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.