How you can resist funding the government → about the IRS and U.S. tax law/policy → compliance costs of federal income tax

“In 2005, taxpayers will pay roughly $1.2 trillion in federal income taxes. But America’s tax burden is more than just the amount of tax paid. It also includes the cost of complying with federal taxes, including tax planning, paperwork and other hassles caused by tax complexity.”

And time is money, as they say. What if you took all of the hours people spend working on their taxes and multiplied that by their hourly wage?

In 2005 individuals, businesses and nonprofits will spend an estimated 6 billion hours complying with the federal income tax code, with an estimated compliance cost of over $265.1 billion. This amounts to imposing a 22-cent tax compliance surcharge for every dollar the income tax system collects.…

When examined by income level, compliance cost is found to be highly regressive, taking a larger toll on low-income taxpayers as a percentage of income than high-income taxpayers. On the low end, taxpayers with adjusted gross income (AGI) under $20,000 incur a compliance cost equal to 5.9 percent of income while the compliance cost incurred by taxpayers with AGI over $200,000 amounts to just 0.5 percent of income.

“How is a mugger different from the Internal Revenue Service?” asks Jacob Sullum. “Both take your money, but the mugger doesn’t make you fill out forms.”

And that’s just a ha-ha until you add up all of the hours people spend filling out those forms — six billion hours last year — which corresponds to an extra cost of over $265 billion (over and above the cost of paying the taxes in the first place).

That amounts to 22 cents for every dollar collected… And the compliance burden does not include the costs associated with litigating tax disputes, operating the IRS and the U.S. Tax Court, or tax planning aimed at minimizing liability.

So lately I’ve been being very urban homesteader — baking bread, brewing beer and sake, making yogurt, weeding the garden, canning soups. I’ve been looking for a paying gig, too, which I think partially explains my sudden explosion of home usefulness: it gives me something productive to do while I wait for résumés and bids to be ignored.

What I haven’t been doing much is writing anything substantial for The Picket Line. Sorry ’bout that.

Meanwhile all sorts of interesting things have backed up in my bookmarks, waiting for me to add some insight or context before passing them on for you to enjoy. I think instead I’ll just let them spill out here and trust you to fill in the blanks:

• Francois Tremblay wonders if taxpayers become complicit in what their tax dollars support. He weighs the arguments for both sides (no, because their participation is legally required; and yes, because their participation is nonetheless voluntary) and then engages in some spirited give-and-take with his readers.
• Steven Schallert writes about his war tax resistance at his interestingly-titled blog shutters slide to unveil fingerprints of angels.
• War tax resisters Phil and Louise Baldwin Rieman died in a car accident shortly after Christmas last year. There have been several remembrances of the couple on-line, such as this one from the Church of the Brethren.
• Murray Rothbard writes about ending tyranny without violence (through withdrawal of consent) and the nearly 500-year-old insights of Étienne de La Boétie.
• Carl Watner takes a fresh look at the Whiskey Rebellion and what it means about the origin and nature of the U.S. government.
• Gene Healy and Benjamin Friedman of the Cato Institute note that the U.S. military is preparing a new occupation, and when they meet the enemy the enemy will be us.
• The Taxpayer Advocate said in its annual report that American taxpayers pay — above and beyond what they actually are charged in taxes — nearly two hundred billion dollars just trying to do the paperwork involved in taxpaying.
• Our local paper did the math and put a number on a conclusion that should have been pretty obvious: it’s much cheaper to take public transit than to drive. According to their figures, it costs Bay Area drivers about $1,000 per month to get where they’re going by car instead of by bus and rail. Hell, we pay that much for rent.
• There seems to be a lot of buzz about a revival of local, alternative currencies during this recession.
• A writer for Rebelión notes that Europe’s public is sick of spending so much on the military and asks, “is tax resistance not therefore justified, an investment in the struggle for what is worth the trouble of defending instead of the military costs that impede this to a great extent?” (en español)
• Finally, U.S. nuclear weapons spending topped $52 billion last year (and that’s only counting what we’re allowed to know about). Compare that to the budget of your favorite government agency, business, or non-profit.

I’ve recently come upon an income tax question I didn’t know the answer to:

Let’s say you have the opportunity to rent one room of a two-bedroom house, one room of which is already being rented by someone else. Maybe you are subletting, or in some other way cooperatively paying the rent on the house as a whole. You have the opportunity, for an additional amount of rent, to rent an additional, smaller room in the house (one that would otherwise be common space) for exclusive use as an office for your business (you are a sole proprietor who uses Schedule C). How do you calculate the business expense for this office space rent?

1. Do you take the full amount of the additional rent as a business expense?
2. Or, do you consider the extra room a “home office” since it’s in the same building as your residence, and somehow calculate how much of your combined rent can be attributed exclusively to the office — and, if so, how do you make this calculation, especially with another rent-paying housemate in the picture and a mixture of common and housemate-exclusive space in the building?

My first stop was irs.gov, which has some information on the home office deduction. Unfortunately, nothing I found there seemed to unambiguously consider this particular case. Their examples all seemed to assume that one person, the business-owner, is also the sole renter or owner of the house or apartment, and is paying a single amount for a single occupancy space, part of which is being converted to business use.

So then I called the IRS telephone assistance hotline. Four times I called the IRS telephone assistance hotline. Four times I pressed 1 then 2 then 2 then 3, or maybe 1 then 3 then 1 then 2 then 3. Four times I talked with someone who heard my question and transferred me to the “small business department.” And four times I was put on hold, only to be cut off or hung up on after ten, twenty, or thirty minutes of listening to tinny, repetitive muzak.

So I called up my local IRS office, as I’m lucky enough to have one a short bus ride away, and asked to make an appointment to talk with someone about my question. Two days later they called back to tell me they couldn’t answer questions like mine — that it was “out of scope” for their office. They recommended I call the IRS telephone assistance hotline. I told them how that had gone and asked if they had any better ideas. They had none.

Yesterday I tried to get sneaky and call the IRS “Telephone Assistance for Businesses” line in the hopes that this would get me at least one step closer in the queue. No such luck. This time I had to press 1 then 5 then 1, but then had to do the same dance of talking with someone who transferred me to the “small business department.” A mechanical voice told me the expected on-hold time was “greater than thirty minutes,” but it turned out to be only about 25. Unfortunately, the woman I eventually spoke with, “Jan” (#0843180), was having phone problems of some sort (or maybe I was), and she had difficulty hearing what I was saying, finally couldn’t hear me at all, then I could no longer hear her either, and after a couple of minutes of frustrating silence, I was cut off again.

All I got out of Jan was 1) that because Congress is still in session, they can’t tell anyone definitively what the law is going to look like when it comes time to file taxes, and 2) the IRS is unwilling to advise me on what the best thing to do would be in this circumstance (I protested that it wasn’t the “best” thing I was looking for, but the “correct” thing).

She had just begun walking me through what sounded like it would be a long, long flowchart (“Were you a U.S. citizen at the end of 2011?”) when our audio troubles became insurmountable.

So now I know what that process feels like. It’s encouraging to me to know that people who try to deal person-to-person with the IRS are likely to come away from the experience frustrated, infuriated, and yet more cynical about their government and its bureaucracies.

An audit issued about a year ago showed that 22% of calls to the taxpayer assistance line “hung up or were disconnected before receiving service.” But that was more people than the 20% who actually received person-to-person service — the rest were either shuffled off to other lines, called or were left on hold until after hours, or were presumed to have successfully gotten their questions answered by pressing buttons and listening to recordings. “A reduction in funding for toll-free telephone and correspondence services resulted in a Level of Service goal for Fiscal Year 2012 of 61 percent, compared to 70 percent the IRS achieved in Fiscal Year 2011. The last year the IRS provided a Level of Service over 80 percent was Fiscal Year 2007. This decrease translates to longer customer wait times, increased customer abandons, and an increased number of customers redialing the IRS toll-free lines for service.” (“Level of Service” is vaguely-defined in IRS documentation as “the relative success rate of taxpayers who call for live assistance on the IRS toll-free telephone lines.”)

I may try the Taxpayer Advocate Service to see how that process works.

It may be that in the same way that you don’t call up the Justice Department to find out what’s illegal this week, but you’re supposed to hire a lawyer if you’re confused, the correct thing for me to do with tax questions like mine is to consult a tax professional of some sort. But the IRS seems loth to admit that they’re incapable of helping ordinary people with their ordinary tax questions (and mine doesn’t strike me as particularly out-of-the-ordinary).

Some bits and pieces from here and there:

• Peter J. Reilly, who has a blog at the Forbes website, writes about how the IRS labels conscientious objectors to military taxation “frivolous” as a way of discouraging dissent, and how war tax resister Elizabeth Boardman is challenging this in court.
• Some developments in the “won’t pay” movement in Greece:
  • The movement’s guerrilla electricians reconnected the electricity to a poor family in Bournazi that had been unable to pay the tax-swollen rates. They invited the media along, as there’s something newsworthy about the tax collector leaving an unemployed man, his oxygen-tank-using mother, and school-aged child in the dark: “The cold and lack of power create medieval conditions for the poor family who lacked the basics: could not cook, heat, wash, preserve food and medicine in the refrigerator, or read to the young schoolgirl. In a nutshell: hell.”
  • Twenty toll-gate-lifters in Larissa and Volos have been indicted for inciting people to pass without paying tolls. The Panhellenic Federation of Workers Associations of the Local Government has taken the side of the resisters, saying that “the trial is a clear criminalization of the mass political movement against tolls.… the criminalization of ideas and therefore constitutes a flagrant violation of democratic and constitutional liberties and criminalization of belief… it is a clear attempt to terrorize the resistance of our people, especially the practices of those who in an increasingly massive way endorse social disobedience and resistance to act against the tax hike…”
  • I wish I could read Greek or that mechanical translation were more sophisticated. This page seems to be describing a tax resistance tactic that involves paying a single euro in road tax to the federal government, accompanied with a letter of protest about how road taxes & fees are being siphoned off by foreign creditors rather than being used to keep the roads in decent repair.
  • The government is trying to promote a new social norm in which people will be free to refuse to pay for goods and services they receive, unless they are presented with a printed receipt — this in an attempt to crack down on off-the-books transactions. The government has signaled that it won’t prosecute people who steal from merchants in such circumstances.
• The National Taxpayer Advocate (a sort of ombudsman within the IRS) issued her annual report recently. One bit caught my eye: the Advocate estimates that U.S. taxpayers spend a combined 6,100,000,000 hours per year doing the recordkeeping and filing they have to do to be tax compliant. Janet Novak, at Forbes, puts that in perspective:

  That’s the equivalent of more than 3 million workers toiling away full time, all year. By way of comparison, the Federal government employs the equivalent of 2.1 million full-time civilian workers and Wal-Mart, the nation’s largest private employer, has 1.4 million workers in the U.S., although not all are full time.

A couple of bits and pieces from here and there:

• The Internal Revenue Service Advisory Council (IRSAC) released its annual report today. It begins by confirming one of my cherished hopes:

  [P]rior year and proposed budget cutbacks have so diminished IRS effectiveness that most taxpayers are now experiencing increased compliance costs. This undermines the voluntary tax system, reduces government revenues and promotes the underground economy.

• Information about the recent NWTRCC national gathering in New York City is starting to trickle out. NWTRCC social media coordinator Erica Weiland has a blog post about the event and you can also read the coordinating committee meeting minutes.