A popular promise from politicians is the tax return so simple that you could fit it on a postcard. What about a return so simple you didn’t even need a postcard?
In our practice we often see what we call “matching notices” whereby the IRS informs the taxpayer that they had omitted or misstated an item of income. With the vast number of 1099’s, 1098’s, W-2’s, K-1’s, and so on all being electronically transmitted to the IRS, their ability to match all that data to 1040’s is improving.
The natural question is, if the IRS knows all that stuff, why don’t they just figure out my taxes for me? As in most things, several conspiracy theories compete to explain why (as a recent article in The Atlantic discusses) the pain of filling out tax forms is a uniquely American experience. There have been several proposals for the IRS to just compute the tax refundable or due based on the information submitted to it. For a simple return – which is most returns - this would be easy to implement.
So what’s stopping us? Here’s a couple conspiracy theories. 1. Anti-tax activists like Grover Norquist want filing taxes to be so painful we’ll all rebel and drown big government in the bathtub. 2. Intuit and H&R Block don’t want their business of filing easy tax returns for exorbitant fees to be destroyed by the IRS.
Whichever villain you want to choose, the no-filing tax return is possible for most Americans. And for the rest of us, why aren’t those forms bar coded so that we can just scan them into tax prep software with our scanner or cell phone cameras? Blame Intuit, which bought up the patents for that technology and buried it. So instead we get costly and 90% accurate OCR systems that pick through the printed forms and do their best . . .