So preparer regulation wasn’t really the solution? Taxpayer Advocate Nina Olson says tax complexity is the biggest problem for taxpayers in her annual report:
The most serious problem facing taxpayers — and the IRS — is the complexity of the Internal Revenue Code (the “tax code”). Among other things, the tax code:
-Makes compliance difficult, requiring taxpayers to devote excessive time to preparing and filing their returns;
- Requires the significant majority of taxpayers to bear monetary costs to comply, as most taxpayers hire preparers and many other taxpayers purchase tax preparation software;
- Obscures comprehension, leaving many taxpayers unaware how their taxes are computed and what rate of tax they pay;
- Facilitates tax avoidance by enabling sophisticated taxpayers to reduce their tax liabilities and by providing criminals with opportunities to commit tax fraud;
- 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; and
- Generates tens of millions of telephone calls to the IRS each year, overburdening the agency and compromising its ability to provide high-quality taxpayer service.
What do you suppose clued her in?
The byzantine complexity of the tax law is indeed the biggest problem facing the taxpayer. She also prominently mentions the identity theft epidemic, preparer fraud and IRS funding. One item not identified as a serious problem? Unregistered tax preparers.
Just a few short years ago, Nina Olson had this to say:
I have recommended the regulation of unenrolled return preparers since my 2002 Annual Report to Congress, and reiterated and supplemented that recommendation in successive reports. My office was very much involved in the analysis and discussions resulting in the IRS report, and I applaud Commissioner Shulman’s leadership in undertaking this significant review.
So what has that accomplished? The IRS has tacitly admitted the program isn’t working by waiving the continuing education requirement. The population of preparers is poised to crash. That will raise the cost of tax preparation, forcing many to self-prepare and driving others out of the system entirely. Meanwhile, one reason IRS resources are unavailable for taxpayer service is that they are directed to mismanaging preparer regulation.
The problem has always been tax complexity, and it continues to get worse. No preparer regulation will change that. The Taxpayer Advocate’s previous preparer regulation efforts only served to enrich the national tax prep franchises and distract from the real problem of complexity while damaging the ability of the IRS to serve taxpayers.
More on the Taxpayer Advocate report:
Robert D. Flach, NINA OLSEN ON THE DREADED AMT
Jack Townsend, TA Report Identifies IRS’ OVDP / OVDI As Problem
Scott Drenkard, Nobel Laureate James Buchanan Passes Away at 93 (Tax Policy Blog):
Buchanan’s model of government action was based on a theory of “politics without romance,” which contended that policymakers act in their own self-interest the same way that market actors do. This means that politicians are not enlightened, selfless despots, and respond to the incentives of the political sphere, making policy that will help get them re-elected. Often the best way to do that is by catering to special interests. The longer I work in this city, the more I see this observation as true to life.
This is (to me) the essence of the “Public Choice” analysis of government, created by Mr. Buchanan and Gordon Tullock. It explains why passing a law or creating a regulation rarely solves the problem, and instead enables the well-connected to use the government as a club against their rivals. The tax preparer regulations, literally authored by a former H&R Block CEO, are a classic example. James Buchanan’s legacy is a valuable and too-little-heeded caution against increasing the role of government.
Courtney Strutt Todd: Buying a House in 2013? You Could Qualify for a Federal Tax Credit up to $2,000 a Year for the Life of Your Mortgage! (Davis Brown Tax Law Blog)
Paul Neiffer, IRS Announces When Returns Can Be Filed
William Perez, When Can You Begin Filing Your 2012 Federal Tax Return?
Brian Strahle, Medical Device Excise Tax: Ready or Not, It’s Here!
Nanette Byrnes, Virginia plan to end gas tax quickly panned (Tax Break)
The Critical Question: What Is It About Hollywood? (Cara Griffith, Tax.com)
Tags: Brian Strahle, Cara Griffith, Courtney Strutt Todd, Gordon Tullock, Jack Townsend, James Buchanan, Kay Bell, Nanette Byrnes, Nina Olson, Paul Neiffer, Robert D Flach, Russ Fox, Scott Drenkard, TaxGrrrl, Taxpayer Advocate, The Critical Question, William Perez