International Journal of Economics, Business and Management Research: The U.S. Federal and State Tax Simplification and Reform for Senior Citizens

The U.S. Federal and many State Governments provide social security tax deductions, either partial or all, for senior citizens. However, tax systems still require those whose incomes exceed standard deductions to report and calculate their income taxes. Usually, senior citizen’s income sources are from social security benefits, 401K retirement funds, IRA, annuities, pensions, and/or others. This paper provides a linear tax rate and tax formula to simplify federal and state social security and retirement taxes compared with the existing complicated tax calculation systems. This research also provides a reform proposal to combine all taxable incomes for qualified seniors who have certain retirement taxable incomes, such as less than $25,000 for Single Filers or $50,000 for Married Filing Jointly, and have no federal or state tax responsibilities. The numbers can be adjusted according to the tax revenue change after the tax reform. Senior citizens with more than standard deductions can simplify their tax returns. The benefits would include tax processing time and cost reductions for those qualified seniors and governments. It will comply with the goal of the IRS to make tax laws easier for senior citizens. In other words, the proposed method could achieve tax efficiency and optimal senior personal income taxation for federal and state governments, which may also be a good application for other countries.

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