Public Turns to Professionals in Face of Tax Complexity

Today is the deadline for people in most of the country to file their federal income taxes. Residents of Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont and Washington D.C. have one extra day.

More and more taxpayers are relying on professional help to do their returns. According to the IRS, more than 60 percent of taxpayers now turn to professionals. That number has increased almost every year for the last two decades. At the same time, do-it-yourself tax software is also selling rapidly.

In January, H&R Block sued the maker of the most popular software, TurboTax, over one of its TV ads.

"They were claiming that they prepared more tax returns than H&R Block's 12,000 offices, when in reality they have no idea how many returns we prepare," says Block spokeswoman Denise Sposato.

She says even Block itself doesn't keep track of how many returns it prepares. It counts clients instead. TurboTax dropped the claim in its TV ad, but later filed its own lawsuit, accusing Block of illegally copying one of its commercials.

The bitter battle shows how much is at stake in the lucrative tax preparation business, both for software makers and services like H&R Block. IRS Commissioner Mark Everson says the number of people doing their own taxes with just a pencil and calculator is down to about one in five.

"The basic problem is that our tax code is too darn complicated," Everson says. "So more and more people feel they have to turn to a tax preparer to get help in terms of navigating the complex system."

Even using a professional is no guarantee of getting one's taxes right. A spot check of chain tax preparers by the Government Accountability Office this year found mistakes made in every one of the 19 offices visited.

"Even some of the most professional people out there, tax preparers, make mistakes," says Scott Hodge, President of the non-partisan Tax Foundation in Washington, D.C. "So it really argues for some major simplification. I think Americans are ready for that."

In fact, a survey by the Tax Foundation this year found 80 percent of Americans think the tax code is too complex. More people complained about the complexity of doing their taxes than about how much they had to pay.

But Hodge admits there's no political interest in Washington in actually streamlining the tax code. That means more willing customers for software like TurboTax and tax preparers like H&R Block.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.