Taxes, Forms, Worksheets, And Instructions

It’s April 15 — Tax Day.  For many Americans, it’s an angst-filled day, as they rush to complete their taxes and get their forms filed before the midnight deadline.  Even for those of us who are already filed, it’s not a day to celebrate.

Every year, the process of completing tax forms seems to become more complicated and more overwhelming.  Taxpayers juggle federal, state, and local forms, labor through increasingly lengthy instructions, and strive mightily to interpret myriad weird descriptions of deductions, credits and “adjustments to income” to determine whether they have any application to our lives.  This year, the on-line IRS instruction booklet for the 2012 Form 1040 comes in a PDF that is a mind-boggling 214 pages long.  And if you don’t think you need to read every instruction because common sense answers most of the questions, consider this:  according to the instruction at page R-1 of the Form 1040 booklet, for purposes of the credit for the elderly, the IRS considers you to be 65 the day before your 65th birthday!  Somewhere, there is an sober bureaucrat who will give you an earnest explanation of why that approach makes perfect sense.

Although we make the most fun of the federal forms and instructions, for many of us the state and local forms and instructions are just as bad.  This year I had the good fortune to review the New York forms and instructions.  The basic New York personal income tax form, the IT-201, is four pages long and includes 19 separate line items for federal income and adjustments, 5 line items for “New York additions,” 9 line items for “New York subtractions,” 4 line items for deductions, 9 line items for “tax computation, credits, and other taxes,” 13 line items for “New York City and Yonkers taxes, credits, and tax surcharges,” and 14 line items for “payments and refundable credits.”  The on-line instructions for the form comes in a PDF that is a hefty 72 pages long.

Of course, those are just the forms for personal income tax.  I can’t even begin to imagine the complexity and pain involved in filing tax returns for a small business.

With the multiplicity of forms and the confusing instructions, it’s not surprising that many people turn to tax preparation services for help.  According to estimates, about 60 percent of taxpayers seek professional help, and some 800,000 people are employed in helping us prepare our tax returns.  If you add in the various people employed by the IRS and state and local tax agencies to receive, process, and audit our forms, more than 1 million Americans likely earn their living through some tax-related job.  That’s why some people say that “flat tax” proposals that would eliminate all of the deductions, adjustments, additions, surcharges, and other confusing entries are job killers.

I’m sorry if simplifying the tax form completion process would cost some people their jobs, but it simply makes no sense to have Americans fight through these ludicrous forms and instructions every year.  Congress, state legislatures, and local governments should roll up their sleeves, get rid of the special interest exclusions, deductions, and adjustments, and get us to a tax system that is simple and straightforward.  If you want people to pay their taxes — and we should want people to pay their taxes — make the process easy to understand and therefore easy to comply with.

1 thought on “Taxes, Forms, Worksheets, And Instructions

  1. I wish we could pay a flat tax that covered everything, FICA taxes, unemployment insurance, worker’s comp insurance, liability, the whole thing. I’m sick to death of reconciling and reviewing examining the examiners. It is a project compiling all of the figures, and facts supporting them, then reading the returns to be sure everything is correct. The CPA is not responsible for errors, the taxpayer is.

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