What could you do with six billion hours?
Think hard. That’s the equivalent of 8,758 lifetimes. Yes, lifetimes.
It’s also how much time taxpayers spend every year trying to comply with tax filing requirements. That, according to the 2012 annual report as prepared by the National Taxpayer Advocate Nina E. Olson. The report was delivered this year, as it is every year, directly to the House Committee on Ways and Means and the Senate Committee on Finance; it is not reviewed in advance by the IRS Commissioner, the Secretary of the Treasury, or the Office of Management and Budget.
In the report, Olson highlights compliance figures as part of a concern over complexity. As a result, she identified the need for tax reform as the most serious problem facing taxpayers today. She wrote:
The existing tax code makes compliance difficult, requiring taxpayers to devote excessive time to preparing and filing their returns. It obscures comprehension, leaving many taxpayers unaware how their taxes are computed and what rate of tax they pay; it facilitates tax avoidance by enabling sophisticated taxpayers to reduce their tax liabilities and provides criminals with opportunities to commit tax fraud; and it undermines trust in the system by creating an impression that many taxpayers are not compliant, thereby reducing the incentives that honest taxpayers feel to comply.
How complicated? Since 2001, Congress has made nearly 5,000 changes to the Tax Code. That’s more than a change per day. The Tax Code is now about four million words, nearly as long as seven versions of War and Peace or the novel version of Les Miserables and just under four times the number of words in all of the Harry Potter books put together.
Even as the Tax Code has become more complex, the IRS budget has been reduced. This is ironic since the job of the IRS is to collect money to keep other facets of government running. Continuing cuts, Olson warns, jeopardizes the IRS’ ability to collect funds from taxpayers. The IRS is, according to Olson, a success nonetheless: for the last fiscal year, the IRS collected $2.52 trillion with a budget of just $11.8 billion, an average return-on-investment (ROI) of about 214:1.
However, on the service side, the IRS is falling down. As reported previously, the IRS is having difficulty meeting taxpayer needs. Hold times are long with many taxpayers so discouraged that they hang up before their call is answered. In 2010, the IRS anticipated only being able to answer 70% of its calls; that number dipped in 2012 to 68%. While the IRS predicted average hold times in 2010 of 12 minutes, those hold times grew to nearly 17 minutes in 2012. And if you write a letter to the IRS? Forget about it! The IRS only responded to 48% of written correspondences within established time frames.
The report goes on the detail other taxpayer concerns including taxpayer identity theft, tax return preparer fraud, high rates of targeted audits and problems with the Offshore Voluntary Disclosure program. Olson followed up the report with a number of recommendations (tune in tomorrow for more on those).
For more on the report, check out what Olson has to say:
Or read the entire report here (you’re going to want a mug or two of coffee: it’s long!).
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