By Andrew Schwartz
The numbers are in. President Obama recently released his 2015 Tax Return back in April. Initially I was going to critique his tax return. Instead, I am going to present my three-step solution to tax simplification.
- Require All Politicians to Self-Prepare Their Tax Returns Each Year
For starters, let’s require that all politicians, including the President of the United States, to manually self-prepare their tax returns each year – without the help of a tax professional and without using any tax prep software.
Let’s also not allow our country’s legislators to prepare their tax returns during working hours, Doing so will cause the President and each member of Congress to spend countless hours during their nights and weekends in February and March working on their taxes just as many American taxpayers do each year.
It wouldn’t take more than a few years of manually preparing their own tax returns for the politicians to realize how overly complex the tax rules have become.
- Have the IRS send The President and each Politician a notice questioning an item on their return that was reported correctly.
When the IRS has trouble agreeing information received from third parties to what taxpayer reports on their returns, their computers automatically generate a confusing 10-page notice to the taxpayer. Instead of asking for clarification for the item in question, the notice instructs the taxpayer to either pay additional federal income taxes on that item or, if they don’t agree wit the assessment, to send in documentation supporting the position claimed on their tax returns. Sadly, with these intimidating and confusing notices, taxpayers are guilty until they prove their innocence.
I understand that the IRS needs to send notices demanding a balance due to get taxpayers to respond, but to be honest, it’s quite unnerving for most people get a confusing 10-page notice form the IRS assessing additional taxes.
As part of my three-step plan, I would like to see the IRS send the President and every politician one of these notices each year assessing additional taxes, even if their tax returns were completed correctly and they don’t owe any additional taxes.
The politicians, without the help of a tax professional, can then try to get through to the IRS’ “customer service” number, and after being on hold for an hour or more, try to reason with the IRS agent. Or, they can compose and mail in a letter supporting their position, and hope that the person who ultimately processes the response does so correctly on the first try. In my experience, it often takes more than one submission of documentation to resolve an issue with the IRS in the taxpayer’s favor, even when the taxpayer’s tax return is 100% correct.
- Make Sure Each Politician Gets Audited Each Year
The third step of my three-step plan is frankly brilliant. Every year, have the IRS audit the tax returns submitted by the President and each politician. Let the politician defend his or her deductions in front of the IRS agent without any professional help.
If you have ever gotten audited, it’s really an uncomfortable process, even if you have nothing to hide and all of your documentation is available and in perfect order. I think it would be a great annual exercise for the people who actually draft and vote on the tax laws to sit through an IRS audit each year.
Three Steps to Success
How long do you think it would take for Congress to vote for tax simplification, and for the President sign the bill into law, if every politician, including the President, would be required to:
- Independently prepare his or her own tax return without the help of a tax professional or any tax software,
- Then, respond to a random IRS notice each year on an issue where they correctly reported that item on their tax returns,
- And finally defend their tax deductions during an annual IRS Audit.
My guess is less than 2 years. Trust me, I know that there is no easy solution to tax simplification., But starting with the massive Tax Reform Act of 1986, the tax laws have gotten significantly more complicated during these past three decades. Drastic times require drastic measures, and I feel my three-step plan is the perfect drastic measure.