Taxes

Tired of Filing Out Tax Forms? What If the IRS Did Your Taxes For You?

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But look: A FREE T-SHIRT!!!! Who doesn't love free T-shirts?

A new report on the U.S. tax code by a Paul Volcker-led presidential advisory board starts with a single, careful line: "America's tax system is complex." Well, yes. Another way to put it might be that America's tax system is a bloated, ugly, resource-hogging mess that wastes huge amounts of time and money every single year. According to the report, Americans spent about 7.6 billion hours complying with the federal tax code in 2008 alone. In dollar figures, that's about $140 billion, or about one percent of GDP. That's a problem, right? Probably! What should we do about it? Well, see, that's tougher to say—especially for the Obama administration, which asked for the report, but told the advisory board not to go so far as to make recommendations.

Instead, the report carefully discusses, without endorsement, a variety of proposals for simplifying the tax code, some good, some bad, including the option to have the IRS fill out your tax returns for you. In theory, this reduces the compliance cost. You get your pre-filled form, make any quick corrections, then turn it around. But as the folks at e21 explain, doing so would not actually reduce complexity—and it would ultimately put more power in the hands of the IRS to push taxpayers toward filling out their returns in a particular way:

Under the proposal, the IRS would send taxpayers with relatively simple returns a pre-populated tax return based on information taken directly from employers and from last year's return. Taxpayers who opted against preparing their taxes themselves could update the pre-filled tax return as needed–for example changing the number of dependents–and would only have to sign the return and mail it back.

Simplification proposals that would allow taxpayers to file on single forms (or even a postcard) have been common in the last several years, so we've seen this part before. However, we haven't seen one where the IRS essentially does your taxes for you. Many are already skeptical of the IRS's ability to proactively calculate the tax burden for so many Americans, even if only for those with relatively simple returns. Given the compliance gap the IRS already faces, this proposal may cause more problems than it solves. And of course, it would do little to alleviate the compliance burdens for those with more complicated tax returns–the population most in need of simplification.

If anything, I would worry that a proposal like this could lead to increased tax-code complexity, as forms would increasingly be designed around the needs and wants of the bureaucrats who actually filled them out. Pre-filled out tax forms might save some taxpayers time, but they would also encourage taxpayers to pay less attention to what's being done with their money.

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  1. On the back of the t-shirt it says “Seriously, this t-shirt is all I own now”

  2. C’mon, we promise not to cum in your mouths! Please?

  3. Next thing you know you’ll be suggesting we let the SSA handle our retirement investments.

  4. Here’s a very simple way to do it– The form would say ‘We need money. Please send us whatever you think is reasonable.’ Whatever people send, that’s all they get.

  5. they would also encourage taxpayers to pay less attention to what’s being done with their money

    I don’t see that as being a logical conclusion. Automatic withholding is where taxpayers became numb, since they rarely had to write big checks. This is why I’m such a fan of the property tax (as a general mechanism, not necessarily as a Federal mechanism), as writing that check twice a year makes it crystal clear how much your local government is bilking you for.

    As for technology enabling complexity, I heartily agree with that. I would wager that tax preparation software has been the great enabler of tax code complexity of the last decade. All of these credits and whatnot can be added to the tax software, making preparation as simple as a survey.

    1. This is why I’m such a fan of the property tax …, as writing that check twice a year makes it crystal clear how much your local government is bilking you for.

      Not if people escrow taxes (which most do; I don’t), or rent. And this doesn’t get to the immorality of property taxes.

    2. I am damn well aware of the 20-30% “withheld” from my paycheck by the state and feds every week or two.

      I would much prefer an income tax and a sales tax (near zero as possible) than the possibility of the property I own being seized for not paying rent to the government. All property taxes are always immoral all the time.

      1. All property taxes are always immoral all the time.

        FTFY

  6. I don’t see how this saves time. Whether I have to pull together my return, or some IRS agent in Wichita does it, we are still spending time.

    My bet is that any time saved by the IRS agent doing this will be more than lost as individuals make corrections.

    1. The point is not to save you time, but to hire oodles more IRS workers to do the work for you.

      It’s always about government expansion, all of the time.

  7. Plenty of Republicans already agree with “From each according to his ability.” As do virtually all Dems.
    So soon as the GOP gets abroad with “to each according to his need,”
    the IRS (guided by local community organizers and “justice” redistributors) can administer the new tax code fairly.

  8. It’s all the government’s money; the only question to be answered is how much of it they are willing to let you use.

  9. Maybe the time has come to start considering the possibility of the option of looking into various proposals to investigate areas of the tax code that could reasonably, carefully, with heavy heart and seriousness of purpose, yea with means-testing and an eye for common sense fairness, be simplified. As long as any such proposals are revenue neutral, non-regressive and carbon footprint sensitive.

    No homo.

    1. WTF is ‘no homo’? hater did have a great post.

    2. Sir Humfrey Applebee! Welcome to America!

  10. Here’s a way. Why don’t we deduct the cost of our time used to comply with tax laws from the amount we “owe”?

    1. ‘Why don’t we deduct the cost of our time used to comply ‘

      that is impossible…technically we are the property of the Rothschilds government, therefore any time we waste not adding to GDP is time we are liable for…this also explains why we cannot deduct trivialities like eating, water bills, electricity etc. Whe you slaves start to think you actually own your time it leads to all sorts of stupid ideas.

  11. Many are already skeptical of the IRS’s ability to proactively calculate the tax burden for so many Americans, even if only for those with relatively simple returns.

    No kidding. This basically only works for wage apes whose taxes are withheld; the IRS can just decide how much to refund.

  12. Revised Simplified Income Tax Form

    Line A: How much did you earn? $_______
    Line B: Send in amount on Line A.

    (I know it’s an old joke. But it seemed appropriate.)

  13. Why yes, yes I’d be happy to guard this henhouse for you.

  14. Reminds me of a cartoon by the late, great Jeff McNeally (sp?) from about 1978: The form was clear and simple to fill out– 1.”How much did you make last year?” 2. “Send it in.”

    1. your post gets an 8.5

      points deducted for being the second, but extra points for correct attribution.

  15. You get your pre-filled form, make any quick corrections, then turn it around.

    Well, that would make it easier to smoke out the troublemakers determine whom to audit.

  16. I’d have liked the T-shirt more if it were institutional gray and had “Prisoner 06114263” on it.

    1. How’s this?

      IRS Fashions

      1. Voros FTW.

  17. Aresen is right. We should all send 100% of our income to the government. If it deigns to redistribute any of that income, it can do so on some rational, fair basis. Like need.

    This is a far simpler system than we have today.

    1. That made me touch myself.

      1. Here’s a more appealing version of that idea.

      2. It made me want to touch yourself too, Tony.

      3. Americans With Ability Supporting Americans in Need Act.

        Simplify.

        1. The AWASANA Act? Son, you have a lot to learn about being a legislator. That shit don’t even make an uplifting acronym!

          1. I’m laughing, because I almost issued a preemptive disclaimer: “Ain’t got time to come up with a wicked acronym.” However, I must note that your last ‘A’ was a redundancy.

            Screwing Talent to Enrichenfy American Losers Act?

            1. “Redundancy”?!? Boy, I’m going to school you with my whippin’ cane! Soon’s I get back from gettin’ money out of the ATM machine with my PIN number!

              1. Stealing Cash from the Rich to Eliminate Wealth Act.

                1. We want to be sure you taxpayers receive all the Special High Intensity Training you can stand.

                  1. Special High Intensity Training Act? I think you’re doing it wrong.

            2. Sharing our Treasure Equally, Absent Liberty

              1. Better.

  18. So every year the IRS will tell me how much money they think I made. And if I made more than that I’ll certainly tell them all about it.

  19. It’s hard to imagine ever gaining significant economic liberty without a simplified tax code. A consumption tax (with the elimination of every other tax) seems like the only way to go in order to starve the beast. Everyone has “skin in the game,” lobbying kept in check, no more discriminating and social engineering through taxes, and if the pricks even hint of raising it -that’s what elections are for.

    It doesn’t matter what issue you talk about, until there’s tax reform (or revolt), it will be biness as usual. Either that or go full retard: submit your entire income monthly and let your betters return what they think you need.

    1. At this point, cynicism is our only ally.

    2. lobbying kept in check, no more discriminating and social engineering through taxes,

      You are apparently unacquainted with the myriad of exemptions from state sales taxes that are obtained through lobbying for (ostensible) social engineering goals.

      1. I am. Well, it’s not perfect like our current system. You have to start somewhere. I’m all for no taxes, except a modest amount to make sure our leaders are comfortable (including getting Obama a boyz bike to ride on vacation), and a voluntary optional tax. Call it the public option. You give what you want to support your state solutions and worthwhile causes.

    3. How would you deal with the problem of deficit spending and fiat currency?

  20. I’d have liked the T-shirt more if it were institutional gray and had “Prisoner 06114263” on it.

    Most highly bitchin’.

  21. And if I made more than that I’ll certainly tell them all about it.

    And if you made less, have a nice time convincing them.

    1. Yes, but you have that problem now. Currently you have no clue what the IRS *thinks* you made so to be safe you had better report everything, even if you doubt they know about it.

  22. Taxpayers who opted against preparing their taxes themselves could update the pre-filled tax return as needed?for example changing the number of dependents?and would only have to sign the return and mail it back.

    But changing much of anything on a tax return tends to set up a daisy-chain of changes that eventually wash through to the amount owed/refunded line.

    So how would this work, exactly?

    Many are already skeptical of the IRS’s ability to proactively calculate the tax burden for so many Americans, even if only for those with relatively simple returns.

    No shit. Every year some bright spark calls the IRS a bunch of times with the same question, and gets as many different answers as people who answer the phone.

  23. Here’s an idea: Fuck progressive taxation.

    I have another one: Stop using the income tax for entitlement policies.

    That income tax system would fit on a single form sheet.

    1. Hell, man. I have a suggestion (posted here a couple of times previously) that is progressive in a modest degree, has only two dial (the exemption and the rate) and still fits on one side of one page.

      However, no on in power will be interested because there is no patronage in it.

      But the BigMuddy plan can help with that: every elected member of the federal government plus the Commissioner of the IRS and the Secretary of the Treasury should be required to personally do their own taxes every year with no aid but the official instructions.

      If that doesn’t convince them to clean things up a bit, well, at least there is schadenfreude.

  24. This would take all the creativity out of filing tax forms. I think our founders would appreciate some creativity in dealing with the federal bureaucracy as it leeches so much wealth unnecessarily from its citizens.

    Couldn’t the federal government do its constitutional job at half its current size?

    1. Do I hear one quarter?

      1. One tenth?

  25. Including defense?

    Probably a quarter to a third.

    Not including defense?

    A tenth would still be bloated.

    1. I hear a tenth. Will anyone take a twentieth?

      1. With or without defense?

        1. Our sole defense should be our nuclear arsenal. And a giant, space-based laser.

          1. Now you’re talking…one fiftieth!

  26. For the first time ever, I had to send in a paper form this year, because I was stealing $8000 from taxpayers and you couldn’t e-file when doing so.

    It was a pretty painful process, but what really got on my nerves was that 4 months later, it got returned due to missing information. Apparently they want your physical W@ forms, which I thought were just vestigial paperwork. Doesn’t the IRS already KNOW what’s on them? There is no reason for them to actually trust my copy when they are supposed to have their own, which makes me wonder how much money is wasted on such things.

    Furthermore, I would love to see a bill introduced that requires the IRS to make all tax forms submittable online, accepting scanned attachments where needed. This would save tons of money on the deadweight loss of processing physical paperwork. Plus it would have the wonderful side effect of putting tax prep firms out of business, so they can stop lobbying to make taxes more complex.

    1. Oh yes, they know wants on them. But they want to make sure you know what’s on them, and that you know they know that you know what’s on them. Then you can’t come to court later and say you didn’t know.

      1. But when I copied the information onto the tax forms themselves, I would think that would be sufficient acknowledgment. It is when I e-file.

        1. When you e-file, you enter all the information from the W-2 and that is sent with the file. When you prepare a paper return, you do not copy all the info from the W-2 to the 1040. (Disclosure: I work on tax software, specifically e-file.)

  27. And if the IRS precalculates your tax incorrectly, causing you to underpay, who is liable for the error?

    1. Um, you. You haven’t been paying attention, have you?

      1. That question was intended to be rhetorical

        1. And my statement was counter-rhetorical.

  28. I guess that sounds better then just coming right out and saying they want to socialize the public accounting industry.

    1. Just like health care. They don;t come right out and say they want to socialize it.

  29. Also, Mr. Suderman, you’re starting to rock the alt texts. Much luck on the “most read” for this week (as much for The Gobbler’s sake as for yours 🙂

  30. It’s a fucking trap. IRS sends you a form, you sign it, making you liable for any mistakes they made.

    -jcr

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