Smart TaxesSmart Taxes

Taxpayer advocate: Tax law is too complicated

The complexity of the code requires people to spend too much time on their tax returns, watchdog says, even though 90% use software or a tax preparer.

By MSN Money Partner Jan 10, 2013 12:36PM

This post is by Stephen Ohlemacher of The Associated Press.


© James Braund, Digital Vision, Getty ImagesThe nation's tax law is so thick and complicated that businesses and individuals spend more than 6 billion hours a year complying with filing requirements. That's the equivalent of 3 million people working full-time, year-round.


As a result, about 90% of filers will either pay a tax preparer or use a computer software service to help with their federal tax returns this spring, according to a report issued by an independent government watchdog on Wednesday.


"The existing tax code makes compliance difficult, requiring taxpayers to devote excessive time to preparing and filing their returns," says the report by Nina E. Olson, the National Taxpayer Advocate. "It obscures comprehension, leaving many taxpayers unaware how their taxes are computed and what rate of tax they pay. It facilitates tax avoidance by enabling sophisticated taxpayers to reduce their tax liabilities and provides criminals with opportunities to commit tax fraud."


Olson said the tax code also "undermines trust in the system by creating an impression that many taxpayers are not compliant."


She ranks complexity as the most serious tax problem facing taxpayers and the Internal Revenue Service in her annual report to Congress.

Momentum is building in Congress to overhaul the tax code for the first time since 1986. But Washington's divided government has yet to show it can successfully tackle such an issue.


President Barack Obama and Republican leaders in Congress say they are onboard, though they have rarely seen eye to eye on tax policy. They struggled mightily just to avoid the year-end fiscal cliff, passing a bill that makes relatively small changes to the nation's tax laws, opposed to a major overhaul.


"Our broken tax code has become a nightmare of loopholes and special interest provisions that create added complexities and costs for hardworking taxpayers and small businesses," said Rep. Dave Camp, R-Mich., the chairman of the tax-writing House and Ways and Means Committee. "Comprehensive tax reform will make sure everyone is playing by the same rules and help businesses create more jobs and invest in their workers."


Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


More from MSN Money:


Jan 11, 2013 11:12AM
Jan 11, 2013 4:52PM

  There is a saying going around that if you put three IRS tax auditors in a room with copies of one moderately complex return you would get four different audits back.  I can believe it!  

  When CPA's and tax lawyers have to call the IRS for considered opinions on code interpretations then it is time to review and simplify the codes and forms.  The Declaration of Independence of the United States and the Constitution with it's amendments,  can be read and understood by by most fifth graders; why can't the tax code?  Is it so much more important to the operation of this country that only tax lawyers and specialty accountants can tell you what it says?

  This is just plain and simply wrong, and following a simple rule of engineering, if the structure is too complicated it will fail under it's own weight..   

Jan 14, 2013 11:25AM
Tax laws'complexities are the same as healthcare complexities. More money is spent on complying with paperwork than producing the product in both instances. No mystery as to why everything costs so damn much anymore. We are governed by idiots.
Jan 12, 2013 11:21PM
Flat tax rate!  No breaks (read incentives) for marriage.  No breaks (read incentive) for having kids.  Tax welfare at the same rate as income that people work for.  No tax returns for anyone who receives welfare.  Do NOT tax Social Security payments since you paid taxes on that money when you earned it in the first place!  Lower tax rates on businesses that can prove they have American employees and American manufacturing.  Tax breaks for small business.
Jan 12, 2013 10:39PM

I’m not expert or mathematician, but I do way this all of this none sense. Put a federal sales tax except on food, medication even over the counter and anything related to health. If you can afford to buy a $120 thousand car you can afford to pay that tax. The poor only afford a 15 to 50 thousand dollar car, he pay less tax. There other detail in to this I’m sure. No tax filling on income over 250 thousand so you can get a % of this tax back. Anyone with income under maybe 80 thousand can get the tax back and the rest a % according to the income. No loop holes, no deductions except for business and that have to be work out different.

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.