Michelle Singletary: For taxpayer advocate, a familiar refrain

Posted: January 18, 2013

IT'S NOT NICE to tell people, "I told you so." But if anybody has the right to say that, it's Nina E. Olson, the national taxpayer advocate.

Olson recently submitted her annual report to Congress, and tops on her list of things to be fixed is the complexity of the tax code, which she calls the most serious problem facing taxpayers.

Let's look at the most recent evidence of complexity run amok. The IRS had to delay the tax-filing season so that it could update forms and its programming to accommodate recent changes made under the American Taxpayer Relief Act. The IRS won't start processing individual income-tax returns until Jan. 30. Yet one thing remains unchanged - the April 15 tax deadline.

The IRS said that more-extensive changes could result in some people not being able to file returns until late February or March.

Because of the new tax laws, the IRS also had to release updated income-tax-withholding tables for 2013. These replace the tables issued Dec. 31. Yes, let's just keep making more work for the agency that is already overburdened. Not to mention the extra work for employers, who have to use the revised information to correct the amount of Social Security tax withheld in 2013. And they have to make that correction in order to withhold a Social Security tax of 6.2 percent on wages following the expiration of the payroll-tax cut in effect for 2011 and 2012.

Oh, and there was the near miss with the alternative minimum tax that could have delayed the tax-filing season until late March. The AMT was created to target high-income taxpayers who claimed so many deductions that they owed little or no income tax. Olson and others have complained for years that the AMT wasn't indexed for inflation.

"Many middle and upper-middle-class taxpayers pay the AMT, while most wealthy taxpayers do not, and thousands of millionaires pay no income tax at all," Olson said.

As part of the "fiscal cliff" deal, the AMT is fixed. The IRS already had decided to program its systems on the assumption that an AMT patch would be passed, Olson said. Had the agency not taken the risk, the time it would have taken to update the systems "would have brought about the most chaotic filing season in memory," she said in her report.

The tax code contains almost 4 million words. Since 2001, about 4,680 changes have been made, an average of more than one a day. What else troubles Olson (and most of us)? Here's what:

*  Nearly 60 percent of taxpayers hire paid preparers, and another 30 percent rely on commercial software to do their returns.

*  Many taxpayers don't really know how their taxes are computed and what rate of tax they pay.

*  The complex code makes tax fraud harder to detect.

*  Because the code is so complicated, it creates an impression that many taxpayers are not paying their fair share. This reduces trust in the system and perhaps leads some people to cheat. Who wants to be the sucker in this game? So, someone might not declare all income, rationalizing that millionaires get to use the convoluted code to greatly reduce tax liability.

*  In fiscal year 2012, the IRS got 125 million calls. But the agency answered only about two of every three calls from people trying to reach a live person, and those taxpayers had to wait, on average, about 17 minutes to get through.

Congress should make it a priority to simplify the tax code. I know I'm tired of Olson telling us so, while year after year nothing gets done to truly push for change.

comments powered by Disqus