We need the IRS to simply file on behalf of the user and they just have to sign off.
US Tax law is far too nuanced and complex for this. Just simple things like donations create issues.
Donations to registered 501(c)(3) charities are tax exempt. But how does the IRS know if you gave the Salvation Army bell ringer $20? You have to tell them. On your tax return.
Medical expenses in excess of 7.5% of your income are also exempt. And the IRS has no clue which of your expenses were medical. So you have to tell them.
It's far more involved and complex than even just this. Did you move? Are you a member of the military? Costs related to your move are not taxable.
There are probably thousands of potential exemptions. Few of which could be automatically identified and credited without massive privacy issues. And even then couldn't be perfect.
That cardboard box you bought at the local big-box store? Was it a tax exempt moving expense?
Oh, and the IRS has been sitting on my return for 2 months now and I did all the work for them. Could only imagine what it would look like if they had to track all of this.
Don’t let the perfect be the enemy of the good.
https://taxfoundation.org/standard-deduction-itemized-deduct...
I bought a house early last year for 250k. Including all the interest, fees, taxes, etc, plus all my family's medical expenses, and even things that I'm not sure I could include, I still couldn't reach the standard deduction. It really is a lot of money for most people.
Various levels of deduction exist in other countries too - for example in Australia. But I get 95% of the form prefilled from employers/banks/insurance and only add what's missing.
Many trading platforms in Denmark do automated reporting, and some gig-economy apps do automated reporting too. But if you setup a lemonade stand, well, reporting is in you :)
The tax authorities also have pretty good phone support. It's a bit overloaded around filing season (but getting through is possible), but if come home from an internship abroad and call them, they are happy to tell you where and how to report income and taxes paid in Canada for example.
I bet it's expensive to offer phone support. But if you want people to pay taxes the best way to do it is to make it easy to do the right thing.
This advice goes pretty much everywhere, if you make it easy to do something, people will do it :)
At any time, you can log in and easily see how much the government thinks you have earned and from who, and which tax rate (tax code) is being applied to you. You can correct this as well if it is wrong.
Having lived in Australia, the US and UK, I've found the UK system to be the easiest to understand and navigate. Australia isn't too far behind. The US is just a mess.
However it is not a "one click to accept the default" system because there's still a lot of important information it does not know.
But nevertheless the yearly filing process is rather straightforward, as the tax authorities provide their own free web app for this purpose. It hasn't always been great but it improved significantly over the last few years.
There are no deductions, for a lot of stuff you just get money directly from the government, as an incentive.
Not sure how IRS is going to know how many dependents I have living in my house or whether I've lost my hearing and am now deaf.
The IRS could use easily use last years data plus what was submitted by companies to pre fill most Americans taxes accurately and people could amend those forms as needed with less effort than starting from scratch.
Yes, EZ file should work for 99.9% of the US. But it doesn't, because the tax code is horrendously complex
IRS could possibly reach into some of that. Or it simply relies on what you reported last year.
But sure, you'll have to correct some details every few years. This might also be the case if you have income from bitcoin, etc.
Yes, the govt has an interest in knowing the source of revenue for banks. Not only for money laundering and tax fraud, but ensuring the banks have stable income sources to avoid bank failures.