The U.S. Tax Code Is a Godawful Mess (Your Weekly Reminder)


How much are four boxes of used books worth to your local library? This tax season, perhaps it's better to ask how much they're worth to your accountant. Humorist Joel Stein had four different people do his taxes—an online service, H&R Block, a small accounting firm, and a mega accounting firm—to see if his choice of tax preparer would affect his tax bill.

The short answer is that of course it matters.

Take Stein's books, for example: H&R Block told Stein his four boxes were good for a $400 deduction; the mega accounting firm told him they were worth $250; and the small independent accountant said the books were worth $1,250. Stein made a total of $431,388 in 2011 (it pays to be a humorist, apparently), so the books alone aren't that big a deal, but they're just one deduction.

The variation in Stein's full returns was even more stark:

—H&R Block charged him roughly $400 to prepare his returns and had him owing the IRS $1,227 and owing California $1,160.
– charged Stein $30 and said he'd be "receiving a refund of $92,309 from the IRS and $27,245 back from California." The second time Stein used the site, he got "just $16,695 from the IRS and owed California $21,992."
– The small New York accounting firm charged him the same amount as H&R block, and had him "getting a $1,488 refund from the IRS and then giving most of that to California—$1,019."
– The large firm in L.A. charged Stein $1,200 to prepare his taxes and had him paying the "feds and California $2,592 and $1,952, respectively."

What's really funny/depressing about Stein's experiment, which you can read about in Bloomberg Businessweek, is that when he spoke to Mark W. Everson, who headed the IRS from 2003 to 2007, Everson "predicted that all four of my returns would come out the same, since, unless you lie, the numbers all plug into one formula." 

For more hair-tearing, read Jacob Sullum on President Obama's phony tax reform