In recent years, Americans have found themselves coughing up higher amounts of money during the tax filing period. Drawing from our reference article on godzillanewz.com – Higher tax filing costs could take a bite out of your refund, we discuss the increasing costs of completing tax returns in the United States, the reasons behind it, and the consequences it carries for American taxpayers.
At the onset, it’s crucial to establish that tax filing has grown into a more intricate process. Modern complexities of the US tax code have significantly increased the amount of time and effort needed to file taxes. This complexity stems from various factors such as temporary tax provisions, tax breaks, and evolving tax laws leading up to and following the Tax Cuts and Jobs Act of 2017.
The Internal Revenue Service reports that individual taxpayers and business owners spend 6.1 billion hours a year complying with tax filing requirements. This escalation in the complexity of tax filing has driven up the demand for professional tax services, which has in turn increased the costs of these services.
Secondly, inflation plays a significant role in the increasing costs. As the overall cost of living continues to rise, most service providers pass on the climbing costs to consumers. This inflationary trend has seen major tax prep companies raise their prices. Coupled with increased complexity, it means that taxpayers are paying more for tax preparation services than they did a decade ago.
Furthermore, the expansion of online tax prep has also driven up costs. While online services offer convenience, they often come at a high price. The ubiquity of internet services has led to an increase in the number of taxpayers filing their taxes electronically. Unfortunately, this convenience comes with premium packages that increase the total cost of tax filing.
Additionally, some Americans are dealing with the reality of higher costs as a result of the discontinuation of free tax filing programs. For instance, the IRS free file program, which provided free tax filing assistance to low to medium-income Americans, recently ended. On the same note, major tax preparation companies have halted their free filing options, leaving taxpayers to bear the brunt of increased costs.
Consequently, these excessively high tax filing costs have significant repercussions. For one, they chip away at tax refunds that Americans rely on for big ticket purchases or to cushion against financial hits. Besides, high costs dissuade some taxpayers from utilizing professional help, leading to potential errors and the risk of penalties or audits.
Tax filing costs can also contribute to financial stress, particularly for low-income households. Increased costs could mean these households receive less from their tax refunds, reducing the amount they could use as a financial safety net or for essential purchases.
In summary, increased tax filing costs create substantial burdens for Americans. The ever-evolving tax code, inflated costs, premium online service packages, and the end of free filing programs have all contributed to these higher costs. Furthermore, they possess significant implications for taxpayers’ refunds and overall economic stability. It underlines the critical need for policies and mechanisms that can help reduce the escalating costs of tax filing.