Jan 20

Tax Code Complexity

Complexity is Still the Number One Issue According to the National Taxpayer Advocate’s Annual Report

The 2010 Annual Report to Congress from National Taxpayer Advocate Nina Olsen highlights 25 current problems with the IRS and provides recommendations to Congress to correct them. The first two identified are the most significant and pose the most serious problems if not corrected.

The first problem identified in the report is the complexity of the Internal Revenue Code. At 3.8 million words, the tax code is over 11,000 single spaced pages and, reading at 300 words per minute, it would take a person almost 9 complete days to read the entire thing. The Taxpayer Advocate Service estimates that taxpayers spend 6.1 billion hours a year doing their taxes, which equates to over 3 million Americans working full-time ? greater than the number of teachers, professors and librarians combined. This time spent on taxes translates to a cost of $163 billion, based on hourly wage rates. Not only does the long and complex tax code cost time and money, it also results in incorrect filings by taxpayers: many make honest mistakes because of the cryptic wording, while others are able to navigate loopholes to greatly reduce their taxes. An estimated 60% of individuals employ tax preparers to do their taxes for them, adding to the cost imposed on taxpayers. The Taxpayer Advocate recommends a vast reduction in tax expenditures ? deductions or exemptions built into the tax code ? while also lowering the overall tax rates to reduce the burden on most Americans.

Read the full article here: http://www.taxfoundation.org/blog/show/26980.html