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Things we love to hate: Tax forms, bureaucracy, and April fools

April 16, 2006 12:50 am

ACCORDING TO a survey taken in April 2005 by the nonpartisan Tax Foundation, 1 percent of Americans "love" to do their income taxes. Another 11 percent "like" to do them.

From this information we can assume that these people are CPAs or otherwise mathematics fanatics who are due large refunds.

On the flip side are the rest of us, including 45 percent who say they "dislike" doing their taxes and another 25 percent who say they "hate" it.

If you add those numbers, which you should be able to do if you do your own taxes, the total is only 82 percent. The other 18 percent apparently chose "none of the above" either because they are truly neutral on the topic or they live in a cabin in Montana, just waitin' for the G-man to come knockin'.

If you are such an objector, the calendar gives you until tomorrow night--an extra couple of days this year--to change your tune. I'd recommend that, unless you "like" or "love" going to jail.

I do the taxes at my house, which may be the primary reason my wife keeps me around. It also helps me get away with stuff around the house.

Sample conversation:

"So, are you going to doze off in front of the TV all day when there's so much to do around here?"

"Don't forget I did the taxes again this year, dear. But thanks for waking me up--I almost spilled my beer."

For that reason I fall into the category of Americans who merely dislike, rather than outright hate, doing their taxes.

A lot of people dislike doing their taxes because, even though they're getting a refund, the tax forms are so complicated to deal with. Of course doing my taxes was much easier back in the early days of my newspaper career, when the IRS person who received my return probably wept, figuring that anyone with so little income must live outdoors.

Over the years tax time has become more complicated, as my income has risen and my family has grown. Now the IRS person may assume I've moved indoors, but wonder whether my plumbing has moved indoors as well.

In the later years of her life, my mom astutely arranged to have her finances, including her taxes, handled by professionals. It was part of her effort to prevent her kids from being burdened by such things.

Nevertheless, someone needed to be the family financial liaison, and that fell to me. Thanks to the financial professionals, it was not a big deal--until the day the fat letter from the IRS arrived. It enumerated various issues with my mother's tax return from a few years earlier, when the transition to financial professionals was taking place.

The letter said she owed $39,000. It provided a telephone number to call to set up a convenient installment plan, along with various threats should we choose an alternate course of action, such as ignoring the whole thing.

I knew there was no possible way my mom could owe the IRS $39,000. But I was reminded that it can be a bad idea to open the mail between the time I arrive home from work and the time I sit down to eat dinner. Such letters will take away your appetite.

Over the next several months, with the help of her tax professional and the cooperation of the IRS, we discovered that a missing Form 1099 or two had snowballed into this huge discrepancy due to the complexity of the government's income tax formulas.

It turned out she owed a few hundred bucks in taxes and penalties, which we paid.

Then we got a refund for part of that with a letter from the IRS saying it had recalculated and determined that less was owed. Strange, but true.

Then, a few months later--and I am not making this up--I received another fat letter from the IRS saying my mother owed $39,000 in back taxes and penalties. For the same year, enumerating the same old issues, and showing the same IRS contact person.

Luckily, my mom's tax guy was able to straighten that out with a phone call. We found out that the original problem had been cleared up in all of the IRS's computers--except the one that sends out the fat letters.

Especially around this time of year the IRS becomes the butt of every late-night TV joke. But the IRS is merely doing the job it believes the government intended it to do. It's up to Congress to reform the rat maze Americans must endure to pay their income taxes, but that's way too complicated for politicians who can't even fix their own campaign financing system.

According to a report from the Cato Institute, a Washington think tank, tax cuts might mean a few more dollars in taxpayers' pockets, but Americans are having to deal with increasingly complex rules to earn their tax breaks. For example:

The number of pages of federal tax rules and regulations is up from 40,500 in 1995 to 66,498 in 2006.

The amount federal taxpayers pay for tax preparation increased from $112 billion in 1995 to $265 billion in 2005.

The complex Alternative Minimum Tax hits 4 million taxpayers today, but will hit 30 million by 2010 if not repealed. Designed to even out the middle-class tax bite, it instead takes bites more like Godzilla. If you're an AMT victim, you'll know it.

Like many other taxpayers, I invest each year in tax preparation software. I just load it into the computer and it politely asks me questions until my forms are completed. The program's simplicity is another reason more people only dislike, rather than hate, doing their taxes.

But each year, as the tax code becomes more complicated based on the aforementioned statistics, I worry that I and other users are putting too much trust in the software. We really do assume that the programmers have done all the thinking and researching necessary for us to comply lawfully. It's not like there's a human tax preparer for you to blame if something is amiss, or that we have any real understanding of the process.

I'm afraid that when I get that fat letter from the IRS that says I owe $39,000, all I'll be able to do is invite them over for a game of Frisbee with my tax preparation disc.

I have some reform ideas: Simplify the tax code, eliminate the loopholes, and make sure the super-wealthy--both individuals and corporations--pay their fair share. That shouldn't be so difficult, but it would probably take 66,498 pages to do it.

RICHARD AMRHINE is a writer and editor for The Free Lance-Star.





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