A major part of the public relations sell accompanying the “Tax Cuts and Jobs Act of 2017” was the idea that Americans would be soon be submitting their taxes on a postcard. The mock-up of the postcard was trumpeted by politicians well after it became patently obvious to most tax professionals that this was not going to happen.
In this post I want to talk about the math of complexity from my personal history with the U.S. tax code and how that affects your personal tax filing. In a subsequent post, I will share my ideas how tax simplification could happen, although I am not holding my breath on this one.
My perspective comes from two sources. I spent a lot of years around the publishing side of tax books and software, as technology director and managing editor for the best-selling series of tax textbooks. But I started my career coding complex software problems, and the IRS Tax Code is one of these.
In reality, every exception to a tax rule, every new deduction or credit, every alternative calculation and every new required tax form exponentially adds to the complexity of U. S. tax compliance. It is a mathematics problem of complexity as much as a political problem. The IRS Code often reads like a beginning software coder’s “if-then” obsession run amok. The potential errors and unintended consequences caused by complex new tax rules are huge, especially in a law constructed by lobbyists behind closed doors and passed without hearings, as this one was.
Tax code complexity is a feature, not a bug (although the complexity itself causes more bugs). The job of every tax lobbyist is to convince Congress that my client’s income and deductions are different from their income and deductions, and deserve an exception.
I started my career in the early 1970s working for Ford Motor Company, constructing software simulating the equipment and “tooling” used to assemble cars and trucks before it was built and installed.  This is where I learned that, absent a well-structured coding approach, every new “yes-no” or “if-then” logical branch could double the testing required and double the chance for error down the road. The next branch doubles that, and so on.
Absent that programming discipline, and when you keep slapping on software “patches,” the size of your code grows and grows to deal with that complexity and to handle multiple error conditions, and the mathematical probability of error likewise increases. Even your best tests can leave bugs undiscovered until a costly program crash many months later. This level of complexity can and does, for instance, ground an entire major airline, just by messing up their check-in procedures. 
This is, in short, the lobbyist-written logic-challenged mess that is the recently-amended IRS Code. And several software companies need to quickly turn that bunch of patched amendments into bullet-proof revisions of their programs for professional and amateur tax preparers.
I first ran into then-new software publisher TurboTax in the 1980s as the technology director for a business textbook publisher, and helped negotiate a partnership to package their software with our tax textbooks. The first versions were on 3.5-inch diskettes and it grew quickly in complexity, media size and quality.
Today you have the entire power of the Internet to handle the complexity of processing your tax return preparation. The annual testing and amount of computer code supporting these products is immense, and the publishers of these products continue to amaze me because I know how that complexity balloons with every session of Congress messing with the tax code.
In the 1990s I became the managing editor over the print side of these textbooks as well. The primary authors of this series, among the most respected tax experts in academia, would joke in our editorial meetings that the very words “tax simplification” coming from Congress really meant “bigger books next year.”
And so it is with this new law. Every taxpayer is affected by the trade-off of increasing the standard deduction, but, less-often mentioned, eliminating personal exemptions. How this will affect you personally is typically answered by tax experts as, “Your mileage may vary.” I have personally made estimates, but until I see the forms, I can’t say for sure.
While many taxpayers will, as promised, now find that they no longer need to file Schedule A for itemized deductions, you have to look at how the three major taxpayer types currently filing this schedule currently complete their taxes in order to predict whether this actually simplifies things, because the complexity is still there in the code, just with different numbers:
- Some Schedule A filers manually compute their own taxes and fill out the forms themselves. Like many other forms, you will have to enter the data and make the calculations anyway in order to make sure that, indeed, you no longer need to submit that form. So unless you are convinced from the outset that this form no longer applies to you, you still need to do the work. You ignore the Schedule A calculations only at your own peril.
- People who use tax software will find that it cannot tell you that you don’t need Schedule A unless you first complete the online interview, entering all of your Schedule A data anyway. Do you have confidence about which questions you can now skip?
- And likewise if you use a commercial tax service, they will likely still want all of this Schedule A information from you and will record it into their software.
So, in net, there is likely not much human work saved by simply changing the Schedule A threshold. Only the relatively-small percentage of taxpayers who currently file just the 1040 form and Schedule A may see some “lower complexity” benefit to this change.
And if you are self-employed or have any other “pass-through” income, a new host of very complex options for how you calculate your taxable income will add new calculations and new forms. In these cases, this new legislation adds much more complexity than it takes away, and many small businesses will find that they need a tax lawyer, and not just an accountant, to guide them through the changes.
One of my tax authors, himself one of the nation’s top experts in his area of tax law specialization, liked to say that no matter what your level of education is, the knowledge required to file your own taxes correctly is likely one step beyond your personal skill level. And he said this applied to his own tax filing as well.
So, I wish you luck and patience when you encounter these new rules, which, by the way, won’t affect the 2017 return you are shortly looking forward to tackling.
To catch my upcoming (and free) advice on how to realistically simplify U. S. income taxes, bookmark this blog in your browser or follow me on my Twitter page or Facebook page by clicking here, or on the icons at the top-right of the screen.
- You have to go back to the original 1977 Star Wars movie and their green, rotating, wire-frame Death Star image to see the level of crude, but very expensive, technology we used at that time. For a picture of that original Star Wars Death Star simulation, click here.
- Examples of airline groundings due to computer software bugs are numerous. For instance see, “Southwest Airlines Computer Outage Grounds Fleet Nationwide.” CBS News, 20 July 2016.