What if the IRS Did Your Taxes?
April 19th, 2012 by Stephanie Erickson
Tax Day finally came this week – on April 17 – which either meant stress (if you were rushing to meet the deadline) or relief (that you decided to get your taxes done early this year). Whichever situation you were in, you may wonder each tax season, “why doesn’t the IRS just do my taxes for me?” The IRS receives tax forms each year from your employers, bank, and/or stock brokers, so it’s not like they don’t have all the information they need to complete your tax form for you. Matthew Yglesias from Slate writes, “The IRS could simply collect all this information and send you a tax bill. You could read it over, sign at the bottom, and either include a check or wait for your refund.” However, he discusses several reasons why this scenario probably wouldn’t work.
First of all, some professions come with unusual expenses, such as travel time, air fare, or lodging; the IRS won’t know these exact costs as they pertain to your tax return. Additionally, he notes that taxpayers should have the right to forego the IRS’ calculations and submit their own form. California, however, adopted the idea of a partially filled out tax return called ReadyReturn. Josh Barro, from Forbes, writes of his concern with this “ReadyReturn” system, “The key feature of the income tax that encourages compliance is two-party reporting.” In the ReadyReturn system, taxpayers receive a return that has only the data the IRS knows. If a taxpayer wanted to underreport income, they might do so more readily with this system, knowing that the IRS may not have received all of their information. Ultimately, this could result in more tax evasion and a higher tax gap.
Yglesias writes of two political reasons why a ReadyReturn system is not being implemented nationwide. One being resistance by tax preparers – they would lose a large amount of business, or maybe even their jobs altogether. Additionally, anti-tax conservatives oppose pre-filled tax returns, thinking that “if taxes became less annoying, voters might be less unhappy about paying them.” Although a ReadyReturn system would reduce the complexity of tax regulations and the cost of compliance, it seems there’s still too much opposition towards a change in this direction.
Tags: Compliance, IRS, TIN
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