Americans have a long history of independence: whether embarking on a harrowing voyage to an unknown land, striking out to conquer an already-occupied frontier, or tossing crates of tea into the sea to protest unfair taxation.
“In this year’s tax season, it might be wise to disregard the spirit of going it alone in favor of seeking out a tax professional.”
This year’s tax code comes in at an estimated 4 million words. To put that into perspective, the Bible, the largest book in many American homes, weighs in at 774,746 words, or less than a quarter of the length of the tax law. National Taxpayer advocate Nina Olson said in her report to congress this week that, “Complying with the tax code will cost individuals and businesses in the U.S. 6 billion hours in 2013. If tax compliance were an industry, “Olson continued, “It would be the largest industry in the U.S.”
Volunteers were still counting votes in Florida when the focus of the 24-hour news channels shifted from the decision between red and blue to the dangers presented by the fiscal cliff. Somehow, and seemingly against the wishes of many of the members of the legislature, a deal to avert a tumble from the cliff was reached. Despite the nation’s deep exhale of relief when the deal passed, it is not a comprehensive plan to reduce the deficit. It is the longest and most complicated set of tax laws in history, though.
According to Olson’s report the biggest problems are:
● Difficulties with compliance – The harder the laws are to understand the more time you have to spend making sure you’ve followed them.
● Outside help – Complicated laws require most filers to hire outside help or special software to prepare their taxes.
● Obscure comprehension – Most taxpayers don’t really understand how their taxes are computed or what rate they’re actually paying.
● The deal makes it easier for sophisticated taxpayers to avoid paying taxes and criminals to commit tax fraud.
● Undermines trust in the system- If it seems like many people are getting away without paying their share, honest taxpayers are less likely to comply.
● The confusion generates tens of millions of calls to the IRS, overwhelming the system.
If all of this seems a little overwhelming, it should. Figuring out the tax obligations on your payroll check is tough enough, let alone those on the variety of investments included in a properly diversified portfolio. This makes working with a team of qualified individuals extremely important.
It is possible that the complexities of this year’s tax law could spark a reform and next year you’ll be back at the kitchen table with a tax form in one hand and a #2 pencil in the other, but until that happens it’s best to count on CPA’s and financial advisors to make sure that your obligations are met.
We can help you put together a comprehensive financial plan, call us at www.stangierwealthmanagement.com or 877-257-0057.
Photo courtesy of: photo2go, http://morguefile.com/archive/display/758185