Trying to pay your taxes became a little more taxing this year. The average person spent more time and more money preparing their taxes, according to a report based on Internal Revenue Service calculations.
The report reveals that more than a day and more than $200 was spent collecting, calculating, and compiling figures.
If you run a business in this country, you have it far worse. The National Taxpayers Union, in its annual look at the burdens of taxpaying, said the corporate cost of compliance is about $170 billion. General Electric in 2006 filed returns equivalent to 24,000 printed pages.
Blame Congress for More Time, Cost
Congress is the leading culprit in this time and money increase, said the group, a nonpartisan organization that works for lower taxes and smaller government. "Congress is adding to the tax laws' complexity faster than the IRS can simplify its forms," it said. The IRS they say is not to blame for the increases.
IRS calculations show that all taxpayers, even those using the simplest 1040-EZ form to those using the longer forms, spent 26.5 hours in preparing and sending their forms for the 2006 tax year. That was up from 25.4 hours three years earlier.
The average out-of-pocket cost for all taxpayers amounted to $207, which was up from $185 from three years earlier. The self-employed taxpayer shelled out an average of $444 to put his taxes together.
The money taxpayers spend to do their taxes takes a huge bite out of the refunds most filers may receive. IRS Commissioner Douglas Shulman told Congress last week that as of March 29, the agency had issued about 70 million refunds, with the average refund worth $2,467. The IRS expects to process almost 140 million returns this year.
The NTU report estimated that the value of time lost compiling tax returns was $92.6 billion. This amount was calculated using an hourly compensation rate of $26.
Individual taxpayers spent almost $28 billion on software, tax preparers, postage and other out-of-pocket costs.
The $170 billion compliance cost for corporations represented 43 percent of corporate income taxes collected in fiscal year 2007.
Annual Agony - Tax Laws Confusing, Complex
The tax law keeps getting more complex. The Form 1040 instruction booklet has grown from four pages in 1945 to 155 pages in 2007.
It appears Congress loves length when it comes to anything dealing with taxes. For example, the Congressional Joint Committee on Taxation's general explanation of tax legislation, which was enacted during the 2006-2007 session of Congress, ran a novel length 841 pages. This made the 593 pages from the previous Congress look like a short story.
Congress is marking April 15 with several measures that have been introduced to make paying taxes simpler or fairer. Next Monday, the House considers a bill to bar federal agencies from awarding contracts to people or companies that have failed to pay their federal taxes.
The chamber will vote on a bill later in the week that eliminates a requirement for individuals to keep records of calls made on employer-provided cell phones. Among the provisions, the bill would also would stop foreign contractors from using foreign subsidiaries to evade Social Security and other employment taxes. The same legislation would also eliminate a program under which the IRS contracts with debt collecting companies to go after smaller scale tax evaders.
Filing All Returns Electronically?
Meanwhile, in the Senate, Sens. Charles Schumer, D-N.Y., and Daniel Akaka, D-Hawaii, are promoting a bill that would require the IRS to allow all Americans to file their returns electronically free of charge. They say this would save taxpayers some $1.2 billion a year.
Congress has also made life for the IRS more difficult this year by waiting until last December to fix the alternative minimum tax. The tax is intended to affect only a small number of very wealthy people, but could have hit more than 20 million this year. That change slowed down the processing of some refunds while the IRS adjusted its computers.
The IRS also was also tasked with paying the checks owed to Americans as part of the economic stimulus package passed in January. Taxpayers should begin receiving those payments early next month.
The independent IRS Oversight Board in a recent report commended the IRS for across-the-board improvements in such areas as customer service and enforcement of tax law.
Source: The Associated Press