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With the presidential race heating up, graduation only a month away and hundreds of other, everyday things competing for your attention, it’s easy to lose sight of the fact that today is the deadline to file your taxes.

If you haven’t filed yet, you’re in good company. Nearly 13 percent of filers wait until the last week possible to file their paperwork with the IRS. And at least 5 percent miss the deadline entirely.

If you haven’t filed yet, head over to the IRS website to see how you can file your taxes for free. And check out Forbes for a list of tax breaks that you might be missing while you scramble to file.

Regardless of where you stand on the timeline of tax preparation procrastination, one thing is for certain: the whole “tax” thing is absurdly complicated. But just how complicated might surprise you.

The Wealthier You Are, the Less Likely You Are to File On Time

According to data released by the IRS, less than half of filers who made a million dollars or more in 2013 filed on time in 2014. For those earning less than $200,000, the rate is significantly higher. Out of all Americans, approximately 9 percent file an extension to wrap their taxes up by November.

Why such a discrepancy? As you ascend income brackets, your tax preparations get significantly more complicated, as you have to deal with more disparate sources of income, more deductions and more places to make mistakes.

The Tax Code is Nearly 80,000 Pages Long

The US Tax Code has grown exponentially in recent years. The addition of the Affordable Care Act to the tax code resulted in 3,000 pages being added to the document and some projections have it growing beyond 100,000 pages by 2050.

The IRS Doesn’t Write the IRS Code

Despite the code’s colloquial name (it’s really called the “Internal Revenue Code”), the IRS is only responsible for collecting taxes. Congress is responsible for enacting the code, which is why so many presidential candidates have come up with their own plans to fix it.

According to the Washington Post, the term “IRS Code” gained popularity during tax policy debates and IRS hearings in 1997. Politicians latched on to the term as a way to deflect responsibility for the code’s frustrating complexities while still campaigning to simplify the document.

The Source of Revenues Has Changed Over Time

Before World War II, most of the federal tax revenue was made up of excise taxes, like those that you pay on gasoline. Today, those taxes would only fund about two weeks of the government’s expenses. Instead, the largest portion of the federal government’s operating budget comes from individual income taxes, followed by payroll taxes.

Corporate income taxes have declined as more and more business income is taxed on an individual basis.

The Top 10 Percent of Taxpayers Pay Most Income Taxes

Compared to 1985, when the top 10 percent of taxpayers only paid about 55 percent of all income taxes, the top 1 percent of taxpayers today now pay more than the bottom 90 percent of all taxpayers.

While the average tax rate for all Americans is about 10.4 percent, people who earn more than $1 million per year pay an average rate of 23 percent, while taxpayers who earn between $50,000 and $100,000 pay the closest to the average rate. Citizens with an income below $30,000 actually pay a negative income tax thanks to tax credits issued by the IRS.

Our Take

Nobody likes thinking about — or paying — their taxes. But at the same time, tax code complexities cost us an obscene amount of money — 2010 data puts the estimate at $31.5 billion directly paid (to accountants, tax preparers, on tax software, etc) and another $400 billion or so in hours spent by individuals and businesses in the process of tax preparation and compliance. Audits alone cost nearly $10 billion.

Finding a way to cut through that complexity, either by legislative process or by technological advances, would be a significant driver of economic growth, not to mention fewer headaches for you and me.

As we move into election season and candidates begin to roll out their platforms, pay attention to how their policies may affect you. Marco Rubio, who announced his bid for the presidency on Monday, has already rolled out a tax plan, though it appears a bit ridiculous without revisions.

But until then, make sure to file your taxes — and pay them today. The only thing worse than not having money is owing some to Uncle Sam.

 

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Posted 04.15.2015 - 01:20 pm EDT
http://www.genfkd.org/?p=25315

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Chris Sonzogni

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