About 20,000 individuals and 24,000 businesses have been randomly chosen and will soon get letters from the IRS. Don’t panic, these are not collection letters. These IRS surveys will help them update their estimates of what sort of burden they place on you. They are looking to see how much time you spend on filling out IRS forms and how much money you spend on compliance. However, don’t expect any cool freebies or gift cards from Uncle Sam.
If you look up the instructions for many IRS forms, they will list estimated times for recordkeeping, learning about the law, preparing the form itself, etc. As an example, for Form 2553, S Corporation Election, the IRS estimates that the record keeping involved with the form will take 9 hours and 48 minutes, learning the law for the election will take 2 hours and 33 minutes, and preparing the form will take 4 hours and 1 minute. The surveys going out will help the IRS update this information and be able to provide information to Congress about how much it is costing you to do your taxes each year.
This information is also sure to affect short term future policy making as Congress mulls over a few different proposals to simplify taxes and reduce the burden on you. The most prominent tax change on the table right now would consolidate and lower tax rates, but would also eliminate most deductions and credits. In the end, we estimate that most taxpayers would be paying more taxes. That makes the current tax simplification plan dead on arrival. However, an update to the statistics on how much time and money is being spent on tax preparation with the current, complicated system could give new life to this tax hike disguised as tax code reform. The IRS surveys will also provide information to government waste group and others that seek to promote a “Fairtax” solution.
As always read all correspondence you get from the IRS carefully and we are always here to help if you have any questions.