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IRS Advocate wants simpler tax code, lower rates

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Congress should simplify the tax code because it "inflicts a significant, even unconscionable burden" and is so complex that the Internal Revenue Service has severe difficulty administering it, says Taxpayer Advocate Nina Olson.

In the fiscal 2012 National Taxpayer Advocate report to Congress, the Olson identifies tax code complexity as the single biggest burden on taxpayers.

Taxpayers and businesses spend more than 6.1 billion hours each year complying with tax-filing requirements, says the report, and they struggle to adjust to the 4,680 tax code changes since 2001--an average of more than one per day.

The IRS received more than 120 million tax question calls in fiscal 2012, more than 30 percent of which went unanswered, and expects to only be able to answer 63 percent during fiscal 2013.

The report says the complexity leads to perverse results where honest mistakes become subject to enforcement actions while loopholes can reduce or eliminate a sophisticated payer's tax liabilities.

The main solution to the problem, says Olson, is to simplify the tax code by reducing the amount of tax expenditures available.

For fiscal 2013, the congressional Joint Committee on Taxation projects tax expenditures will reach $1.09 trillion, while individual income tax revenue is projected to be about $1.36 trillion. If Congress would eliminate all tax expenditures, the IRS says it could cut individual tax rates by 44 percent and still generate the same amount of revenue.

The report says this would be in line with the revenue-neutral basis Congress last used when making fundamental tax reform.

Olson says that her positions on tax reform are strictly for the purpose of reducing taxpayer burden and do not look for optimal revenue levels or distribution of tax liabilities.

For more:
- read the annual report
- see the report's key points in infographic form

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