Tax Complexity Leads to Confusion for Taxpayers

Today’s Wall street Journal contains an article titled “Piercing Some Common Tax Myths” that may be helpful to confused taxpayers trying to decipher the labyrinthine tax code between now and April 15:

Just when you think you’ve finally figured out your taxes, count on Congress to tweak the rules.

Keeping up with rapidly changing tax laws, phase-ins, phase-outs, regulations, revenue rulings and court decisions can be daunting even for veteran tax pros. Consider: The 2008 edition of CCH’s comprehensive federal tax-law service contained more than 67,500 pages, up from 40,500 pages in 1995.

“A lot of the tax law is really quite hard—and it can also be very counterintuitive,” says Mel Schwarz, a partner and director of tax legislative affairs at Grant Thornton LLP in Washington.

Small wonder that many tax myths and misperceptions have sprung up, as indicated in a recent survey by Harris Interactive for CCH CompleteTax, an online tax-preparation and electronic filing service. Among the fallacies: State sales taxes can no longer be deducted, and home sellers can take a capital-loss write-off when they sell their home at a loss.

The article goes on to answer some common questions about refunds, capital gains and losses on home sales, and economic-stimulus payments.

It’s no wonder so many taxpayers need this kind of advice. In addition to the poll mentioned above, the Tax Foundation’s 2007 Annual Survey of U.S. Attitudes on Taxes and Wealth, conducted by Harris Interactive, found that 83 percent of respondents think the tax code is “very” or “somewhat” complex. In addition, over three-quarters believe the federal tax system needs “major changes” or “a complete overhaul.”

Given the rapid growth in the size (see chart) and complexity of the tax code, it’s not surprising so many Americans turn to tax professionals every April.