Navigating Tax Season in the US: Complexity and Simplification
Filing taxes in the United States can be a starkly different experience compared to other countries, such as Sweden. For Jens Peter de Pedro, a Swedish expatriate, filing taxes in the US has been a "pain point" due to its complexity, while in Sweden, the process is streamlined and efficient.
The US tax code is notoriously complex, consisting of millions of words. This complexity stems from decades of incremental changes that have accumulated over time. The average American spends a significant amount of time and money on tax preparation each year.
Reasons for Complexity
Unlike many other countries, the US relies on taxpayer information for calculating tax withholdings, which can be intricate due to factors such as the married filing jointly status. Additionally, the US provides social welfare benefits through the tax code, resulting in a myriad of credits and deductions.
Simplification Efforts
Despite the challenges, the US has taken steps to simplify its tax system. The Tax Cuts and Jobs Act (TCJA) of 2017 doubled the standard deduction and reduced the number of itemized deductions. The IRS's Direct File program allows eligible taxpayers to submit returns directly to the government at no cost.
Further Simplification Opportunities
While these measures have simplified the process for some taxpayers, there is still room for further simplification. The next step would be for the IRS to pre-populate tax returns with taxpayer information. The most ambitious level of simplification would involve the IRS calculating taxpayers' tax liabilities.
Implementing these changes would require legislative adjustments and collaboration with companies to provide necessary information to the IRS earlier in the process. While these improvements may seem distant, the Direct File program represents a significant step towards simplifying the US tax filing system.