Axiom CPA, P.A. - Axiom CPA Blog

Over the last week we have been working on a project that requires us to prepare several very old tax returns without the aid of tax prep software. The beauty of the US tax system is that everything you need to prepare a return is freely available from the IRS web site (historical forms, instructions, tax publications, even the tax code itself). In reality, it is difficult for me to imagine a layman preparing anything but the simplest tax return manually. This just goes to show you that information is NOT power.

I'm convinced that part of the mess we're stuck with that is the US tax code is a bi-product of the widespread availability of computing power. For something like $25 anyone can walk into a retail store and purchase TurboTax. This is a great program! For $25 you get the ability to perform in an hour what could take a trained professional 4 or 5 hours to do manually. My own opinion is that IRS should purchase a copy of TurboTax for every taxpayer and send it to them in a gift wrapped box. Without something like TurboTax IRS has no hope of collecting the correct amount of tax. The current tax system is so full of exceptions, alternative calculations, recapture provisions and phaseouts that it is impossible to expect most taxpayers to get it right. Remember, the average US adult reads at an 8th grade level. If we all had to prepare our returns manually one of two things would happen a)the Treasury would go bankrupt because we would get it wrong and IRS has no hope of catching so many errors or b)the US populace would riot at the prospect of paying grossly inflated taxes because they couldn't figure out how to claim all the deductions and credits they're entitled to.

We focus mainly on businesses rather than individuals so this debate is somewhat academic to my standard of living. I do think individual tax advisers are important and worthwhile so long as they add value in the form of planning and education. It's just unfortunate that low cost tax software has enabled legislators to cram more and more complexity into a tax system that defies comprehension more times than not.