Taxpayer advocate calls for IRS overhaul

Nina Olson is the head of the Taxpayer Advocate Service, a supposedly independent branch of the IRS charged with helping taxpayers resolve disputes with the IRS, and come up with ways to improve the way the system works for us.

In her latest annual report on ways the tax code is and isn't working, Ms. Olson had this to say "The most serious problem facing taxpayers is the complexity of the Internal Revenue Code. The only meaningful way to reduce these burdens [of compliance] is to simplify the tax code enormously."

She adds that "Taxpayers who honestly seek to comply with the law often make inadvertent errors, causing them either to overpay their tax or to become subject to IRS enforcement action for mistaken underpayment of tax. [However,] sophisticated taxpayers often find loopholes that enable them to reduce or eliminate their tax liabilities."

She also laments the huge amount of time and money that people must spend on filling out their taxes and complex forms and computations make it difficult for people who would qualify for the Earned Income Tax Credit to qualify for it.

Steve Forbes suggests that President Obama should respond to the report by moving toward a flat tax system but concedes that that won't happen.

Whatever the solution to the current IRS nightmare is, Obama should make a priority of finding some way to simplify the tax code. Freeing up people's time to work and earn money instead of calculating tax liability would be a great long-term economic stimulus.