It’s tax season in America, and everyone knows what that means … or maybe no one does. Taxes are an annual source of anxiety and confusion for countless Americans. If you’ve spent time reading any kind of tax document, you’d think it was designed to evoke these emotions.
In some ways, it is.
According to the Tax Policy Center, simplicity is usually the least important goal when it comes to taxes. If the government wanted to simplify taxes, it could implement a head tax (a fixed-dollar tax on all citizens). But it wouldn’t account for differences in income, labor, familial status, or needs. In this case, fairness trumps the need for simplicity.
Of course, politics still affect our resulting tax system. Corporations, nongovernmental organizations, politicians, etc., lobby for particular activities to receive tax subsidies. It’s probably unfair to say politicians desire complexity for its own sake, but so many opposing goals makes tax season a yearly nightmare for everyone.
A tax code overhaul
In 2017, Congress actually tried to make things easier by implementing the largest tax code overhaul in 30 years. The Tax Cuts and Jobs Act doubled the standard deduction, eliminated personal exemptions, and decreased individual income tax rates.
Because of this, most Americans paid less in 2018; they kept more of their income throughout the year. But did it result in a bigger refund in the spring? No, and that’s what Americans usually judge tax laws by. In 2018, the average refund was around $2,860. In 2017, that number was slightly more robust at $2,899. Taxpayers were confounded.
A failure to communicate
In a CNBC article, Jeffrey Levine, certified public accountant and director of financial planning at BluePrint Wealth Alliance, explained what went wrong: “The biggest way the new tax law was botched was the failure to communicate the difference between a lower tax liability for the year versus lower tax bills in April.”
Indeed, clear communication is critical when talking about taxes. The government seems to have thrown simplicity and plain language out the window a long time ago (even though it shouldn’t have), and the system seems to get more complex every year. Until we focus on the “user experience” and cut through that complexity, tax season will continue to be stressful for everyone.
Thriving on complexity
A whole industry exists to help people do their taxes because it’s too hard to do alone. The absurd intricacy of today’s tax regulations has spawned a multibillion-dollar software opportunity, with companies like TurboTax (NYSE: INTU), H&R Block (NYSE: HRB), and Credit Karma vying for a piece of the market.
These companies turn the process into a conversation. By asking you about your life, they discover how your taxes should be completed. Their goal is to match you to the regulations, not the regulations to you. In this case, focusing on the customer’s experience puts taxes into plain language (the key to understanding content).
Putting taxes into plain language
Here are a few ways you can simplify the tax process:
1. Take time to go through everything.
Even if you know how to do taxes, it can still be complicated. Setting aside time to properly review all documents will make your life easier come April.
2. Review your tax resources
Companies that offer tax filing services have helpful resources. For example, TurboTax has an online glossary of tax terms. The IRS also provides some basic tutorials to start you off.
3. Make a list of important life situations
Do you donate to charity often? Work from a home office? Have a child? If you answered yes to any of these questions, you may qualify for tax credits (which are dollar-for-dollar bill reductions) or tax deductions (which make your taxable income lower).
Many people fear the complexity of taxes. Simplifying the tax process helps people cut through the jargon and pinpoint exactly what they need to know. It would be great if the government prioritized simplicity as a goal, but we all know how long policy reforms take. Until then, take a deep breath, shuffle your documents, and get down to business.
DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.
This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
Strategic acquisition in the German fintech sector
Lehner Investments has signed an acquisition deal with the FinTech company Catana Capital.11.5 million shares will be issued at the...
The interest rate threshold keeps dropping
Our Nation's debt to GDP ratio has now climbed above 130%. More importantly, that debt has surged to equal 800%...
ESG ETFs were that blockbuster fund in 2020
Equity ETFs saw the largest inflows in 2020, with $67.2 billion (€55.3 billion). After a period of risk aversion and...
Kia Morocco, between rebirth and ambitions
After a good progression in 2020, the importer of Kia continues its basic strategy aimed at restoring the brand's aura...
Bitcoin price dump may have been triggered by largest BTC mining pool
From January 15th, in particular, the amount of bitcoin outflows from F2Pool, currently the largest mining pool with about 15%...
Crowdfunding6 days ago
Italian real estate crowdfunding doubles funding in 2020
Crypto7 days ago
Is the course of Bitcoin striving for stability
Featured7 days ago
How the coronavirus pandemic helped setting records on the bond market
Africa7 days ago
Financing companies in Morocco: between questions and actions