Tax Filing Set To Become More Time Consuming Under New Laws

by Mike Godfrey, Tax-News.com, Washington

16 September 2003

As the Internal Revenue Service continues to draft new forms to take into account the new tax laws enacted this year, it is becoming clear that there is a downside to tax cuts, as taxpayers prepare to spend more time filling in longer forms.

For example, when calculating capital gains tax, taxpayers will be required to work with two different rates, taking into account the old 20% rate prior to May 6 (when the new tax law was activated), and the new 15% rate operational thereafter (on stocks held for more than 12 months). As a result the draft form for reporting capital gains or losses has grown from 40 lines to 53 lines. This could potentially affect up to 15 million people, according to figures recently released by the IRS.

It isn't only capital gains tax that will require extra attention from taxpayers next year. The IRS expects some 20 million people to conform to new rules for reporting dividend income next year after rates were slashed to 15%. Around 27 million taxpayers who received an advance child tax credit payment will have to complete a "relatively simple" worksheet, and the Revenue Service also estimates that some 10% of small businesses will have to spend more time keeping records to benefit from tax breaks on the purchase of new equipment.

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