Study: Tax simplification saving Americans up to $5B
As an October deadline nears for taxpayers who missed the initial April cutoff for filing taxes with the IRS, a new study suggests Americans may be saving as much as $5.4 billion from the elimination of incentives to itemize returns.
The Tax Foundation estimated this week that some 28.5 million Americans would be better off by skipping itemization of their taxes in the quest for deductions from their final tax bill, indicating in many cases they will come out ahead under an expanded standard deduction authorized under the new federal Tax Cuts and Jobs Act that took effect for the 2018 tax year.
The Internal Revenue Service has estimated previously that the newly revised tax forms should shave anywhere from 4 percent to 7 percent off the time it takes people to file their returns.
The Tax Foundation correlated that estimate with previous calculations from the White House Office of Management and Budget that Americans spent nearly 9 billion hours in the aggregate doing their taxes — the equivalent of 4.3 million people doing taxes full time — to arrive at the overall savings figure.
The IRS continues to publish tips on a regular basis on how taxpayers and preparers should interpret varying new rules under the Tax Cuts and Jobs Act, including a missive in early August on a new, depreciation deduction that allows most businesses to take a full write-off of assets in the first year they are put into service.
Speaking to a Congressional committee in April, acting IRS Commissioner David Kautter said a 2017 shift to allowing advance appointments at free taxpayer assistance centers has helped reduce the time it takes to complete returns.
“This is the second year that all (centers) are offering appointments in advance, a process that we have found dramatically cuts wait times for ... visitors,” Kautter said. “As in 2017, we have had no reports of long lines during the 2018 filing season — clear evidence that the appointment process reduces burden on taxpayers who seek in-person assistance.”
Another major change is in the offing, after the IRS promised in June it will have a streamlined Form 1040 ready for the 2019 tax season, that will be half the length of this year’s form and eliminate the 1040A and 1040EZ versions.
In June, a taxpayer ombudsman at the IRS indicated the agency needs to provide better guidance in complying with the Tax Cuts and Jobs Act.
“Its general approach seems focused on pushing information out rather than engaging in a two-way dialog with taxpayers,” stated Nina Olsen, national taxpayer advocate, in her mid-year report to Congress. “The significant cuts to the IRS’s budget combined with the need to implement several significant new laws in recent years has stretched the IRS very thin.”
Alex.Soule@scni.com; 203-842-2545; @casoulman