Americans spend hours and hours preparing their taxes. We shouldn’t have to.

[jollystomper]

It will never change as there is a whole industry built around our tax code, from tax preparers, payday advance lenders, to lobbyists whose work it is to look out for special interests and keep the tax code complicated. I've done my own taxes for fifty years and have a fairly good understanding of the personal income tax code, my prep and filing time is more like three to four hours.

I agree. With software, my federal return with all forms present takes about 4 hours. It helps that I have a lot of information already prepared - for example, I already know my charitable contributions and mileage, and medical expenses and related mileage, since I track these during the years. I think a lot of time is spend because folks have to gather up receipts for various things that they never start organizing until tax time.

Just follow the money... if there were money to be made from simplifying the tax code, it would have been simplified long ago. These days complexity generates revenue, and not just in the tax industry.

While I am afraid you're right, I wonder if social media creates opportunities to get to get the attention of voters and incumbent politicians to break or diminish the hold special interests have on our current state of affairs. Can our system defy "we the people" forever? One can only hope...

Again, this is not a partisan observation, both sides are totally beholden to special interests at present.

Do not count of social media... I cannot think of a single issue where social media has rallied all of the "sides" together. Social media is more designed to divide than unite, since there is more money made by dividing people.

 

[cathy63]

I suspect the 11 hours figure is correct, because it includes a (relatively) small number of returns that require hordes of accountants to prepare (non political wink going out to Donald Trump.) If you threw out everyone earning more than $XXXX (a million? few hundred thousand?) I suspect the estimate would drop significantly.

I think the 11 is somebody's made-up figure that's been promulgated by journalists quoting other journalists without verifying original sources. The IRS says (in the 1040 instructions for 2021) that their estimated time for "average" non-business taxpayers is 9 hrs, including 3 hrs of record keeping. If you include business returns, their estimate goes up to 13 hrs. These are estimates that they're required to provide to comply with the Paperwork Reduction Act, not based on actual surveys or observations.

I agree with you that average is not the same as median for this data set, and I'd say median would be a lot more meaningful when people are writing articles and talking about "typical" taxpayers.

For those who like stats, the IRS has a whole department that publishes many interesting numbers: https://www.irs.gov/statistics For TY 2019, about 18% of returns had Schedule C, and 10% had a schedule E. I'd say anyone who has either of those is not really a "typical" taxpayer.

 

[scrabbler1]

I think the 11 is somebody's made-up figure that's been promulgated by journalists quoting other journalists without verifying original sources. The IRS says (in the 1040 instructions for 2021) that their estimated time for "average" non-business taxpayers is 9 hrs, including 3 hrs of record keeping. If you include business returns, their estimate goes up to 13 hrs. These are estimates that they're required to provide to comply with the Paperwork Reduction Act, not based on actual surveys or observations.

I agree with you that average is not the same as median for this data set, and I'd say median would be a lot more meaningful when people are writing articles and talking about "typical" taxpayers.

For those who like stats, the IRS has a whole department that publishes many interesting numbers: https://www.irs.gov/statistics For TY 2019, about 18% of returns had Schedule C, and 10% had a schedule E. I'd say anyone who has either of those is not really a "typical" taxpayer.

You beat me to it, about the benefit of using the median instead of the mean which can be distorted by outliers. I wish the authors of articles would be more specific when referring to a "typical" taxpayer because it is never clear what that really means.

 

[youbet]

I spend a lot of time on tax planning, but actually filling out the tax forms is trivial.

Yeah, filling out the forms is definitely not the issue.

 

[MichaelB]

In terms of time spent, I suspect top of the list is talking about taxes, followed by thinking about taxes, finally doing taxes. Still too much.

 

[marko]

I did not read every post in detail but somewhere I read that the two biggest lobbyists for keeping the current, highly confusing process in place are TurboTax and H&R Block. Apologies if this was mentioned earlier.

 

[klec]

Agree on the BS stat! I'm an independent contractor with a few income streams, as well as dividends. My accountant sends me an Intuit link to answer a few questions ... maybe 30 minutes. She charges less than $100. A bargain!

 

[Ronstar]

It takes me an hour or 2 to gather the 1099's etc, and then deliver to the CPA to prepare and file the returns. Every year I plan on doing them myself because our returns are so simple, but I find the CPA fees to be reasonable so I have them do it.

 

[pb4uski]

.... About 1/2.

I think it's closer than about. [emoji2]

 

[Bamaman]

Filing taxes is no big deal, and I always question why I always put it off until the last night.

Our taxes would be very simple had we not be raising a 10 year old that we get a bunch of credits on.

It was maybe a 1 hour job to do the filings online. I'm not about to try to read the IRS tax instructions with a kid's issues. It'd be like trying to read Russian.

 

[foxfirev5]

I did not read every post in detail but somewhere I read that the two biggest lobbyists for keeping the current, highly confusing process in place are TurboTax and H&R Block. Apologies if this was mentioned earlier.

Yep. When DW and I mall walk in the early Spring it's amazing watching the poor folk lined up at H&R to have their taxes done. What's even sadder is those that need to get an advance on their return. My first red flag is when someone calls it their return rather than a refund. Pay $300 to get a $1000 refund. Criminal.

 

[rk911]

Yep. When DW and I mall walk in the early Spring it's amazing watching the poor folk lined up at H&R to have their taxes done. What's even sadder is those that need to get an advance on their return. My first red flag is when someone calls it their return rather than a refund. Pay $300 to get a $1000 refund. Criminal.

it's not just the poor folks using H&R. my wife's best friend (she's a widow) has been using H&R for years and she is far from poor. she has no desire or the skills to do her return even with software so she turns to professional preparers. (I use "professional" in the sense that, in theory, they know what they're doing and she pays for the privilege.)

my wife, when she is a widow, will be in the same boat as her friend and I have tried to impress upon her not to use H&R or any of the 'store front tax preparers) but to seek a CPA/Enrolled Agent for tax prep.

 

[CardsFan]

my wife, when she is a widow, will be in the same boat as her friend and I have tried to impress upon her not to use H&R or any of the 'store front tax preparers) but to seek a CPA/Enrolled Agent for tax prep.

I have the same issue. DW has no interest in preparing taxes. Some time in the next few years I will probably look for a CPA and have them start.

As far as time spent now, it probably takes me 2-3 hours over the course of 2 weeks, using Turbotax. The heavy lifting (entering the brokerage info) is simple with a direct download from the brokerage to Turbotax.

 

[Dreamer]

My DB died in 2001 at 45. Several years before he died, he complained how much H & R Block charged for doing his taxes. I told him to bring them to me and I would do them for him. He had a W-2 and a dependent child. He was not interested in looking at government forms. I don't know if he thought he could not do his own or what.

 

[RetMD21]

I can't read the links due to paywalls. If the IRS prepared returns using known W2 and 1099 income and applied the standard deduction based on last year's tax situation it would save a lot of people from paying someone to do simple taxes.

 

[ivinsfan]

it's not just the poor folks using H&R. my wife's best friend (she's a widow) has been using H&R for years and she is far from poor. she has no desire or the skills to do her return even with software so she turns to professional preparers. (I use "professional" in the sense that, in theory, they know what they're doing and she pays for the privilege.)

my wife, when she is a widow, will be in the same boat as her friend and I have tried to impress upon her not to use H&R or any of the 'store front tax preparers) but to seek a CPA/Enrolled Agent for tax prep.

You know what we've been using H and R for a C corp return and personal returns since 1996. One preparer was actually an enrolled agent and for the last 15 years we've used the owner who is an Enrolled agent and available 5 days a week year round for anything that pops up. As far as price there in no doubt the amount we pay him for a the business return plus the 2 families personal returns is the absolute best value in our business.

 

[ivinsfan]

I have the same issue. DW has no interest in preparing taxes. Some time in the next few years I will probably look for a CPA and have them start.

As far as time spent now, it probably takes me 2-3 hours over the course of 2 weeks, using Turbotax. The heavy lifting (entering the brokerage info) is simple with a direct download from the brokerage to Turbotax.

You'll choke when see the CPA fees for a simple return. If your town has an H and R go in see who owns the place and who runs the place. You might be surprised.

 

[scrabbler1]

One advantage for me doing my 91-year-old dad's taxes is that I can co-ordinate with his investment advisor the proper withholding from his IRA distributions so he either owes very little or gest very little back (or, with his state return, make sure zero is withheld because he never has a state tax liability). Saving him $300 in tax preparer fees he likes, too!

 

[kgtest]

DF taught me how to do my taxes when I was 16 and filed my first return. I remember driving to the library to get the paper booklet that contained both the forms and instructions for the 1040.

DF does my 92 yr old grandma's taxes...and I will do DF taxes when he gets old as well. I will also teach my children to do their own taxes. This is just tradition in our family.

 

[Badger]

Same here. I have a folder for next year's tax filing in my desk and add relevant information to it when it becomes available. Then when tax time rolls around, I have the documents and info I need to file...

... Now it's much simpler and entering data into the tax program take a short time. Then I let it sit for a while then go back and recheck all my entries.

+1
I keep a folder too and for decades I did my returns with pencil, paper, and a hand calculator on our modest teacher salaries. Then 10+ years ago I started using AARP while still doing the forms myself to see if they matched. They are always within about $100.
It doesn't take either of us more than a couple of hours and my income comes from more sources now like SS, pensions, RMDs, dividends, and interest.
Unless the majority of people have more and varied sources of income I don't see why it should take any longer. The forms are fairly simple even for this Bear of little brain.
If the majority of people (somewhere around 80%) have income of less than $100k I don't see many ways their sources of income can be much more complex and how filing tax forms could take much more than a couple of hours.

Cheers!

 

[RetMD21]

If the majority of people (somewhere around 80%) have income of less than $100k I don't see many ways their sources of income can be much more complex and how filing tax forms could take much more than a couple of hours.

Cheers!

I help family members with simple tax returns that they seem to be incapable of doing. Adding up the income from W2s, SS 1099s, interest and dividend 1099s and then subtracting the standard deduction is awfully easy. Still, all the income is reported to the IRS electronically so I don't see why this even needs to be done.

 

[RunningBum]

I did not read every post in detail but somewhere I read that the two biggest lobbyists for keeping the current, highly confusing process in place are TurboTax and H&R Block. Apologies if this was mentioned earlier.

Probably true, but I wonder if it is really enough money for that alone to be the reason for keeping tax returns complicated. If they really had that much pull, would we have had the late Form 1116 change for the foreign tax credit that had them so delayed in getting it implemented? Did H&R B even get it done finally? How many customers did they lose to some of the smaller tax services that were able to get it done first?

Speaking of the foreign tax credit, do people who get that really want a simplified tax system that would eliminate it? The purpose of it is to not pay a double tax on foreign income. Some of the complications come to avoid the US Treasury from giving you a larger credit than taxes you need to pay on domestic income. This is just one example of things ingrained in our system that may have fairly drastic impacts on some people's taxes. It's easy to say just pay X% on all income, but the ramifications are much more complicated, to where it's very unlikely we'll see such a change.

 

[cathy63]

I help family members with simple tax returns that they seem to be incapable of doing. Adding up the income from W2s, SS 1099s, interest and dividend 1099s and then subtracting the standard deduction is awfully easy. Still, all the income is reported to the IRS electronically so I don't see why this even needs to be done.

You are leaving out the part where you make a decision about which standard deduction to apply. You are using your personal knowledge of your family members to decide whether they are filing single or married, under or over 65, whether they have children and how old they are, etc. The IRS doesn't know or keep track of any of that. The most they can do is verify SS numbers are valid and not used on multiple returns. Other parts of the federal, state and county governments do know some of this info, but there are privacy gates that are supposed to prevent them from collating it all in one agency.

If we want the IRS to do everyone's taxes for them, then we either have to give them access to a whole lot more data and the infrastructure to manage that kind of data collection; or we have to stop giving tax breaks for getting married, having kids, owning a house, giving to charity, experiencing a disaster, having large medical expenses, etc.

 

[Midpack]

Speaking of the foreign tax credit, do people who get that really want a simplified tax system that would eliminate it? This is just one example of things ingrained in our system that may have fairly drastic impacts on some people's taxes. It's easy to say just pay X% on all income, but the ramifications are much more complicated, to where it's very unlikely we'll see such a change.

I do. I’m not suggesting a simple “pay X% on all income” solution. And I’m not suggesting we just eliminate all deductions and credits and leave the tax rates as is. There’s a huge opportunity to simplify between the two extremes. Taxpayers will adjust how they spend and invest under the new rules, just as they do now with all the convoluted deductions and credits we have now, that are generating unintended consequences.

It appears from the link in post #1 every other developed nation has a better simpler approach…

But I'm under no illusion we'll see a simplification of the IRS tax code anytime soon, if ever.

 

[jollystomper]

One factor may be, to what extent do other developed nations use the tax code not just to collect revenue, but to influence social policy and provide incentives for various groups or industries favored by whichever administration is in place.

While people may complain about the time to do their taxes, the ability to use the tax code in the above manner - necessitating its complexity - seems quite popular.