FR 2024-30074

The document from the U.S. Department of the Treasury is a notice issued by the Internal Revenue Service (IRS) seeking public comment on the paperwork and burdens associated with U.S. Income Tax Return Forms for individual taxpayers. This request, mandated by the Paperwork Reduction Act of 1995, invites feedback from both the general public and other federal agencies. The comments are being solicited to better understand the time and financial costs taxpayers incur when filing their tax returns.

General Summary

The IRS is focused on reducing the burden taxpayers face when preparing and submitting their annual income tax returns. The notice includes estimates stating that approximately 168.8 million individuals will file tax returns, spending an average of 12 hours and 37 minutes each, which results in an estimated annual monetized burden of nearly $93.7 billion. Additionally, the IRS plans to continue offering a free e-file tax return system, known as Direct File, in the 2025 tax season.

Significant Issues and Concerns

Several technical terms and references, such as "IRC sections 6011 & 6012" and "OMB Number: 1545-0074," are used without explanation, potentially making the document challenging for a general audience to fully comprehend. Furthermore, while the document provides large estimated figures for the economic burden on taxpayers, it lacks context or detailed information on how these figures were calculated. This absence of transparency could lead to misunderstandings about the true nature of the burden on taxpayers.

Additionally, the document hints at possible changes in "regulatory guidance" but fails to provide specific details, which might create uncertainty among taxpayers about future tax filing processes. The mention of the Direct File system does not clarify which taxpayers it supports, leaving some individuals unsure whether they can use this service.

Impact on the Public

The document aims to establish a dialogue with the public to minimize the burden of tax filing. By soliciting comments, the IRS seeks to understand the challenges taxpayers face and find ways to make the process more efficient. The potential use of a free Direct File system could simplify the filing process for many taxpayers, potentially reducing both time and economic costs.

Impact on Specific Stakeholders

Individual Taxpayers: The most directly affected stakeholders are the individual taxpayers who bear the primary burden of time and financial costs associated with filing tax returns. Any improvements or changes resulting from this public commentary could relieve some of these burdens.

Tax Professionals and Software Providers: Tax professionals and companies that provide tax filing software may experience shifts in their market if the IRS implements new strategies or systems that simplify the process for taxpayers. An increased adoption of the Direct File system might reduce demand for these services.

Government and Policy Makers: For the government, particularly the IRS, this initiative is an opportunity to improve tax compliance rates and taxpayer satisfaction by identifying and implementing more effective processes and systems.

In conclusion, while the initiative is a positive step toward better understanding and potentially reducing the burden on taxpayers, the document could benefit from clearer explanations and more transparency regarding the potential impacts of proposed changes. Stakeholders across various sectors will need to stay informed and possibly engage in this consultation process to ensure their concerns and suggestions are heard.

The document under review presents an invitation to comment on the burden associated with U.S. Income Tax Return Forms for Individual Taxpayers, as part of the IRS's efforts to reduce paperwork and respondent burden. Within this context, several key financial references offer insight into the economic implications for taxpayers.

In examining the estimated burden, the document provides projected costs associated with the time and expenses incurred by taxpayers. It estimates a Total Annual Monetized Time value of approximately $44,997,000,000, reflecting the cumulative time individuals spend on tax-related activities. This figure takes into account the hours required for recordkeeping, tax planning, gathering materials, understanding tax law, completing, and submitting the returns.

In addition to time, there are Out-of-Pocket Costs estimated at $48,683,000,000. These costs consist of expenditures such as purchasing tax preparation software, hiring third-party preparers, and covering the costs of printing and postage. These are direct cash outlays that individuals bear as part of their compliance with filing responsibilities.

Combining both these components, the document states an Estimated Total Monetized Burden of $93,680,000,000. This figure aggregates the two preceding estimates, presenting the overall financial burden of tax compliance, exclusive of the actual tax liabilities owed by taxpayers.

Despite providing these figures, the document does not offer a detailed explanation or methodology on how these calculations were derived, leaving the process somewhat opaque. Consequently, readers may find it challenging to comprehend fully how their personal tax compliance efforts contribute to such aggregated monetary totals. This concern aligns with one of the identified issues in the document, wherein readers may struggle to understand the compilation of these financial estimates without additional context.

Moreover, the potential changes in regulatory guidance mentioned without specific details may further introduce uncertainties for taxpayers, particularly with respect to adjusting expenses associated with compliance.

While the estimated figures illustrate the heavy economic burden of tax compliance, clearer guidance and detailed breakdowns of calculations could help taxpayers better understand the significance of these numbers in relation to their tax preparation activities. Furthermore, explanations regarding who qualifies for the free direct e-file tax system and how this may affect their financial expenditures could also provide valuable insights for taxpayers seeking to manage their compliance costs more effectively.