Are tax returns too complicated? National Taxpayer Advocate says so, urges reform
By Jay Keller
The National Taxpayer Advocate on Wednesday told Congress that the complexity of the tax code is the most serious problem facing taxpayers and stressed the need for immediate reform to simplify the Internal Revenue Code.
So complex and challenging is the tax code (at an estimated four million words) that the 2012 Annual Report to Congress shows that individuals and businesses spend about 6.1 billion hours a year complying with tax-filing requirements, requiring the equivalent of more than three million full-time workers.
“If tax compliance were an industry, it would be one of the largest in the United States,” says the report by National Taxpayer Advocate Nina E. Olson.
Oslon urges Congress to apply a “zero-based budgeting” approach, assuming all tax benefits will be eliminated and then added back only if public benefits of the revision outweigh the complexity it imposes on taxpayers.
Internal Revenue Code requires the National Taxpayer Advocate to prepare an Annual Report to Congress which contains a summary of at least 20 of the most serious problems encountered by taxpayers.
For 2012, Olson outlines 23 problems, provides updates on six previously identified problems, makes dozens of recommendations for administrative change, makes seven recommendations for legislative change and analyzes the 10 tax issues most frequently litigated in the Federal Courts.
Of the 23 issues this year, Olson identified three top issues including the need for tax reform.
The second issue Olson raises is that the “ IRS is not adequately funded to serve taxpayers and collect tax”while outlining how underfunding harms taxpayers and the public.
On this point, Congress is urged to revise budget rules so that the IRS is “fenced off” from spending ceilings and funded more proficiently.
Olson also recommends that IRS resources should be allocated only if balance is achieved between high-quality taxpayer service and effective tax-law enforcement.
Taxpayer Advocate Services handled over 55,000, most of which involved multiple issues and cost many resources.
Oslon writes that taxpayers need “one-stop shopping” or a single point of contact they can work with on all cases. Additionally, the IRS needs a “traffic cop” to ensure completion and oversight of internal units.
This article is the first in an occasional series on tax reform and the issues raised by the office of the Taxpayer Advocate, an independent government watchdog, in its annual report to Congress. In this series, we will explore and examine the most serious problems, recommendations to lawmakers, research studies and how the TAS has helped mold and shape public policy. For questions, comments or concerns, please use the comments section below to join the conversation.