IRS National Taxpayer Advocate Nina E. Olson urged Congress to simplify the U.S. Tax Code and recommended measures to reduce the burden on taxpayers who are struggling to pay their bills.
Olson advanced a simplification plan organized around six core principles:
1. The tax system should not entrap taxpayers.
2. The tax laws should be simple enough to allow most taxpayers to prepare their own returns without help, permit taxpayers to compute their tax liabilities on a single form, and let IRS telephone assistors fully and accurately answer taxpayer questions.
3. The tax laws should anticipate the largest areas of noncompliance and minimize the opportunities for such noncompliance.
4. The tax laws should provide some choices, but not too many.
5. Refundable credits provided by the law should be easier to administer.
6. The tax system should incorporate a periodic review of the Tax Code, which Olson calls a "sanity check."
Olson cited the Alternative Minimum Tax as one example of complexity. "Although it was originally conceived to prevent wealthy taxpayers from escaping tax liability through the use of tax-avoidance transactions, 77 percent of the additional income subject to tax under the AMT today is attributable to the disallowance of deductions otherwise allowed for state and local taxes and personal and dependency exemptions," she declared.
"Few people think of having children or living in a high-tax state as a tax-avoidance maneuver, but under the unique logic of the AMT, that is essentially how those actions are treated," she noted.
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