Americans only have to file taxes once a year. For something that only happens once a year it shouldn’t take so long, right? Well, wrong. While we only do this once a year it apparently takes Americans approximately 2 billion hours to file taxes each year according to the Federal Register (information provided by Patriot Act with Hasan Minhaj). That’s about 12.5 hours per taxpayer. Taxes can take long amounts of time for even the smallest refund. It can take even more time if an individual is audited too. Doesn’t sound so easy, does it? It’s not, and that’s why so many people dread tax season each year.
It also bears the question, why is it so hard to do taxes? To answer that question, you would have to consider the form in which most Americans do their taxes. We should also consider how often Americans are audited. They all play a role in answering the question. So, in this article, I will briefly go over both in order for you to have a better understanding.
IRS Can’t Go Toe to Toe with the Tax Prep Industry
A vast number of American taxpayers file their taxes online. To be more accurate, 40% of Americans file their taxes online. That means there are millions of Americans turning to tax prep services like Intuit TurboTax, TaxSlayer, and TaxAct. These tax preparation services are so popular among the American people for their simple layout and use that, if the IRS wanted to introduce their own free individual tax prep service through their website, it would have a lot of competition.
Actually, the IRS tried to start its own tax software at one point. It was going to be free and easy to use. However, Intuit, the same company that owns TurboTax, decided to partner with them and create their IRS Free File Program. This is supposedly the free tax prep service that Intuit TurboTax offers unlike their Intuit TurboTax Free Edition, which ironically isn’t “free”.
Let Me Be Clear
It’s free to use the basic services of the Intuit TurboTax Free Edition service, but at some point or another, there will be something that pops on the screen that will tell you to pay a fee for an exclusive part of the service. These pop-ups will most likely be an exclusive service that you would need to file your taxes or you would really want to use for your circumstance, such as filing as unemployed, self-employed, or want maximum deductions. This is what makes the Free Edition “not free”.
Their IRS Free File Program, on the other hand, despite being a part of Intuit, is actually free.
The IRS partnered with Intuit in order to have software that is simple and inexpensive. Little did they know that Intuit would still make it harder for that tax prep service, despite being linked to them, in order to make more money off of the American people, which brings me to my next point below.
The Tax Prep Industry Wants to Make Money Off Americans
The Tax Preparation Industry’s main goal is to make money off of you.
Like I stated before, services like Intuit TurboTax like to trick people into using their services by labeling them as “free”. Yet, when you go on to their websites, you begin to realize that a lot of the services aren’t free.
For the services that are free though, like, through the IRS program, you barely see them when you type “free tax prep services” into a search engine. I tried searching it on Bing and ended up having to scroll towards the bottom to find the program. Oddly enough though, they don’t even emphasize the word free when you scroll to it. You would have to click on it and look around before you figure out it is actually a free service. With other non-free services, they have “free” in big letters everywhere. Between the two, which one would you click on? Obviously, the one that says free all over it.
This is just another example of how they try to get you to use their “free” services instead of actual free services.
Disproportionately Audits Poorer Citizens
Another reason why doing taxes is so hard is because the IRS audits the millions of American citizens of lower socioeconomic statuses more. Definitely at a higher rate than Americans who would be considered rich.
The wealthier Americans within the country usually have multiple streams of income from multiple investments and jobs. So, you would think that with all that money moving around them that the IRS would keep a closer eye on their income. Yet, they don’t. I can only assume that they choose to not focus on the wealthier Americans because those Americans are able to afford the best accountants. These accountants make sure that their clients are able to have maximum deductions while making sure all their income is filed. Obviously, poorer or even middle-class Americans can’t afford these types of accountants, so they either end up getting someone cheap or inexperienced to do it or just doing it themselves. Through these methods of filing taxes, I would then assume that more mistakes would occur, unlike with the wealthier people.
Since it is unknown why poorer people are audited more often than weather ones, I can not say if these assumptions are true, but I’m sure that they are not far from it.
What Could Make it Better?
Taxes would be so much easier to file if the tax prep industry wasn’t so money hungry and if the IRS’s free program had better marketing, so Americans would know it better. It also wouldn’t hurt if poorer Americans had greater access to more secure services in order to avoid frequent auditing.
Will these things ever happen? I don’t know. Hopefully one day more Americans could realize these truths and take them to their local government to petition or urge them to do something for the people. I know I sure hope so.
If you would like to read more money articles, check out this article on How to Start Fixing Your Relationship With Money.