EXECUTIVE SUMMARY: April 15th seemed an appropriate day to publish a commentary on the complexity, history and humor of our state and federal tax laws. April 1st might have been a more appropriate date, but some of this stuff just seems to be a bad joke.
Let's start with the great quote in 1947 from the renowned Federal Judge Learned Hand: "In my own case the words of such an act as the Income Tax… merely dance before my eyes in a meaningless procession: cross-reference to cross-reference, exception upon exception—couched in abstract terms that offer [me] no handle to seize hold of [and that] leave in my mind only a confused sense of some vitally important, but successfully concealed, purport, which it is my duty to extract, but which is within my power, if at all, only after the most inordinate expenditure of time. I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out that net, against all possible evasion; yet at times I cannot help ... wondering whether to the reader they have any significance save that the words are strung together with syntactical correctness."
There may be a rather universal feeling about the Tax Code among federal judges. Supreme Court Justice Harry Blackmun noted: "If [a United States Supreme Court Justice is] in the doghouse with the Chief [Justice], he gets the crud. He gets the tax cases."
COMMENT: In 2007 USA Today provided five tax preparers with a set of facts and asked each of them to prepare an income tax return. The five preparers produced five different tax results and could not agree among themselves on which result was correct.
From 1987 to 1998, Money magazine conducted an annual study in which it submitted facts to a group of tax return preparers. In Money's 1998 report, forty-six tax return preparers had forty-six different tax results, with the tax liability ranging from $34,240 to $68,912. This was the 7th time that Money noted that none of the tax return preparers came to the same conclusion.
In an April 4, 2006 report, the Government Accountability Office noted that it submitted tax preparation information to nineteen commercial tax preparers around the US to determine how accurate their work was. Every one of the completed returns contained errors and some overlooked common deductions.
But is it not just the tax preparers who are confused. In 2002, the IRS reported that 28% of the answers given by its call centers were wrong, 12% were incomplete and 12% of the time taxpayers' questions were not answered and taxpayers were told to do their own research.
If the tax professionals don't know how to handle the complexity of our tax laws, what hope does the average taxpayer have?