IRS watchdog urges tax code simplification

US tax breaks needed to be cut to spare taxpayers costs and complexity, an Internal Revenue Service watchdog report released on Wednesday said even as political chances for a tax code overhaul might be receding.

The Taxpayer Advocate Service, an oversight arm of the IRS, wrote in its annual report to Congress that Congress needed to consider rebuilding the tax code from scratch and permit tax breaks only if the costs and complexities were justified.

A tax-code revamp, last effected in 1986, faced a tough road ahead in 2013 with Democrats and Republicans in Congress and the White House locked in argument over what tax reform meant.

The convoluted tax code meant many taxpayers accidentally paid too much in taxes, or too little, which could trigger an IRS audit, according to the report.

Ninety per cent of taxpayers sought professional services to file their taxes or bought commercial software to do returns on their own. Unscrupulous taxpayers could work loopholes in the tax code to dodge tax payments.

According to Nina Olson, who heads the Taxpayer Advocate Service, tax law complexity led to perverse results.