Tax Code Jungle: A Guide for the Perplexed

US Tax Code

The US Tax Code, officially the IRS Internal Revenue Code (IRC), is almost 7000 pages long. Together the IRC along with Federal Tax regulations, and IRS Guidance are a behemoth with over 70,000 pages of rules, regulations, and instructions.¹ Imagine reading “War and Peace” … 54 times in a row — that’s the tax regulation for you.² Reading it cover to cover would take an average person over 2,300 hours—that’s about 98 days of non-stop reading!³

It’s not static either; it changes annually to reflect new laws and adjustments. In 2020 the IRS made more than 4600 changes to the tax code. That’s more than a dozen changes every day for an entire year⁴.

Components of Tax Regulation and Guidance

IRS Internal Revenue Code (IRC) – This is the actual US Tax code, and represents the core legal framework. The is the smallest component of the Regulation and Guidance.

Treasury Regulations – These are more specific instructions, and they provide instructions on how the Treasury interprets the IRC including examples of specific tax areas and how to apply the IRC. This represents a moderately sized component of the Regulations and Guidance.

IRS Guidance – This is a broad category that encompasses various resources published by the IRS to help taxpayers understand and comply with the tax code. It represents the largest component of the Regulations and Guidance and includes:

• Revenue Rulings: Official interpretations of the IRC by the IRS on how the law applies to specific factual situations. (Think of them as Supreme Court decisions interpreting the Constitution).
• Revenue Procedures: Statements outlining procedures for taxpayers to follow when dealing with specific tax situations. (Imagine them as IRS regulations implementing the tax code).
• Notices: Announcements from the IRS providing information on tax law changes, upcoming deadlines, or other relevant topics.
• Publications: Informational guides published by the IRS to explain tax topics in a clear and concise manner.

Tax Simplification

There have been many attempts at simplifying taxes, but for the most part there has been limited relief for Taxpayers. Many of the simplifications passed were about reducing tax brackets and simplifying calculations, but not many things that actually simplified taxes for citizens. There have been calls for solutions like the Flat Tax which would greatly simplify the Tax code by eliminating deductions, and simplifying taxes by requiring everyone to pay a flat fixed rate eliminating many of the complexities of the tax code. 

Help is Available

Recognizing the Herculean task facing taxpayers, the IRS offers several resources. From the Free File program⁵, which provides free tax preparation software to those who qualify, to the Taxpayer Advocate Service for those facing tax problems, help is available. There’s also a plethora of guides and FAQs on the IRS website to illuminate the path through the tax jungle.

A significant portion of the population, about 53% according to recent statistics⁶, seeks some form of help when filing taxes. This help ranges from using software like TurboTax to hiring professionals.

Despite free resources, many opt for paid services to ensure their taxes are filed correctly. Over one-third of taxpayers pay for tax preparation services⁷, with costs varying widely depending on the complexity of their tax situation.

For those with limited income, paying for tax help might not be feasible. Fortunately, there are programs like the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE), offering free tax help to those who qualify based on income, age, or disability⁸.

The U.S. Tax Code is indeed vast and ever-changing, making tax season a daunting time for many. While the IRS and government do provide resources to help, the complexity of the system means a significant number of people still seek and pay for professional help. However, there are free alternatives that offer a guiding light through the tax code forest, ensuring that everyone has the opportunity to navigate the intricacies of tax filing without being left in the dark.