Professor Susan Stranix and Randy Tang, 19, president of DCCC’s Business Society, help students sort through their taxes at the society’s yearly event on Feb. 25.
Individuals and corporations spent $265.1 billion on income tax preparation before paying a single dime of tax in 2005, according to the Tax Foundation, a non-partisan tax research group based in Washington, D.C.
This yearly “compliance cost” is projected to rise to $482.7 billion by 2015, and the money is spent dodging obstacles and finding loopholes in a tax code containing 5.6 million words – seven times the length of the Bible.
The stimulus package devotes $288 billion to tax relief in a section that adds another 577 pages to the federal tome.
When the federal government first collected income tax in 1913, the tax code was eight pages long and was limited to the wealthiest one percent.
One of the reasons the tax code grew to be so complex, said Professor Anthony Daly-Leonard, is that it gives Congress an avenue by which to direct the economy that would otherwise be absent with a flat tax.
Daly-Leonard, a certified public accountant and past advisor to the DCCC Business Society, said proposals for a flat tax have been brought up in Congressional bills. The primary obstacle, he said, is that a functional flat tax would require all individuals to pay an 8 percent minimum – well above the zero percent for many at the poverty line.
Daly-Leonard has filed taxes for others before, and explained that, even with loopholes, a millionaire can easily expect to pay $400,000 a year in taxes.
“The objective,” he said, “is to have people pay the legal minimum.”
On Feb. 25, the Business Society held a yearly event to offer students free help. Professor Daly-Leonard and Professor Susan Stranix, present advisor and an assistant professor of business, helped nearly a dozen students with their taxes.
Jolene Jordan, 43, an allied health major, saw a sign for the event. She said she has paid accountants $200 or more for tax help in previous years.
“I just can’t afford that this year,” she said. “I don’t know tax code – I know allied health.”
Clancy Conway, 25, a business major, is an officer of the Business Society who was on hand to assist. He admitted that he was unfamiliar with the federal tax code, adding that he moved here from Australia less than two years ago.
He explained that the Australian system is far simpler, and that their government has created a site for streamlined filing on the Web.
“Here, even online stuff costs money,” he said.
Many sites exist to help U.S. citizens file their taxes simply and nearly all of them will charge at least a nominal fee.
Randy Tang, 19, a management major, was another officer on hand to help with the event. He admitted he was also unfamiliar with the tax code, citing his recent arrival from Taiwan.
He noted that Taiwanese taxes were simpler due to – if no other reason – the lack of an additional tax imposed by States.
Pennsylvania charges a flat rate of 3.07 percent on all personal income, and each county may levy additional taxes on income and property.
While the tax code may be overwhelming, there is hope for financially strapped college students: The Hope and Lifetime Learning Credits, which can credit up to $2,000 spent on tuition and registration fees toward taxes that an individual owes.
Furthermore, the recent stimulus package will raise the maximum of the Hope Credit to $2,500 for 2009 and 2010, and the expanded credit can also be applied towards books.
Additional provisions in the stimulus package will also allow students to list computers as an education expense and temporarily suspend taxes on federal unemployment benefits, giving students more money to hope for next year.
Some restrictions will apply and it is the taxpayer’s responsibility to know the law.
“I just work and go to school,” Jordan said. She took advantage of the Hope credit last year, and said, “It definitely helps.”
For more information on the Hope and Life Learning tax credits, visit http://www.irs.gov/publications/p970/ch02.html
