US Government must improve tax system
The IRS’s complex and pre-digital tax system needs to be updated to support UK individuals and businesses earning income in America, say leading audit, tax and business advisory firm, Blick Rothenberg.
Simon Gleeson, a Partner at the firm, said: “UK nationals living outside the country are only liable to UK tax on income earned in the UK, but will face the daunting prospect of tackling the IRS’s tax returns on income earned in the US.”
He added: “Unfortunately, neither candidate in the US election has as of yet announced a plan to invest in the IRS and improve the US tax system. Both HMRC and the IRS have been subject to a reduction of agents to assist taxpayers in favour of investment in computer and data tools. But HMRC’s digitisation is more complete and allows taxpayers to do their returns for free.”
Simon said: “In the US there are a limited number of free filing tools and many more paper tax returns, which means the IRS has much more work to do than HMRC. Paper cheques, fax machines and post processing backlogs continue to be a feature of the IRS.”
He added: “The IRS backlog is not helped by the fact that American tax legislation is intricate and complex. Taxpayers in America are likely to have multiple layers of tax applied to their income: federal, state and potentially city. Each of these layers has different tax rates, all of which change each US tax year.”
Simon said: “The UK Self-Assessment paper tax return varies in length, but is usually shorter than its US equivalent, the IRS estimates it takes the average American two days to complete their return. Unlike in the UK, nearly all employees need to complete a US tax return. So doing a complex and time-consuming return isn’t just limited to the self-employed.”
He added: “As the US election and UK Budget loom ever closer, we can only hope that politicians wake up to the IRS tax nightmare that their citizens are dealing with and invest in a simple and efficient tax process.”
