More time needed for figuring taxes — IRS

updated 10:12 a.m. ET April 15, 2004

WASHINGTON - If it seems like it's taking you longer and longer to fill out your tax return each year, you're not imagining things.

The government estimates it takes taxpayers 28 hours and 30 minutes to complete an average tax return with itemized deductions and income reported from interest, dividends and capital gains. That's 42 minutes longer than last year.

Not very comforting for Americans staring at a midnight deadline, local time, Thursday, to get their 2003 taxes filed.

The preparation-time estimate takes into consideration the time spent gathering records, learning and preparing the forms, and sending them to the IRS.

David Keating, senior counselor at the National Taxpayers Union and author of a recent study on tax complexity, said the growing complications in the tax code creep up on us like old age.

"You don't notice something from one day to the next, or maybe one year to the next. But when you look back over decades, it's shocking," he said.

"As it gets older, it's getting uglier."

When the Internal Revenue Service started tracking the paperwork burden in 1988, it took the average taxpayer 17 hours and 7 minutes to complete those typical forms.

Now, even the simplest Form 1040EZ takes on average 3 hours and 43 minutes to complete.

Some of this year's paperwork burden stems from changes in the taxpayers' favor, such as new laws that reduced the rates on capital gains and dividends and increased the child tax credit.

The IRS reported Wednesday that the average tax refund increased 5 percent this year to $2,090.

Michael Lister, president of Jackson Hewitt Tax Service, said he looks at the increased complexity and sees chances for taxpayers to take new deductions and credits.

"I look at complexity probably a little differently," he said. "Those could be considered complexities. I look at them as opportunities."

Others look at complexity and see headaches.

The National Taxpayer Advocate, an office within the IRS charged with helping taxpayers navigate the tax system, sees complex tax law as a major stumbling block for taxpayers trying to understand their responsibilities.

In her most recent report to Congress, National Taxpayer Advocate Nina Olson said two of the top three problems that taxpayers face result from complexities in the tax code — the alternative minimum tax and the earned income tax credit.

At the upper end of the income scale, the alternative minimum tax aims at preventing wealthy taxpayers from sheltering all of their income from taxation. At the lower end of the income scale, the earned income tax credit aims at pulling working families out of poverty.

The alternative minimum tax can mean 3 1/2 hours of paperwork, only to lead the taxpayer to discover the extra tax isn't owed.

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The government estimates that it takes taxpayers only one minute to understand the earned income tax credit, an estimate that Keating said is "ridiculously understated." The taxpayer advocate points out the credit has evolved from one line on the tax return to a separate schedule with 13 pages of instructions and its own dedicated publication.

To cope with the burden, taxpayers flock to a professional or turn to a software program to do the work, the National Taxpayers Union study said. More than 88 percent of taxpayers have used a paid professional or purchased tax software so far this year.

The popularity of tax software shows up in IRS statistics that measure a 20 percent increase this year in taxpayers using home computers to file electronically.

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