Here's your Chance to Help Fix the Nation's Tax System

Everyone loves to complain about the U.S. tax system, and as part of her report Nina E. Olson has created a new way for taxpayers to share suggestions to improve the complicated tax code. Think you’ve got the answer? Join in!

From TodayShow.com:

On Wednesday, the National Taxpayer Advocate launched a suggestion box where taxpayers can offer their ideas for reforming the tax system.

“There has been near universal agreement for years that the tax code is broken and needs to be fixed,” National Taxpayer Advocate Nine E. Olson said in a statement announcing her annual report to Congress “Yet no broad-based attempt to reform the tax code has been made.”

Olson said tax reform is the No. 1 priority facing the tax administration, but any attempts to change the system have hit massive roadblocks.

In the release, Olson said she’s hoping to hear what taxpayers would be willing to give up in favor of a more simplified system. She also wants to know what aspects of the current system seem particularly burdensome or unfair.

The Taxpayer Advocate Service helps taxpayers who are experiencing economic problems, need help resolving problems with the IRS or believe the IRS isn’t working the way it should. It’s an independent organization that operates within the IRS.

Read more here

IRS Announces New Return Preparer Application System and User Fee

In their newest press release, the IRS announced that they would launch a new online application system for tax return preparers in September.

The IRS has proposed to require all individuals who receive compensation for preparing all or substantially all of a federal tax return or claim for refund after Dec. 31, 2010, to have a Preparer Tax Identification Number (PTIN).

Under the proposed regulations, compensated tax return preparers will need to obtain, or reapply for, a PTIN and pay a user fee using this new comprehensive system, which is part of a series of steps planned to increase oversight of federal tax return preparation. Tax return preparers will be creating PTIN accounts with the IRS when they use the new system.

“This is an important first step because it lays the groundwork in our efforts to ensure the quality and integrity of professional tax return preparation, which most taxpayers rely on in one form or another,” said IRS Commissioner Doug Shulman.

Compensated tax return preparers would pay a $64.25 user fee the first year for a PTIN based on two underlying costs. The IRS proposes to collect $50 per user to pay for outreach, technology, and compliance efforts associated with the new program. And the third-party vendor will receive $14.25 per user to operate the online system and provide customer support.

Under the proposed regulations, compensated tax return preparers will be required to renew their PTINs annually and pay the associated user fee. The amount of the fee may change in future years as the actual program costs are periodically reevaluated.

Continue reading at IRS.gov…

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The Income Tax System is Broken

From CBSNews.com:

On April 15, don't be surprised if the line at your local post office is a bit shorter than usual. That's because your neighbors may not be paying any income taxes this year.

An astonishing 43.4 percent of Americans now pay zero or negative federal income taxes. The number of single or jointly filing "taxpayers" - the word must be applied sparingly - who pay no taxes or receive government handouts has reached 65.6 million, out of a total of 151 million.

Those numbers come from an analysis published yesterday by the Tax Policy Center, a joint project of the Urban Institute and Brookings Institution. Neither is a low-tax or conservative advocacy group; the Urban Institute was created under the Johnson administration during the Great Society era, and it receives most of its funding from the federal government.

"You've got a larger and larger share of people paying less and less for the services provided by the federal government," says Roberton Williams, a senior fellow at the Tax Policy Center. "The concern is that the majority can say, 'Let's have more benefits, spend more,' if they're not paying for it. It's 'free.' That's not a good thing to have."

By historic standards, today's situation is an aberration. Between 1950 and 1990, the number of owe-no-money federal tax returns averaged 21 percent, dipping to 18 percent in 1986, according to Tax Foundation data. In the 1990s, the owe-no-money percentage hovered around 25 percent of taxpayers.

But then politicians began another round of tinkering with the tax code, adding reams of new pages to an already incomprehensible set of rules that even the guy overseeing the IRS can't seem to figure out.

Democrats wanted to lower taxes on the least affluent, while Republicans wanted to lower taxes on everyone. The result was bipartisan enthusiasm for tax credits aimed at everything from children (1997) and college students (1997) to hybrid cars (2005) and homebuyers (2009). Many of these credits dole out cash to people even if they report no income, making them mere government handouts.