One of the major goals of the Tax Cuts and Jobs Act of 2017 (TCJA) was tax simplification.
Because of the expanded standard deduction and child tax credit, lower marginal rates, and reforms to the alternative minimum tax and itemized deductions, an estimated 28 million tax filers were better off taking the standard deduction rather than itemizing, which dramatically simplified their taxes with less time spent working on taxes, less need for record-keeping, and less potential for errors.
The IRS estimated that the 2017 reform reduced the time needed to complete an individual tax return by between 4 percent and 7 percent for all tax filers. The Tax Foundation estimates that the resulting compliance savings could range from between $3.1 billion to $5.4 billion, which is an underappreciated boon, since tax compliance cost is a deadweight loss to the economy.
So yes, the 2017 tax reform not only lowered taxes for lower and middle income taxpayers, but it also saved them time and money through simplification.
Unfortunately, the actions taken by the Biden administration in 2021 mean that for almost everyone, your taxes are going to be more complicated this year.
And the IRS is already sending out letters to taxpayers warning them about the additional complications.
The new complications are a result of all of the goodies the federal government bestowed upon Americans to mitigate the effects of the Covid-19 pandemic (and to mitigate the results of government responses to the pandemic!).
Both the third “stimulus” payment and the child advance tax credit payments carry with them tax complications. (We put “stimulus” in quotation marks because it really was a relief payment to offset government policies, not an attempt to stimulate economic growth.)
Essentially, if you accepted the advanced child tax credit payments, you don’t get to take the full child tax deduction, and you might even have to pay some of it back to the government.
Similarly, with the third “stimulus” payment, you might have to pay some of it back, as well, depending on your tax situation. Or you might get even more back, again, depending on the calculations.
The main point is that many taxpayers will have to do additional calculations in order to get their taxes right, and these additional complications increase the potential for mistakes. Whether the payments themselves were good policy is a separate discussion, but there is no doubt that the Biden administration has taken us back in the direction of additional tax complication rather than further simplification.