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Emerson Report 1.12.12

Taxes the IRS Doesn’t Even Understand

At the beginning of the New Year our thoughts turn from the happy holidays to more mundane things, not the least of which is taxes.  Forms start arriving in the mail, folders of receipts emerge from the filing cabinet, and we commence an annual calculation: Will we get a refund or will we owe?

Anyone who has attempted to prepare income or business tax forms knows that the answer to that question can only be discovered with a calculator, an inexhaustible supply of patience, absolute silence, and several hours to spare.

The process of preparing our own taxes is more complicated, more frustrating and more time consuming than I think it has been in all of American history.
Making a mistake can turn a slow process into an even slower one, resulting in fines or damaged credit or even more expenses.

The federal government doesn’t make it easy.  Changes in the tax code are routinely left to the last minute.  Special credits require special forms, each one with pages and pages of instructions, worksheets and tables.  Credits are phased in, phased out, hard to find and easy to miss.  The Internal Revenue Service provides guidance online, but there are also private tax preparation services and computer programs to help.

The entire U.S. tax code is 70,000 pages long.  There are 1,175 different tax forms.  The IRS sends out some 8 billion pieces of mail each year. And this year, Americans will pour 6.1 billion long hours and $27.7 billion into preparing their taxes. Even the Commissioner of the IRS admits to using a tax preparer.

I asked the IRS for a report on how many IRS employees prepare their own tax returns.  These are the professionals who advise the public on the dustiest corners of the code. They are the experts, the staffers at the help desks, and the folks who are supposed to catch the mistakes any of the rest of us might make.
So, when I got a response from the IRS last month, I was very surprised to learn that 26 percent of IRS employees use a paid tax preparer and 56 percent use tax preparation computer software.

The short report tells readers that IRS employees are less likely to rely on a paid tax preparer than the general public (which uses these services in 59 percent of cases).  But the prevalence of IRS employees who are unwilling or unable to prepare their own tax returns tells all Americans that the system is too complicated, too unwieldy, and too inefficient.  I don’t think there is a better case for reform.

Whether you hire a tax preparer, use computer software, or attempt the old method of paper-and-pen, know that you have plenty of company even within the ranks of IRS employees.  Also, remember that they are there to help you.  The Taxpayer Advocate can help answer questions, and throughout the state there will be public events and resources to assist taxpayers with their 2011 filings. Take advantage of all the resources at your disposal, prepare your taxes well, and I hope that at the end of the long calculation there is a little of your own money going back into your pockets.

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