Paul L. Caron

Sunday, January 24, 2010

NY Times: Why Can't the IRS Provide Taxpayers With Pre-Filled Out Tax Forms?

New York Times, Why Can’t the IRS Help Fill in the Blanks?:

In the digital age, filing income tax returns should be a snap. The important data from employers and financial institutions have already been sent to the government’s computers. Yet taxpayers are still required to perform the anachronistic chore of preparing a return from scratch. And, in many cases, they pay a software company for the privilege.

Requiring taxpayers to file returns without being told what the government already knows makes as much sense “as if Visa sent customers a blank piece of paper, requiring that they assemble their receipts, list their purchases — and pay a fine if they forget one,” said Joseph Bankman, a professor at the Stanford Law School.

Many developed countries now offer taxpayers a return containing all information collected by the taxing authority — to “get the ball rolling by telling you what it knows,” Mr. Bankman says.

It’s a stunningly reasonable idea. When you prepare your return, why can’t you first download whatever data the IRS has received about you and, if your return is simple, learn what the IRS's calculation of your taxes would be? You’d have the chance to check whether the information was accurate, correct it as needed and add any pertinent details — that you’re newly married, for example, or have a new child — before sending it. Far better to discover problems early with the IRS, whose say matters more than third-party software’s best guess.

(Hat Tip: Ann Murphy.)

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"...why can’t you first download whatever data the IRS has received about you..."

And what they don't know, who is going know the difference?

Posted by: JD | Jan 24, 2010 9:27:36 PM

As long as there is a special function in the IRS' to make sure high level Democrats don't have to pay taxes, unlike us Little People.

Posted by: EvilDave | Jan 24, 2010 2:34:30 PM

This presumes the IRS is half-competent in its data management. Remember that the largest fraud draining the U.S. Treasury used to be felons in prison making up a bogus W2 saying they worked for Joe's Garage and were paid 50K and had 20K withheld and the government owned them 10K, please send it to them care of this prison address.

It wasn't until the 1987 "Secrecy in Banking Act" (more accurately the recording and reporting of your secrets act) that the banks (competent) IT systems were leveraged to obtain verified W2 data from employers. The government seems to believe that criminalizing misbehavior is as good or better than having a modern checks-and-balances accounting system.

To say nothing of tax law making IRS something other than a spreadsheet with formulas, where a few of today's multi-gigabyte-memory laptops could easily process the nation's taxes if the rules were written to favor automation rather than human argument and a multi-billion dollar IRS personnel budget.

Posted by: Ari Tai | Jan 24, 2010 1:01:54 PM

This assumes the IRS can do a massive amount of data matching in a relatively short amount of time, and that all of the data matching is accurate.

And that most returns are very, very simple, and there were no changes from the prior year.

Who would trust the IRS? Who trusts the NYT?

Posted by: save_the_rustbelt | Jan 24, 2010 11:13:53 AM


And put H&R Block, Jackson Hewitt and Liberty out of business.... What would you want to kill off these predators. It is like killing off the wolves in Yellowstone to protect the fawns. Pretty soon you would have too many fawns.

Or do you realisze now that if the billions siphoned off by H&R Blockhead and all the other thieving tax preparation chop shops were redirected in the poorest communities to entrepreneurship that America would be vastly better off. Bingo!!! This is as urgent of an issue as bank fees and credit lending, STOP the predatory retail tax stores from stealing Treasury money and encouraging tax cheating (bigger Earned Income Credits = bigger Refund Anticipation Loan fees for H&R Blockhead). Mail out prefilled tax forms and cut off the head of the snake. Do it!

Posted by: Shiekh Ali-Babba | Jan 24, 2010 7:15:06 AM