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Is the Complex Tax Code Constitutional?

When the IRS’ own top dog hires a professional tax preparer because the tax code’s gotten too complex, it’s probably safe to say that things have gotten out of hand.

There’s no shortage of facts and figures that speak to tax code headaches. The IRS’ taxpayer advocate blanketed the code with criticisms–ranging from its 3.8 million word count to the 6.1 billion hours it takes Americans to prepare their returns each year—in her annual address to Congress.  

Now, the most recent By the Numbers column goes a step further to ask a question many taxpayers would applaud–and courts could consider audacious: Is the tax code too complex to be constitutional?

Section 6702 on frivolous tax submissions –on page 600-and-something of the 2010 code–enumerates the “loopholes” that won’t excuse filers from paying up, and smacks a hefty $5,000 fine on those who try them.  (Until 2006, the penalty was $500 per offense.) Taxpayers have even taken the government to court, arguing as far-fetched a defense as tax-law compliance being a form of slavery, and thus a violation the 13th Amendment. No dice, unsurprisingly.

So what’s an overwhelmed taxpayer to do? Can we be held accountable for rules we don’t understand?  This hardly seems fair.

A taxpayer could, theoretically, pay taxes as usual and then file for a refund, according to the article. The filer could then claim “complexity” is a violation of due process of law (protected by the 5th Amendment). But the likelihood of circulating through this process without the $5,000 frivolity fine is pretty slim. At this point the filer could sue, though the government would most certainly argue the case is settled by legal precedents. That’s a lot of coulds and ifs to even get there. And the process wouldn’t be cheap. But, perhaps such a case could make a point?

“Everyone knows it’s unfair, but you’d never be allowed to argue that in court,” as  the column points out via Daniel Pilla, a tax litigation consultant and the author of 11 books, including “The IRS Problem Solver.”

Readers, do you think our Constitution protects us from an obscure and overworked tax code? Should courts lend an ear to the argument?


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Comments (5 of 10)

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    • The IRS sends a lot of nocties each day. Most of this nocties are corrections and often requests. We must read the letter carefully and apply the right reply to the IRS.

    • gmM5Ba Walking in the presence of giants here. Cool thinking all around!

    • PS wrote: “Most of the complexity of the tax code has been created by people who are trying to get away with something.” The alternative minimum tax is reaching further and further into the middle class. Using common itemized deductions should not be that hard. Mortgage interest, real estate taxes, charitable donations, medical costs: nothing exotic. You call that “trying to get away with something”?!

    • Memo to Kelly: Isn’t the government doing that already? Look at Quantitative Easing 2. Click of the mouse on the Fed’s computer and viola $600 billion to buy back treasuries from the banks. All in the name of injecting more cash into the banking system so they’ll create more loans. US corporation are sitting on $1 trillion of cash waiting for the dust to settle in Washington. The government wants it both ways. Tax us on our income and get us again by inflating the dollar. If the spending doesn’t stop, we’ll all be in higher tax brackets.

    • We should be taxed on sales not on income like we are in TN. Not everyone works for an employer that provides a W2 look at drug dealers, grass mowers, etc. but they all buy food and clothes. The Fair Tax is not the answer.

About The Tax Blog

  • The Tax Blog brings together a team of award-winning tax journalists from the Dow Jones network and around the web to examine the tax issues, changes and legislation that affect families, investors and small business owners. Our contributors include Tax Report columnist Laura Saunders (WSJ), Tax Guy columnist Bill Bischoff and senior reporter Jilian Mincer (SmartMoney.com), retirement-focused reporter Anne Tergesen (WSJ), wealth management writer Arden Dale (Dow Jones Newswires), TaxWatch columnist Eva Rosenberg and personal finance reporter Andrea Coombes (MarketWatch), and reporter Alyssa Abkowitz (SmartMoney). They’ll provide the latest news and insight, mine the tax code for tips and loopholes, and answer your questions about tricky tax situations. Contact the The Tax Blog with ideas, suggestions or tax questions at thetaxblog@dowjones.com.