IRS should implement return-free filing
It could save U.S. taxpayers an estimated $2 billion and 225 million hours of miserable prep time
Tax time can be a nightmare. In a world where technology makes it possible to conduct almost any financial transaction—from paying bills to buying stock to taking out a car loan—with a few taps on the smartphone, tax preparation remains a decidedly low-tech experience for far too many people. If you don’t want to shell out for tax-preparation software or pay someone to do your taxes, it can mean long nights sweating over pay stubs and receipts, biting on pencils and trying to figure out what you owe in time to snail mail a check before April 15.
It doesn’t need to be that way. In many countries, including much of Europe, taxpayers are provided with an automated alternative known as “return-free filing.” Using information collected from employers and banks, governments supply a simple, prefilled return, and taxpayers are free to accept it as is, amend it with deductions and credits, or ignore it and prepare their taxes some other way.
If implemented by the Internal Revenue Service, return-free filing could save U.S. taxpayers an estimated $2 billion and 225 million hours of miserable prep time.
California already employs a version of this system, a pilot program called ReadyReturn, in collecting state taxes, and it has saved the state money while achieving a 98 percent approval rating from users. It’s such a simple, much-needed technological update to our antiquated tax-collection process that it’s hard to imagine who would oppose it—other than Intuit, the company that gets about 35 percent of its $4.2 billion in annual revenues from selling TurboTax software.
Intuit has spent about $11.5 million lobbying the federal government over the past five years to oppose return-free filing. (It has also spent $3 million in California to oppose ReadyReturn.) While Intuit has supplied money and behind-the-scenes lobbying muscle, anti-tax activists such as Grover Norquist, founder of Americans for Tax Reform, have provided the rhetoric, denouncing return-free filing as an “IRS power grab” and a ploy to “socialize all tax preparation in America.” Allowing the government to both prepare and collect taxes is a conflict of interest and would inevitably lead to higher taxes, they claim.
That’s paranoid nonsense. For one thing, participation would be voluntary, and those who distrust the government’s prefilled returns would be free to prepare their taxes in other ways. In truth, return-free filing would merely provide taxpayers with access to information the IRS already collects from employers and banks and uses to estimate taxes as part of its process of checking returns. Providing that information to taxpayers prior to filing would save time and money for everyone who opts into the system.
It’s time for Congress to stop listening to the special interests and the conspiracy theorists, and bring the IRS into the 21st century. This is not a partisan issue: Return-free filing is an idea that’s been embraced by both Presidents Ronald Reagan and Barack Obama. It shouldn’t be controversial. It should be implemented as an option for federal taxpayers without further delay.