Thursday, April 9, 2015

We Need One More Horseman for a US Tax Apocalypse

The US Income Tax System seems to be heading for trouble and only needs one more horseman for a Four-Horse apocalyptic mess.

Horseman Number 1: The tax code is extremely complicated, with rules upon rules upon rules and forms and guides and ...  The tax code is over 70,000 pages long, and this means that you could only explain it with a guide of well over 150,000 pages.  The website is huge and you are continuously using search and wading through documents to find what you need.  Form 1116 is estimated to take 20 hours to fill out, and it performs the simple task of making sure you get credit for foreign taxes paid so you don't get taxed twice.

Horseman Number 2: The IRS is run as a US government agency and has extremely unwieldy processes that hamper the workers.  It also seems to have a pretty aggressive approach to taxpayer when there is a problem, which makes it unpopular.  The recent scandal over non-profit tea party group approvals demonstrates their methodology.

Horseman Number 3: Congress is run by the Republicans and they don't like taxes and they don't like the issue with the approval of non-profit tea party groups.  Therefore, they cut the funding to the agency so they cannot provide adequate customer service or adequate checking of tax returns for errors and fraud.  The IRS receives 10% less funding than it did 5 years ago while the tax code has increased in complexity, which makes no sense.  Lines at the IRS offices are out the door and 60% of phone calls are unanswered.

So the loser in all this is the honest taxpayer, who gets little help preparing their taxes and feels like a chump paying their taxes while others cheat.  The solution is obvious: simplify the code, thereby reducing the cost of the IRS and the cost of preparing taxes, and making it easier to catch cheats.  However, with the US government in gridlock, the Maple Leafs will win the Stanley Cup long before this happens.

Photo credit: Flickr

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