America's tax code is a growth industry

Sunday , April 17, 2016 - 6:00 AM1 comment

E. KENT WINWARD, Special to the Standard-Examiner

The Internal Revenue Service wants you to have a rotten weekend at least if you owe them money and you tend to procrastinate. Seems predictable that the IRS would drag out the April 15 deadline for a tortured three-day weekend. But if you mistakenly think you missed the deadline on Friday, relax. You have until Monday at midnight.

The income tax ritual has become a part of our cultural heritage, giving new meaning to T.S. Eliot’s line from “The Wasteland”: “April is the cruellest month.” April means we get to see Statues of Liberty waving signs on Harrison Boulevard. April means your CPA’s family begins to wonder what she looks like. April means that the IRS probably isn’t laying off any civil servants this month and the employees will keep working, leaving the unemployment lines a bit shorter. Not to mention, April is big money for the tax preparation world.

April is not just a tax month for CPAs, taxpayers, tax preparers and IRS employees — bankruptcy attorneys feel the tax rush as well. Much of the bankruptcy world revolves around tax refunds and tax debt. I won’t go into the boring minutiae of my job, but I can tell you there isn’t an hour that goes by that I don’t utter the word “taxes.”

This is the thing we often forget: our laws shape the world in dramatic ways. If we had no laws requiring the filing of 1040s and TC-40s , the only 40 we would care about in April would be WD-40 for winter rusted hinges. If we had no tax laws, your neighbor who works for the IRS wouldn’t have a job, software developers wouldn't have work with TurboTax, CPAs would have vastly different work schedules and H&R Block would need to figure out how to pay the rent.

Our banal and boring tax code is a growth industry with rabid lobbying efforts to protect all those seasonal tax jobs and profits. Which is why I was interested to see new legislation proposed by Sen. Elizabeth Warren of Massachusetts in the news this week. Maybe because Warren was a bankruptcy professor that I feel some special affinity to her, but I usually like the ideas she comes up with, because they mesh so well with the legal world in which I live.

Warren proposed the Tax Filing Simplification Act of 2016. The idea is elegant. Completely do away with tax returns for simple returns and create an IRS-run free file option for everyone. Oh, and the taxpayer would be able to get access to all of the information on W-2s, 1099s, and other forms that the IRS already possesses, ideally already filled in on the forms.

This is how dumb our current system is: Most tax returns simply give the IRS the information the IRS already has. A lot of work is performed to get faulty returns to match the IRS’s data and fix human errors, at great cost. Simply organizing and changing the flow of the tax information would improve and simplify the system. The idea of most people not needing to file returns dates back to Ronald Reagan, who called for a “return-free” system in 1985.

Just in the bankruptcy world, I can tell you that the savings in time, effort and money would be enormous if the tax return process was simplified and simple returns did not need to be filed.

Utah should take note State tax returns are almost an automatic calculation based off of the federal return. How hard would it be for the state to change the due date of the state taxes to Oct. 15, get all the data from the IRS and send notices to everyone saying, “Here is your return based upon your federal return.” If you have a complex return, no problem, you can still do it the old-fashioned way, but most people would just have to approve the state’s version of their tax return and be done. California already has a version of this in place.

I know it is hard to imagine an April without the middle being crammed with taxes and snow, but a couple of tweaks to the law are all it would take and the tax process could become a lot less costly and much more efficient.

That is all for now. I’ve only got until midnight tomorrow to file my taxes.

E. Kent Winward is an Ogden attorney. Twitter: @KentWinward.

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