Tax Code and Tax Preparation

Last updated on April 22, 2023

Tax preparation is difficult for most taxpayers and part of the reason is the complexity in the tax code. At present, the tax code is 10.8 million words and 14,000 pages long. Due to the complexity and enormity of the tax code, even tax lawyers often specialize in just one area of the tax code. Taxpayers, especially small businesses, find it impossible to prepare taxes themselves due to the complexity in the tax code.

It becomes necessary for taxpayers to hire a tax preparer for tax return preparation because an error can easily attract an IRS audit. Even though the IRS corrects miscalculations and certain errors in tax returns, an error that leads to a significant difference in the tax bill is usually scrutinized. Even if the error was unintentional, convincing the IRS that the error was accidental can take a lot of time and effort.

The total cost of compliance is about $224 billion a year. For individuals alone, it is $90.3 billion. Individual taxpayers annually spend $31.7 billion annually on tax preparation software and other out-of-pocket costs for tax return preparation. Simplification of the tax code, therefore, will not only save taxpayers’ time, but also their expenses in tax preparation.

Efforts towards simplifying the tax code are being made by creating blueprints of what a new tax code would look like, but it will take a long time to determine which changes must finally result in the overhauling of the tax code.