four of ten citizens ever succeed in getting through to the IRS on the phone, even after waiting multiple hours. Over days. There have been over 5 million ‘courtesy disconnects’ – that’s IRS lingo for its phone system hanging up on you.”[5]

 

Our tax system is already extremely complicated and is becoming more complicated each year. Elected officials often talk about tax reform, but few reforms are actually accomplished, and when “reform” does occur, it usually results in an even more complicated tax system. Those who are tired of the time, effort, and monetary costs of paying federal income taxes under the current system should demand that our elected officials consider the merits of proposals such as the national retail sales tax or the flat tax, and adopt a tax system that is truly more simplified and less taxing to us all.

 

Endnotes:
[1] Michael Tasselmyer, “A Complex Problem: The Compliance Burdens of the Tax Code,” National Taxpayers Union Foundation, Policy Paper No. 176, April 8, 2015, pp. 1-2, <http://ntu.org/foundation/policy-paper/a-complex-problem-the-compliance-burdens-of-the-tax-code?utm_source=Taxpayer+Tab&utm_campaign=690fa17614-Tab+26-03-15&utm_medium=email&utm_term=0_deb6614940-690fa17614-189718041> accessed April 9, 2015.
[2] Ibid., p. 2.
[3] Ibid., p. 5.
[4] ]Ibid., pp. 5-6.
[5] Paul Jacob, “Poor, Poor IRS,” Common Sense, April 10, 2015, <http://thisiscommonsense.com/2015/04/10/poor-poor-irs/> accessed April 10, 2015.

 

Amy K. Frantz is Vice President with Public Interest Institute, Mount Pleasant, Iowa. Contact her at Public.Interest.Institute@LimitedGovernment.org.

 

Permission to reprint or copy in whole or part is granted, provided a version of this credit line is used:"Reprinted by permission from INSTITUTE BRIEF, a publication of Public Interest Institute." The views expressed in this publication are those of the author and not necessarily those of Public Interest Institute. They are brought to you in the interest of a better-informed citizenry.

   

 

 

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