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Taxpayer Advocate Urges Tax Simplification Due To Recession

WASHINGTON — Nina Olson, A National Taxpayer Advocate, produced an annual report requesting that Congress significantly simplify the tax code and recommended measures to reduce the tax burden on citizens that are struggling to pay their taxes.

Her report makes note of how serious the current financial conditions are for many Americans during this difficult economic period. Olson stated ...

“It is imperative for the IRS to consider the circumstances of taxpayers facing economic hardship before initiating enforcement actions”.

When the Internal Revenue Service contemplates an enforced collection action such as a levy, a lien or an asset seizure, both the tax code and IRS procedures require that IRS personnel take considration whether the collection action will impose an economic hardship on the taxpayer. Despite these requirements ...

“Current IRS guidance provides little direction to help IRS employees identify taxpayers who are experiencing economic hardship and prevent undue economic burden,” Olson stated.

Tax Simplification Is Needed

The report designates the complexity of the tax code as the most serious problem facing taxpayers. According to data compiled by Olson’s office, U.S. taxpayers and businesses spend about 7.6 billion hours a year complying with tax-filing requirements.

“If tax compliance were an industry, it would be one of the largest in the United States,” the report says. “To consume 7.6 billion hours, the ‘tax industry’ requires the equivalent of 3.8 million full-time workers ...”

The report estimates that U.S. taxpayers spend $193 billion a year complying with income tax requirements, an amount that equals 14 percent of the total amount of income taxes collected. One count shows the number of words in the tax code has reached 3.7 million, and over the past eight years, changes to the tax code have been made at a rate of more than one a day – including more than 500 changes in 2008 alone. Individual taxpayers now find the tax rules so overwhelming that more than 80 percent pay transaction fees to help them file their returns – about 60 percent pay a preparer to do the job and another 22 percent purchase tax software.

Pursuant to Internal Revenue Service Circular 230, we are required to advise you that if there is any tax advice contained herein, it was neither written nor intended by this firm to be used, and cannot be used, by any taxpayer, for the purpose of avoiding penalties that may be imposed by or under United States law, including but not limited to the Internal Revenue Code. Moreover, if any person intends to use or refers to any such tax advice in promoting, marketing or recommending a partnership or other entity, investment plan or arrangement, the regulations under Circular 230 require that we advise you as follows: (1) This writing is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties that may be imposed on a taxpayer; (2) The taxpayer should seek other or additional advice based on the taxpayer's particular circumstances from an independent tax advisor.