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Sunday, December 10, 2023

Doing your taxes ain’t getting any easier

People spending the weekend scratching their heads over their tax forms may wonder what became of the idea of making tax laws simpler.

People spending the weekend scratching their heads over their tax forms may wonder what became of the idea of making tax laws simpler.

President Bush appointed a federal commission to study that question, but their recommendations have yet to lead the administration or lawmakers to push ahead and try to overhaul the system.

In the meantime, taxpayers this year face a standard Form 1040 tax return that has 76 lines, some with multiple parts. Accompanying the form are 142 pages of instructions.

Some of the drudgery stems from recent laws that reduced people’s tax bills but not the paperwork, according to the National Taxpayers Union. The group reports annually on the increasing complexity and demands of tax returns.

The group’s senior counselor, David Keating, said it does not help matters that many recent tax cuts are set to disappear before the decade ends.

The head of the Internal Revenue Service wants tax laws made easier, too. “Congress fails in the effort to get a simple, understandable tax code,” Mark Everson told lawmakers recently.

The nine experts appointed by Bush to the tax restructuring commission recommended abolishing many of the deductions and credits that make taxes so complicated.

In their place, the commission offered tax breaks for charitable contributions, mortgage interest and health insurance, but few others. The plan would offer taxpayers several savings accounts to reduce their tax bills when preparing for college costs, retirement and other major expenses.

The commission said that even if many tax breaks were removed, most people would pay the same amount as they do now.

A prototype of the tax form that would be necessary under their simplified plan cut the number of lines on the standard Form 1040 by more than half, to 32 lines. The entire form could fit on one side of a standard sheet of paper.

The House’s tax-writing Ways and Means Committee plans to hold its first hearing on tax overhaul in May. It will examine the nation’s international tax laws and their effect on multinational corporations.

Senate tax writers on the Finance Committee have not scheduled hearings on the topic. The committee’s top Democrat, Sen. Max Baucus of Montana, has told Treasury Secretary John Snow that the presidential commission’s report is “dead” and “going nowhere.”

Some recommendations drew criticism before the experts could get their ideas on paper; for example, the possibility of converting the mortgage interest deduction to a credit.

For now, lawmakers are not concentrating on tax simplification. They are working on bills to keep the current system running, including legislation that would revive some expired tax cuts and prevent others from disappearing.

One item on that agenda would prevent the alternative minimum tax from reaching most of the 19 million taxpayers that it could hit this year. A temporary patch holding back the tax expired at the end of 2005.

The alternative minimum exists as a second system of taxation that forces some individuals and families to figure their taxes twice and pay the higher amount. It was originally intended to prevent wealthy individuals from dodging all income taxes.

The levy comes with its own 55-line form, which many taxpayers fill out only to find they do not owe the tax. The president’s panel said the alternative minimum tax should be abolished.


On the Net:

President’s Advisory Panel on Federal Tax Reform:

© 2006 The Associated Press