Within the monolithic fortress of the IRS, you have a friend. Nina Olson, the agency's official taxpayer advocate, submits an annual report to Congress full of recommendations for taxpayer-friendly reforms.
Last year, Olson reported on the mind-boggling complexity of our tax code, which features at least 3.7 million words, up from around 1.4 million in 2001. Her report estimated that the cost of complying with all these rules is nearly $200 billion; we spend hours filling out forms, and often enlist human or software assistance in the process.
That $200 billion sum exceeds the market capitalization of all but the largest companies. Other third-party estimates put the figure closer to $300 billion, which makes the amount of tax actually collected from big corporations look like a pittance:
|
Company |
Annual Income Taxes Paid, Most Recent Fiscal Year |
|---|---|
|
IBM |
$4.7 billion |
|
Intel |
$1.3 billion |
|
Procter & Gamble |
$4.4 billion |
Source: Capital IQ, a division of Standard and Poor's.
The only upside of all those billions spent on compliance is that it keeps companies such as H&R Block
Hello? Anyone there?
This year, Olson sees a declining level of service as taxpayers' No. 1 problem. She points out that for fiscal 2007, the IRS aimed to answer 83% of calls from taxpayers (with a person, not a recording). For fiscal 2010, the goal has fallen to just 71% of calls.
If we taxpayers are expected to file correct returns, but have less than a three-in-four chance of getting a question answered by the IRS, something's clearly wrong. (Want to get more annoyed? The average wait to be helped by the service is 12 minutes!)
Lien on me
Another problem is that IRS routinely slaps liens on taxpayers' properties when they owe money, without examining each situation on a case-by-case basis. That indiscriminate lien-slapping affects taxpayers' credit ratings, along with their ability to make or keep more money. Ironically, that can jeopardize their ability to pay their taxes. Olson cited lien filings that had risen almost 475% over the past decade, even while collections have fallen by about 7% (adjusted for inflation). Clearly, liens aren't bringing in the aimed-for bucks.
In addition, professional tax preparers face little oversight. Right now, lots of folks can charge you a fee to help you with your taxes -- even if they lack the skills to do the job right.
Olson has much more to say in her long report; let's hope that her suggestions don't fall on deaf ears. Alas, she's been citing some of the same problems for many years, including all of the ones I've listed above. Yet the problems have persisted, if not worsened.
Keep learning and saving
Nina Olson may be your friend in the IRS, but it still can't hurt to learn how to help yourself at tax time. Click in to our Tax Center for money-saving tips -- and be sure to learn about IRAs, which can save you thousands of tax dollars while helping you save for retirement.
