Ever-complicated IRS code baffles taxpayers

 Kathy Kristof
January 22, 2002

The U.S. tax code has become so complicated that millions of individuals can't even figure out how to properly report their family status and dependents, according to a report recently delivered to Congress. 

 And that's just one of many problems that the nation's 132 million taxpayers face today, largely as a result of unintended consequences of piling tax changes on top of one another over the years, Taxpayer Advocate Nina Olson said in a report delivered to Congress.

 "In many cases, the problems we identify grew up over time and bring about consequences that no one would deliberately design," Olson said. "These problems are errors in the Internal Revenue Code that beg to be corrected."

Among the problems:

The many definitions relating to family status, including three separate definitions of "qualifying child," which are used to determine whether a taxpayer can claim a various deductions and credits.

The alternative minimum tax, established to ensure that wealthy taxpayers paid at least some tax, which now hits individuals earning as little as $50,000 annually. Those who must figure their AMT liability -- a group that's now expanded to include virtually every middle- and upper-income family -- can figure that filing a return will take an additional 12 hours.

In most instances, taxpayers find that they don't owe AMT taxes, but that doesn't absolve them from doing a full day and a half of work.

The sorry state of the IRS toll-free telephone help, which causes thousands of people to call the Taxpayer Advocate's office each month because they couldn't reach IRS representatives on the toll-free lines, or didn't trust the advice they received.

The lack of effective means to reduce tax penalties for minor and unintended errors, such as the taxpayer who would up with a $10,000 fine for filing his return and paying his taxes late. As it turned out, the taxpayer filed on time, but the Post Office returned his 1040 for being 10 cents short on stamps.

Olson said her focus was not only to identify problems but also to talk about problems that could be solved. Much of what ails the current system could be fixed by simply eliminating the AMT for individuals and creating a single, uniform definition of qualifying child.

"I realize that many today in the United States believe that there is no constituency or political reward for achieving tax simplification, or, more importantly, tax rationalization," Olson said. "I maintain that this nation can ill afford to ignore the increasing burden ... and irrationality of our system."

The entire U.S. tax system relies on taxpayers voluntarily reporting their income and deductible expenses to the government and submitting a check for what's due, Olson added.

"To the extent that we ... make this compliance too burdensome, or too confusing for taxpayers, or out of tune with taxpayers' sensible way of life, we create an environment in which even the most compliant taxpayers wonder why they bother."

Kathy Kristof writes for The Los Angeles Times, a Tribune Co. newspaper.

She can be reached at kathy.kristof@latimes.com.

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