https://www.npr.org/sections/money/2019/04/03/709656642/epis...
Transcript: https://www.npr.org/templates/transcript/transcript.php?stor...
There are very influential anti-tax and small government think tanks that vehemently argue against it, from the perspective that it reduces oversight.
Their position is that people just won't pay much attention to how much taxes they're paying if they don't have to fill in tax paperwork themselves each year. Their position is that if you make it invisible to end users, governments will just keep creeping up that tax percentage on end users and people will just accept it.
They're not wrong as regards to visibility, in the UK where tax is PAYE (Pay As You Earn), I don't think I ever paid more than a moments glance at the P60 (but I'd often check month to month that things were in the ballpark I'd expect. I'm a little more unusual in that regard probably). In the US I've had to pay close attention.
Anyone who uses TurboTax etc. doesn't actually "do their taxes". They're basically just doing a data entry job, mechanically typing values into boxes from forms as TurboTax prompts them. In many cases people don't even do that, instead opting to direct TurboTax to automatically fetch their data from a payroll provider, bank, brokerage, etc. and do it for them. So for many people it's just 1) enter in financial institution usernames and passwords; 2) click "file my return".
And given that the IRS wouldn't just "send you a bill", but instead send a pre-filled return, people would have every opportunity to read through it and decide if they agree with what the IRS filled in.
There is materially nothing different. The tax prep lobby has just done a fantastic job of convincing people that it "feels better" to fill out your own taxes rather than getting a pre-filled return from the IRS. Which is bonkers, especially since that supposed "feel good" crap wastes billions of dollars every year.
(The US is also pay-as-you-earn, btw. If your employer doesn't withhold enough taxes from your paycheck and you don't make up for it by paying quarterly estimated taxes, you have to pay extra penalties come tax day.)
How is the amount on a check or bill, if made clearly visible, somehow “not visible”?
To make this more explicit, presumably the chain of reasoning is as follows:
1. Make tax filing more painful.
2. As a general rule, people will set out to do that which reduces their pain.
3. Therefore, people will set out to do that which makes tax filing less painful.
4. People determine that lobbying for lower taxes will make tax filing less painful.
5. Therefore, people will set out to lobby for lower taxes.
Step 4 doesn't make sense to me because reducing total tax rate and reducing tax code complexity are orthogonal issues, and advocating for lower taxes will not in and of itself lead to a simpler tax code.
It's just an in-your-face reminder of how much you're paying in taxes, supposedly sending a stronger message to you than if the IRS were to send you a pre-filled return.
So the idea is, if you're more obviously reminded of how/why your tax money is leaving your wallet, you'll hate taxes more and lobby for lower taxes. You understand that doing so won't make filing taxes any less complicated (and in fact it might be more complicated if taxes are lowered through new deductions and credits that you need to prove eligibility for), but you'll expect to be paying less.
It's still stupid, but at least the chain of logic could potentially hold if you squint close enough and agree with the premises.
But that’s just going back to my comment 4 levels up this thread. If it’s an issue of tax amount visibility and not tax filing pain, the latter is not needed for the former.
For instance, all interest is charged as income for tax purposes, but 1099-INT is only issued for $10 and above. Similar restrictions exist for 1099-MISC but at a higher threshold, if you are a freelancer who receives a lot of small 1099 income from multiple sources, the IRS has no way of knowing that.
Conversely, if you’re eligible to itemize deductions, the IRS has no way of knowing what you gave to charities over the year. That’s entirely self reported and they only even ask for the receipts if you get audited. Charities don’t send records of their donors to the IRS.
The majority of taxpayers are not in that situation. They would benefit greatly from an IRS-provided pre-filled tax return.
For people that are in this situation, the IRS will send them a pre-filled tax return with incorrect data. Then they have the choice to either start with the pre-filled form and make corrections, or start from scratch with their own data. They are no worse off (and possibly much better off, if the corrections are minor) than they are under the current regime.
Regarding itemized deductions, with the 2018 tax year changes, the standard deduction is so much higher (and SALT deductions so much limited), that even fewer people than before will itemize. And the percentage of people who itemize already wasn't that high. But again: people who do itemize could merely correct the pre-filled form the IRS sends, or start from scratch if they really want to.
I suspect we will eventually see an IRS prefilled form, anti-tax activists and the tax filing industry can only hold it off so long. Some amount of people will end up overpaying their taxes because they choose to use the prefill rather than itemizing, and some people will feel more entitled to cheat on their taxes (e.g. waiters not reporting cash tips) but then we already see that happen today anyway.
In fact, charities are prohibited from valuing donations of property for the donor. The donor must do that, and justify the valuation if audited.
There are many unknowns, perhaps not for you, but for other people. Also you need to file in order to have this 'discussion'/exchange. Perhaps the state erroneously thinks you made 500k and is taxing you accordingly when in reality you made 100k. You then prove the state wrong (whichever way) and you save yourself the tax$ and the pain.
Maybe it's different elsewhere but here tax it's simple, all electronic and a free service provided by the tax office for the majority of Australians.
That's still less painful than doing the whole thing from scratch, and the majority of people don't have this situation, so they have very little work to do.
Let's remember that just because there are edge cases, that doesn't mean you should abandon hope for making the common case easy. The best user interfaces make the common case easy and the uncommon case possible.
It also requires all the states' revenue departments to coordinate with the IRS, because if everyone needs to file a correction based on state taxes anyway the system doesn't make much sense.
We can stop wasting billions of dollars a year on the tax prep industry and instead send a tiny fraction of that amount to the IRS so they can beef up their operations.
The one issue I see is that a lot of people expect to be able to file their taxes (and get their refund) by early February. People who have brokerage accounts (and other things) generally can't do this, as brokerage tax forms aren't due until mid-March. Since the IRS wouldn't know who does and does not wait on brokerage forms, they'd have to wait on everyone, and delay sending out pre-filled forms until late March. A lot of people would be pissed about not getting their refund in early February like they're used to. (Personally I think this is a dumb thing to get pissed about, but at the end of the day you have to convince voters it's ok, and the backlash against this would be huge.)
Requiring that brokerages and other entities with a later deadline move their deadline up to late January just might be a non-starter for some. Then again, if I look at my 1099-DIV and 1099-B forms, it's not clear why it takes so long to prepare them. All it takes is a DB query against my transaction history for the year that could be done on January 1st; no need to wait 2.5 months.
Certainly some forms couldn't be prepared until businesses close their prior-year books, but I think that'd affect a small minority of taxpayers.
Not that it really matters though, it all comes out in the wash.
Eg. my tax code is 1185L - essentially meaning I have a tax free allowance of £11,850 PA and have no additional income.
There are also multiple ways of doing things, and picking one path may be strategic to you (if you expect more or less income in the following years). Giving up on this flexibility and its ramifications will affect your outcome negatively.
For simple filings, yes, it should be possible for them to give you a bill that is close to what you'd compute yourself.
This is my experience for the US system.
Which would be fine by me, in all honesty. Let the IRS compute a "basic" return for you. If you want one that digs deep and actively minimizes your tax bill, then you can get your taxes done in one of the more traditional ways.
After filing, I got a letter that said (in more formal language) "oh, you missed this, we're direct depositing it."
In any case, even for stuff the IRS might legitimately not know about, it would still be a tremendous simplification to reduce it down to, "Hey, here's a list of things that have deductions or credits. If you think something's missing, enter the info."
You would then review the return and could update/file a return if you have additional deductions or business income that would not otherwise be reported to the IRS.
I believe the UK and some other European countries already have this system.
The government favours them as subsidies at point of purchase, rather than something you do at the end of the year. That actually works out a lot nicer as a tax payer, as you don't need to have the full amount of money up-front, and also means you're way less likely to miss out on some of them.
If you do have some uncomplicated deductions (eg. you are a higher rate tax payer and have made large donations to charity, or have business expenses which were not paid by your employer) you can phone the tax office or ammend them online.
Only those in more complicated situtations need to file anything, which most people do through the tax office's website.