Clear as Mud: Americans Spend 6.1 Billion Hours Attempting to Comply with the Tax Code

            This week, the National Taxpayer Advocate Nina Olson released her annual report to Congress detailing the major issues taxpayers face in complying with Internal Revenue laws.  Among them:  Filing taxes takes too long, costs too much money, and is extremely overwhelming for taxpayers.  Ms. Olson’s report analyzed IRS data to conclude that taxpayers and businesses spend 6.1 billion hours a year complying with tax-filing requirements, exhausting valuable time better spent elsewhere.  Another major issue: the use of tax liens.  The number of liens filed by the IRS has increased 550% over the last decade, which causes significant consequences for consumers.  Tax liens are reported on credit reports making some taxpayers unable to obtain a mortgage, lease, car insurance, or credit card.  Liens may even affect employment prospects. 

            Ms. Olson’s analysis also found that the tax code has grown to over 3.8 million words as of February 1, 2010, compared to the 1.4 million words reported in 2001.  The increasing complexity of the tax code has also forced more Americans to seek out CPAs, enrolled agents, and software programs such as TurboTax.  According to a recent IRS study, the median individual taxpayer spent $258 in 2007 for tax prep compared to $220 spent in 2000.  This cost increases exponentially when tax returns contain errors due to the complexities and are audited, forcing individuals to again seek out professional assistance. 

            Ms. Olson’s entire report to Congress may be found at   http://www.taxpayeradvocate.irs.gov/Media-Resources/Annual-Report-To-Congress-Full-Report.