Tax System

Issues in Tax Compliance Burden Gao ID: T-GGD-96-100 April 3, 1996

Businesses and individuals spend time and money--and sometimes experience frustration--trying to comply with federal, state, and local tax requirements. GAO refers to this experience as the "taxpayer compliance burden." GAO collected information on the federal tax compliance burden from businesses, tax accountants, tax lawyers, representatives of tax associations, and Internal Revenue Service (IRS) staff. Several themes emerged from GAO's analysis. First, the complexity of the Internal Revenue Code, compounded by the frequency of changes to it, is the driving force behind the compliance burden on companies. Second, a reliable estimate of the overall costs of business tax compliance would be costly and in itself burdensome on companies to obtain. GAO is studying two return-free filing approaches used in other countries to determine whether they reduce the tax compliance burden on individuals. Despite their promise, these approaches may impose burdens on employers, tax preparers, and state tax systems. Moreover, IRS' ability to implement such systems is unclear. Reducing the tax compliance burden on businesses and individuals will be a challenge because of various policy trade-offs, such as revenue impact and taxpayer equity.

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