Why doesn’t the IRS just send me a bill for the taxes I owe based on the info they already have?

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19

So it's time to file taxes in the United States and it occurred to me that I am required to provide a lot of information that the government already knows. For instance, I have to provide the contents of my W-2 form, but my employer already sent the Internal Revenue Service a copy of that document. Indeed, if I don't accurately report my income, the IRS will know because it differs from the information that they already have.

Why doesn't the IRS just save me the trouble of submitting information it already has and just send me a "bill" telling me what I owe (based on the information it already has)?

Obviously, there is some information I would still need to fill out, like self-employment income. But wouldn't it be easier, and save more money for everyone, to just have the IRS tell me the information it knows and, if I don't have any corrections or additional information that I need to report, just ask me to write a check and send it back?

EDIT: I'm interested in the political rationale for the IRS not doing this. As some commenters have noted, countries in Europe already have a system very similar to this where the IRS-equivalent discloses their known information and the individual fills in unknown information (such as self-employment income), so I am aware that it is technically feasible.

Thunderforge

Posted 2018-04-09T01:02:25.590

Reputation: 7 231

75I see three close votes because "This question does not appear to be about governments, policies and political processes within the scope defined in the help center." Could I please have some clarification about why this is not on-topic, given that the IRS is a government body? Is there some way that I could improve the question so that it would be on-topic? – Thunderforge – 2018-04-09T03:31:28.517

@Thunderforge: The clarification can be found, as already indicated in the close reason, in the help centre. Just because something is related to “government” in the US meaning of the word doesn’t mean it’s about politics. (In fact, however, one of the answers so far is a “political” answer.)

– chirlu – 2018-04-09T08:00:45.587

11Comments deleted. Please don't try to answer the question with comments. If you would like to answer, please write a real answer. – Philipp – 2018-04-09T11:10:49.227

2Should this be moved to Money.SE? – dalearn – 2018-04-09T14:14:19.887

3@dalearn - the highest voted answers already show the political side of this question, so my suggestion is to leave the question here. – Alexei – 2018-04-09T14:29:40.433

@Thunderforge - for me the question is perfectly valid. However, you can add that you are interested in the political aspect: multiple comments and answers indicate that the process is much less painful in other places such Austria or EU countries, so this suggests a political difference, not a technical (economical) one. This should clarify its connections to Politics.SE and hopefully prevent it from being closed (currently 3/5 close votes). – Alexei – 2018-04-09T14:33:03.797

1@Alexei Thanks for the suggestion; I've edited to clarify that I'm looking specifically for the political differences, since the presence of a system in European countries suggests that it's not a technical issue. – Thunderforge – 2018-04-09T15:50:44.807

7

I had to delete some more comments. Everyone, please remember what question comments are for. They should be used for asking the question author for clarification, providing constructive criticism for the question or otherwise communication with the author. They are not meant to post information which belongs into an answer.

– Philipp – 2018-04-10T09:12:24.747

Several ways have been found to do this in other countries, as noted (even Italy!). To answer the question fully, one would need to know: how much relevant data IRS really has (e.g. do states share everything?); how much citizens know about it (does the federal government want you to know they know such things?); how better or worse that data is, on average, than what people enter (e.g. does IRS know about deductible expenses more than people usually bother entering? does IRS want to reduce taxation income?). – Nemo – 2018-04-10T14:20:50.743

The question supposes that a significant factor is political. While there are politics involved (e.g., the tax preparation companies lobbying to keep the tax code complex), those are dwarfed by the practical issues of how the taxing authorities would acquire all the relevant information, and how to handle the exceptions for the taxpayers for whom the relevant information is not available except from the taxpayers themselves. – Adrian McCarthy – 2018-04-13T16:53:19.137

This isn't an answer, since it doesn't provide a rationale for the political decisions. But seeing how the European examples work, it stands to reason that such a system could not possibly work in the US given the resistance to something like a national ID. To put it into perspective, all the European countries that I am aware of have some kind of ID number tied to you as a person and tax payer or to you as a tax payer only. This would mean every US citizen would have to get such a unique ID number that is valid across state lines - when they don't even want national ID cards ... – 0xC0000022L – 2018-04-16T21:28:49.913

An episode of “Adam Ruins Everything” went over that in detail, with citations. – JDługosz – 2018-04-17T00:41:00.030

Answers

211

It's certainly possible, and plans have previously been made to do it, but then what would happen to the tax preparation industry?

That may seem like a silly question, but for the capitalist tax prep industry, automating away a large portion of their industry is a huge problem, so naturally they would lobby against it.

ProPublica has an article from last year that covers the issue.

Filing Taxes Could Be Free and Simple. But H&R Block and Intuit Are Still Lobbying Against It.

Here’s how preparing your taxes could work: You sit down, review a prefilled filing from the government. If it’s accurate, you sign it. If it’s not, you fix it or ignore it altogether and prepare your return yourself. It’s your choice. You might not have to pay for an accountant, or fiddle for hours with complex software. It could all be over in minutes.

It’s already like that in parts of Europe. And it would not be particularly difficult to give U.S. taxpayers the same option. After all, the government already gets earnings information from employers.

But as ProPublica has detailed again and again, Intuit — the makers of TurboTax — and H&R Block have lobbied for years to derail any move toward such a system. And they continued in 2016.

Intuit spent more than $2 million lobbying last year, much of it spent on legislation that would permanently bar the government from offering taxpayers prefilled returns. H&R Block spent $3 million, also directing some of their efforts towards the bill. Among the 60 co-sponsors of the bipartisan bill: then congressman and now Health and Human Services Secretary Tom Price.

The bill, called the Free File Act of 2016, looks on the surface to be consumer-friendly. It makes permanent a public-private partnership in which 13 private tax preparation companies — called the “Free File Alliance” — have offered free online tax filings to lower- and middle-income families. The Free File Alliance include both Intuit and H&R Block.

But the legislation would also permanently bar the IRS from offering its own free alternative.

Intuit has repeatedly warned investors about the prospect of government-prepared returns. “We anticipate that governmental encroachment at both the federal and state levels may present a continued competitive threat to our business for the foreseeable future,” Intuit said in its latest corporate filings.

Sen. Elizabeth Warren, D-Mass., offered a bill last year that would have actually allowed the government to start offering prefill tax returns. While Intuit did not lobby against Warren’s bill — presumably because the legislation had little chance of success — tax giant H&R Block did. (H&R Block did not respond to a request for comment.)

Neither Warren’s bill nor the Free File Act made it out of committee.

AquaticFire

Posted 2018-04-09T01:02:25.590

Reputation: 1 504

Comments are not for extended discussion; this conversation has been moved to chat.

– Philipp – 2018-04-10T19:14:02.580

27It’s already like that in parts of Europe. - I can confirm. I forgot to submit a tax-return one year while living in Estonia. The form submitted itself and I missed out on a €20 deduction. The next year, I took the 5 minutes to actually sign in, check it, and submit it. – Mark K Cowan – 2018-04-10T21:19:10.623

The article is presupposes several disputable claims, e.g., "it would not be particularly difficult to give U.S. taxpayers the same option." In many cases, it would be tremendously difficult for the IRS to get all the relevant information from someone other than the taxpayer. The fundamental problem here is not political, it's feasibility. The fact that it's done in other countries suggests to me that their tax systems require far fewer inputs and/or those countries track a scary amount of information about their citizens. – Adrian McCarthy – 2018-04-13T17:00:28.543

14@AdrianMcCarthy It would be incredibly difficult for the IRS to generate an optimal tax return, but very easy to generate a tax return based solely on 1099s and W-2s with the standard deduction and EIC. For the majority of people that's good enough. If that's not good enough for you, hire a tax professional. It's the same way in those countries. – Chuu – 2018-04-13T18:05:29.937

Also, if your employer is shady and sends out a tax form that says they charged you 10k in taxes, and sent 8 to the IRS, what's to stop them from just using that, and pocketing the money (other than laws)? – Anoplexian – 2018-04-16T16:08:25.980

1@Anoplexian Why would anything other than laws stop it? What's stopping citizens from filing bogus tax reports today? – pipe – 2018-04-17T09:27:15.953

2@Anoplexian The idea here is the option for having your taxes do themselves, not a requirement. If you have special circumstances like those Adrian raises, or if you have serious suspicions about your employer, you can always file yourself. Even if you don’t, you would still have all the paperwork available to double-check things if you like. – KRyan – 2018-04-17T14:06:46.300

1@Anoplexian the idea here is that the government sends you the tax form, not your employer. You (if so inclined) can verify what the government sends vs the W-2 or equivalent you get from your employer. If the government form says you paid $8K in taxes but your employer's W-2 shows you paid $10K, you flag that to the IRS. – Doktor J – 2018-04-17T15:37:47.453

1@pipe The IRS can be very thorough in investigating any supposed tax fraud. For most citizens, the possibility of an IRS investigation levied against them is enough of a deterrent. – Nzall – 2019-01-14T14:01:26.963

90

The IRS doesn't do that in the USA, because politics has decided so, as outlined in AquaticFires answer.

I have paid income tax in Sweden, Canada, and the UK. In Sweden, I was sent a completely filled form which I was invited to amend, in case anything was missing. It was just a couple of pages. It usually resulted in either a small deposit into my bank account or a bill to pay a small amount of additional taxes. In the UK, I'm not sent anything at all. Only some people need to file tax returns, and that does not include me, because I have only one source of income and have no deductibles (when donating to charity, I opt to give my deductible to the charity instead). Only in Canada (Ontario) did I have to go through any significant work to prepare my tax return.

As evidenced, there is zero technical reason for the IRS not to send a filled form. The reason is entirely political.

gerrit

Posted 2018-04-09T01:02:25.590

Reputation: 40 843

Comments are not for extended discussion; this conversation has been moved to chat.

– Philipp – 2018-04-10T19:13:07.513

It seems inaccurate to say that "politics has decided so", when based on the other answer it sounds like two big moneyed-up players are the ones who made the decision. Vested interests aren't quite the same thing as politics. – aroth – 2018-04-12T03:30:24.093

10@aroth Corrupt kleptocratic political decisions are still political decisions. – gerrit – 2018-04-12T12:03:29.553

4The question asks for the "political rationale" but this answer claims only that it's "entirely political" without giving any rationale. – Adrian McCarthy – 2018-04-13T17:03:12.870

I think Nordic countries (I know Sweden and Iceland firsthand) aren't necessarily the best examples. Most of them also seem to have a personal ID to which all of the stuff is tied. And the employer must report to the respective counterpart of the IRS, as must banks. So there's little wiggle room to "hide" income. Also only if you have loans or real estate will there be more to amend in the prefilled forms. Given most US citizens seem to frown at the prospect of a national ID card, I can hardly imagine something like that to work in the US. – 0xC0000022L – 2018-04-16T21:24:50.770

I had to delete some more comments. Please keep comments relevant to the question or use the chatroom. – Philipp – 2018-04-18T16:28:15.513

27

The other answers address some of the reasons why, in this case, inertia of the status quo is not overcome. From the perspective of the IRS simply mailing a bill creates a collection challenge that is more logistical and not purely political.

Income

Most income Americans generally make through wages is reported (and witheld) directly to the IRS as it is being made, and most businesses are required to make earnings and distributions reports available and payments made to the government quarterly. However, not all income is reported quarterly since the underpayment penalties for some circumstances is small, and America is somewhat unique in that it currently also taxes income from worldwide sources. This means that there could be significant tax liability that exists which the U.S. Government has no way of regulating directly. This is one of the arguments against citizenship-based (versus residency-based) tax laws.

Deductions

Another complication is deductible expenses which may disappear in a simplified tax plan, but probably not completely. The government will not be able to determine prior to you declaring your intent to deduct any given expenditure, so it will not be able to include those factors into a simple "bill" to be mailed and then paid directly by each resident/citizen. As Adrian McCarthy correctly points out in the comments, the amount of information the Government would need to collect and also make decisions about is vast. Farmers for instance can deduct livestock's depreciation over 5 years as a business expense (source), but have the option of front-loading all of that depreciation in the first year after purchase. This makes sense if you're planning on a bumper crop and you want to hold on to those particular animals for five years, but you may want to decide not to do that if you think your income may be higher two to four years from now, or if you want to sell an animal before 5 years have passed and not have to track the basis and repay back in the year it is sold. Sometimes, two animals meet in a field and a new animal is produced, but this animal has different rules for you because it just so happened to be born on your farm.

Goods are sometimes bought for cash at auction where aggregate information may be provided after sale but individual buyers are not identifiable, and in order to calculate everyone's deductions correctly the government would have to know this information. Other questions that may affect deductions such as "Did you buy a house this year?" are easy enough perhaps for the federal government to track, but each one is generally complicated by a related question such as "Is this your primary residence?". This creates a decision making process that is intractable from anyone's perspective other than the individual tax payer, or would require an amount and sophistication of tracking and reporting that I don't think most people would be comfortable with.

You could get around this by just mailing the bill and then have a place where you could list any deductions and calculate a different bill amount, but then you'd have just about re-invented tax filing. It can be much simpler, but politicians have yet to show the will required to make it so.

Political Resistance

Politicians ranging from Grover Norquist to Ronald Reagan have also been champions of the idea that, in Reagan's words, "paying taxes should hurt." From that perspective, letting the IRS "calculate" your taxes so they can then send you the bill is a conflict of interest since the Government will of course overcharge you. Instead individuals should be given the chance to calculate the total ourselves.


NB- I don't think being able to make certain deductions from your taxes will ever be able to disappear completely because politicians are pragmatic people and they know that upsetting everyone will probably be the last professional politicking they'll ever do. Upsetting other people's constituencies though is something that can be tolerated, and there could be actual practical uses for using the tax plan to encourage certain spending habits from time to time. Plus the sheer weight of it all has created a few businesses that are optimized for it, and could cause a systemic shock for them and their customers/creditors if it is ripped away like a band-aid. All of this creates uncertainty, which some could argue is also the government's duty to prevent.

Jeff Lambert

Posted 2018-04-09T01:02:25.590

Reputation: 12 864

4The flaw with the "deductible expenses" argument is that most people take the standard deduction, because they don't have enough other deductions. – Bobson – 2018-04-09T19:59:37.730

4@Bobson The flaw in that argument is that, if all you want to do is take the standard deduction then it should only take about an hour or so to fill out the 1040EZ from your W2 and mail it in. The only difference the OP proposes is that the W2 comes from the government and not the employer, and the 1040EZ comes pre-filled. Taxes only really get difficult when you're doing more than just taking the standard deduction. – Jeff Lambert – 2018-04-09T20:02:56.717

1I think a lot of this is self-driven also, in the sense that politicians say, "The tax system is too complex!" because they have complicated taxes (or they want to replace the people in power who are currently responsible for the mess). Normal people that have normal wages hear that and get afraid that they may be missing out on some deductions or just don't want to deal with the risk and wind up spending more on tax preparation than they receive in benefit of hidden deductions that they don't qualify for. – Jeff Lambert – 2018-04-09T20:09:21.247

11Excellent answer. Paying taxes hurts so much, because politicians who want to prove that government cannot do anything right want to make collecting taxes hurt, proving that if government does it, it is not right, so they get more votes, and more power to force government to do something else wrong. – Peter M. - stands for Monica – 2018-04-09T20:11:28.117

2This is probably the biggest problem, coupled with the facts that if the government fails to list a source of income but then tries to prosecute someone for failing to report it, its original failure to list that income might be viewed as entrapment. If people have to look over the government's bill with a fine-tooth comb to guard against such things, they might as well just fill in the information themselves. – supercat – 2018-04-09T22:19:36.383

1@Jeff Lambert: An hour or so? While I've never actually been able to use a 1040-EZ (self employed with investments, so Schedules C, D, SSE, & often others - my record is about 20 pages), I can actually do the 1040 part in about 10 minutes, once all the other forms are complete. – jamesqf – 2018-04-10T03:17:41.940

Wages are withheld on when paid, and retirement benefits can be as well, but reported annualy. I'm unsure what you mean by 'business ... earnings and distributions'. If you mean (nonexempt) interest and dividends paid to investors, which can occur on any schedule, they are reported annually unless small but almost none have withholding. If you mean earnings of a business, either passed through to partners or S-holders or taxed at the corporate level, those are reported annually though the bulk must be paid quarterly. – dave_thompson_085 – 2018-04-10T07:24:17.760

3@Bobson+ 30% itemizers is less than half but still a lot of people; OTOH the TJCA (Dec 2017) changes are expected to reduce that. A similar fraction (about 30%) have 'adjustments' (available without itemizing), although most of them are related to self-employment income, which of course is already outside the 'government knows' group. And about 30% get credits (also without itemizing) which the government doesn't know about. I don't have data if and to what extent these fractions overlap, but I rather doubt the prefilled form would not need any change for even half of filers. – dave_thompson_085 – 2018-04-10T07:30:45.860

@Bobson - You said, "...because they don't have enough other deductions." I was surprised by that, but based on assumptions. Is there somewhere to look up the actual number of people taking standard vs itemized? – Don Branson – 2018-04-10T20:14:30.997

@JeffLambert the flaw in your argument is you've straw manned the OP. He didn't only propose the W2 come from the government, he used it as an example of the kind of data the IRS could provide. In any case, I don't see how the IRS filling out a 1040-EZ for you is slower than doing it yourself. – iheanyi – 2018-04-10T21:58:24.783

@iheanyi It's not slower, but I would expect a bigger benefit before people would actually be influenced to take action. I don't see how it is a straw man, since comments are just comments. A "bill" coming from the government is essentially your W2 along with a line item list of charges (the 1040EZ). You can call those forms whatever you want and even re-arrange what's on them so that maybe it is just a single sheet of paper with a different name, but the result is the same. – Jeff Lambert – 2018-04-11T05:01:59.110

1@JeffLambert if the government can provide a pre-completed 1040EZ, I don't see the concern with them not having enough info. If the major issue is "not much benefit" I think you drastically underestimate the amount of headache people go through each year just dealing with simple tax situations. My stuff is relatively simple and I'm pretty well informed/capable and it still takes time on my 1040. Given that with the exception of sales tax and charitable giving, everything else is known by the IRS, that would save me hours of just collecting and entering data. – iheanyi – 2018-04-11T16:06:53.760

I realize my personal experience shouldn't be generalized, but even when I was a grad student, completing my taxes was simpler but still time consuming. I'm sure the price tag of this per year is huge, by comparison to the cost of the IRS to essentially do what TurboTax and the other major companies are doing w/ their software. – iheanyi – 2018-04-11T16:10:39.930

1@iheanyi What I mean by bigger benefit is that there's a proportion of voters who feel taxes should be something that is painful, even if the ultimate outcome is that you receive a refund check from the government. This helps keep up frustration that government is bad. It would take an actual act of Congress to flip it around, and saving some people hours of their time isn't that much of a consideration when other people's laziness is a common method of attack. – Jeff Lambert – 2018-04-11T16:35:29.917

This answer is on the right track, but I don't think it goes far enough in highlighting all the bits of info that the IRS doesn't have. Even for very ordinary taxpayers, one or two little things can make a big difference (Did you get married/divorced/widowed/separated?). So even if they could calculate it for the majority of people, you'd still need a complex system to handle the exceptions (and then rely on taxpayers to know that, this year, they have a special situation and thus need to submit themselves to the exception process and not just accept the IRS bill). – Adrian McCarthy – 2018-04-13T16:44:51.960

@AdrianMcCarthy I agree. I updated that part to add a couple of examples. – Jeff Lambert – 2018-04-13T18:03:25.477

@DonBranson: https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-publication-1304-complete-report with about a 2-year delay -- but TCJA changes the rules significantly for Tax Years 2018-2025, and we don't know yet how much that will affect actual filing behavior.

– dave_thompson_085 – 2018-06-15T23:47:09.500

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It's been tried. Look up "ReadyReturn" in California (or just: https://priceonomics.com/the-stanford-professor-who-fought-the-tax-lobby/). Intuit, H&R Block and the rest of the tax preparation lobby will do just about anything to stop it.

Flydog57

Posted 2018-04-09T01:02:25.590

Reputation: 1 240

2

If you'd like more information on this answer but would rather listen to the explanation in audio form, there was an excellent story about this on the Planet Money podcast last year at about this time: https://www.npr.org/sections/money/2017/03/22/521132960/episode-760-tax-hero.

– mweiss – 2018-04-10T23:34:40.020

It's also not just the tax prep lobby. Many anti-tax activists believe it is effectively a tax increase because it limits the number of people who will do a proper return and take their deductions, etc. Also covered in the podcast mentioned above. (I think that episode is the one that covers that.) – Eric G – 2018-12-06T18:57:34.867

21

Why doesn't the IRS just send me a "bill" for the taxes that I owe? In other words, why doesn't the IRS just save me the trouble of submitting information it already has and just tell me what I owe?

Obviously, there is some information I would still need to fill out, like self-employment income. But wouldn't it be easier, and save more money for everyone, to just have the IRS tell me the information it knows and, if I don't have any corrections or additional information that I need to report, just ask me to write a check and send it back?

There are a few practical and policy reasons:

  1. When you fill out a tax return you are verifying that you have reported all of your income, including income which is not covered by information reporting and may be unknown to the IRS. It creates a hook to impose penalties on you if you don't report income and the IRS later learns that you had income. Lots of people have at least a little income (e.g. tips or babysitting money) upon which taxes are owed that is not reported to the IRS. This is particularly true of rental and self-employment income, which while they make up the lion's share of unreported income.

  2. When you fill out a tax return you are keeping your contact information current making it easier to find you.

  3. Lots of people are entitled to refunds but don't make timely refund claims and requiring people to fill out tax returns to claim that revenue generates net revenue for the government.

  4. There are quite a few events (having children, getting married, getting divorced, a child being emancipated, going blind) that have an impact on your tax obligation and are not reported to the IRS. You supply that information when you file your own tax return. Similarly, the IRS rarely has complete information about your itemized deductions. For example, even if it gets information reporting on mortgage interest, it doesn't know if you really used that property as a personal residence so that you are entitled to claim that interest as an itemized deduction.

  5. There is a fair amount of art that goes into determining tax liability for taxpayers with complex tax situations and letting the taxpayer make a first attempt subject to audit reduces the power of the IRS bureaucracy over how tax laws are interpreted in disputed situations that the IRS may not contemplate.

  6. Some of the information that informs the IRS of who has income comes from other people's tax returns (e.g. alimony payments).

  7. For the people for whom the IRS could generate a reasonably accurate return, the time and cost of filling out a tax return is very modest.

From a political perspective, the key observation is that to enact an automatic tax return system, it would be highly desirable to simplify the tax code in many fairly modest ways. But, the details of the tax code's benefits and limitations are carefully crafted political compromises and all of those compromises would have to be reopened for political negotiation to implement this system.

ohwilleke

Posted 2018-04-09T01:02:25.590

Reputation: 34 346

3

If you'd like more information on this answer but would rather listen to the explanation in audio form, there was an excellent story about this on the Planet Money podcast last year at about this time: https://www.npr.org/sections/money/2017/03/22/521132960/episode-760-tax-hero.

– mweiss – 2018-04-10T23:34:22.377

17

Aside from the fact of political interests, there is:

  1. The IRS does not want you to know what they know about you. This is a means to keep you honest about anything they may potentially be unaware of. For a highly relevant example, cryptocurrency has been popular and they wouldn't want people dodging those taxes.
  2. It has been argued by some politicians that this encourages the IRS to charge higher and put the burden on citizens to correct the amount

user1675016

Posted 2018-04-09T01:02:25.590

Reputation: 813

3This. The IRS will just apply "the formula" with no deductions or anything in your favor and bill you. If you challenge it, you still have to do the same work, and you are now a prime target for audit. Just bend in the wind, like a good little blade of grass. – wberry – 2018-04-11T22:20:49.957

"The IRS does not want you to know what they know about you" - that seems very speculative, bordering on conspiracy theory. Do you have any basis for that claim? – sleske – 2020-09-18T12:18:45.010

10

While the IRS knows SOME of the information required to calculate your taxes, it doesn't know all of it.

If you work a regular job, it knows your income. Some forms of outside income are reported on 1099s and the IRS knows that too.

But there are lots of things the IRS doesn't know. It doesn't know if you are married and how many children you have. It doesn't know if you went blind this year. It doesn't know if you gave money to charity. It doesn't know if you were robbed or the victim of a natural disaster. It doesn't know what your medical expenses were. It doesn't know how much money you spent on books and supplies for college. All those things alter the amount of taxes you pay.

For many Americas, all this information is irrelevant because they just take the standard deduction and don't claim any other special exemptions, etc. But the IRS has no way to know if you will claim any of these things or not.

One could certainly imagine a much simpler set of tax laws where none of this matters, where they just take your income, apply some formula, and say, this is how much you owe. Many people have been arguing for such a system for many years. But as long as we have the present complex system, either the IRS has to ask you to fill out long and complex forms, or, I suppose, they could required that people who give you money or take your money send all this information to the IRS, i.e. somebody else could fill out long and complex forms.

I suppose that for the large percentage of Americans whose taxes are fairly simple, they could give you a pre-filled form that you can just check a box saying "yup, that's all the relevant information", sign it and send it back. Then if this form doesn't cover your case, you could throw it away and fill out the more complex forms. Or they could keep the present forms and just fill in the few things that they know.

But really, even the simplest form, you have to tell them if you're married and have children. How would the IRS know if you got married this year or had a baby or if a member of your family died or moved out on their own? I suppose they could require hospitals to notify the IRS when a baby is born and require funeral parlors to notify the IRS when someone dies, etc. But again, that just shifts the burden from you to the hospital or the funeral parlor. And then if someone else makes a mistake, presumably you are responsible to fix it somehow. There'd have to be procedures for notifying the IRS that a reported birth, death, marriage, divorce, whatever was incorrect and getting it fixed, adding another level of complexity.

Jay

Posted 2018-04-09T01:02:25.590

Reputation: 798

Deaths are already reported to SSA, who can easily share with IRS. Nearly everyone born in US since 1987 is 'enumerated' (assigned SSN) at birth handled via the hospital, so they do know you exist and who your parents are -- although some children don't live with both parents, or even one. Marriages and divorces are complicated enough already --there's an entire industry of wedding advisors and organizers -- that adding a short government form wouldn't be a big problem. – dave_thompson_085 – 2018-04-16T11:47:47.373

@dave_thompson_085 If the question is, "Could laws be changed to require that all information required to calculate your taxes be submitted to the IRS in advance so that come tax time they have all the information", I'm sure the answer is "yes". But that just changes who has to submit the information and when. In some cases it might be simple, in other cases it would be a pain. Like you'd have to report to the IRS when your children move away from home and are no longer dependents. That would be an extra form to file, which would seem like more hassle, not less. ... – Jay – 2018-04-19T23:00:00.743

... I suppose when the state registers a marriage or divorce, they could be required to notify the IRS. But sometimes they'd make mistakes, so there would have to be a form to fill out to challenge what the state told the IRS, and some procedure to resolve it. Presumably this wouldn't happen often, but it would likely be a big paperwork hassle when it did. Etc. – Jay – 2018-04-19T23:02:51.640

8

Having you fill out the form and send it in also allows you to address any changes that may have occurred during the year - getting married, divorced, having a child, having a child graduate college and move out, or otherwise "age out" of being declarable, death in the family, etc. And then income related stuff as mentioned above, from 1099 of the various kinds. Not all companies report them at the same time either. Or taxes you paid, which the gov't would not have known about - like property taxes. I pay my city directly, with no quarterly reporting to anyone when they are paid. Unless my city reports on them, which I am not provided any evidence of. (However, the married filing jointly standard deduction I think will swallow those taxes up in the 2018 filing.)

CrossRoads

Posted 2018-04-09T01:02:25.590

Reputation: 181

You can address those same changes on a pre-filled "form". That companies don't report stuff at the same time doesn't matter as you simply wait until the IRS sends you what is "complete". – iheanyi – 2018-04-10T22:00:18.927

5

This is not an answer, since - obviously! - no one but the IRS rulemakers is qualified to provide an actual answer. However, it attempts to point out some relevant factors that really belong in comments. (And were put there, then deleted by officious busybodies.)

The most important factor is that for many people, the IRS simply does not know what information should go on that pre-filled tax form. W2 or 1099 income, perhaps, but then there are many legitimate sources of income - self employment, inheritance, and the like - that aren't reported.

Then there are deductions. For instance, I recieve $X gross income reported on 1099s, but then I have a number of business expenses that are subtracted before I report my net income on which I pay taxes. The IRS has no way of knowing these expenses - indeed, sometimes I don't have more than a vague idea until I add up the shoebox full of receipts for the year, and try to decide which are legitimately deductible.

Even for people who are not self-employed, there are many events that might render that pre-filled form incorrect. Get married or divorced during the year? Have a kid, or perhaps are now supporting an aged parent? The IRS does not know these things, and unless you are a fan of Big Brother government, there is every reason why they should not.

jamesqf

Posted 2018-04-09T01:02:25.590

Reputation: 10 503

6-1 I'm not expecting that the IRS knows everything about a person's personal life. This question is about the government providing the information that it knows, as it does in European countries. – Thunderforge – 2018-04-10T04:07:56.690

2@Thunderforge: But this is the US, where most people would strongly object to something like the Swiss "Contrôle des Habitants" tracking their every change of address. – jamesqf – 2018-04-10T17:20:46.153

2@jamesqf well, unless people are lying to their employers and financial institutions, the IRS would necessarily know any relevant address for tax purposes. – iheanyi – 2018-04-10T22:01:28.277

@iheanyi: Why? As an independent contractor, I get paid by direct deposit. Likewise most contact with the IRS is on line. No need for my clients, or the IRS, to know a physical address - I could easily use a post office box for things that absolutely require paper. Likewise for my bank: all their contact with me is on-line. In both cases, I've continued to work seamlessly with them while occasionally residing on different continents. Nor do they have any reason to know my maritial status, number of dependents, &c. – jamesqf – 2018-04-11T18:40:32.780

@jamesqf so you're saying your business address, PO box or whatever, would not be a correct one to send your pre-completed tax return? Though why would they send it by mail, why not just make it available online and you login using a password and pin that you establish with them via mail? – iheanyi – 2018-04-11T19:32:16.330

@iheanyi: No, I'm saying two things. First, in the context of general government intrusiveness, that mailing address means they don't know where I actually live. Second, WRT taxes particularly, they don't know enough to fill in relevant details regarding mortgage interest or how much I can deduct as home office expense. – jamesqf – 2018-04-12T19:54:49.333

1With regards to the first, they don't need to know where you live to fulfill providing precompleted tax forms. As for the second, that's why they'd likely do electronic, though mortgage interest is reported to the IRS so they'd know that too along with the address of properties you own and likely the address the mortgage company had as your mailing address – iheanyi – 2018-04-12T19:57:30.767

4

In reviewing the previous answers I see a glaring lack of attention to a different political issue that could prevent the IRS from automating the tax filing process: States' rights.

Our government is "a sovereign Nation of many sovereign States" and as such citizens have annual tax obligations to both the national and state revenue systems. Some states do not charge an income tax, some do, and (prior to Trump) most Americans could deduct from their federal taxes the amount of taxes paid to any state(s) where they may have worked.

In order for the IRS to pre-calculate the federal taxes due they would need to obtain the individual state filing information first, and doing that would be a logistical nightmare, especially for anyone who owes taxes in multiple states (migrant workers, traveling consultants, etc).

Leaving a blank on IRS forms for state taxes effectively defeats the whole pre-filled tax calculation since the total due could not be calculated until that blank is filled in.

This then creates a technological hurdle that could be solved but only by either (A) requiring states to have earlier filing periods, or (B) requiring some kind of uniform state taxation system. Either of these options would tread rather severely on States' rights to determine their own systems of taxation.

O.M.Y.

Posted 2018-04-09T01:02:25.590

Reputation: 602

2

This isn't because of some grand conspiracy due to lobbying efforts by the tax preparation industry. While they do lobby Congress with the goal of resisting efforts to streamline the process (you can't e-file on your own, for example; you have to go through a licensed preparer, and they do make sure the IRS information is limited only to help filling out forms), the real, simple answer is:

Because the IRS doesn't actually know how much you owe.

The IRS does have some of the information it would need to estimate how much you owe (based on the taxes your employer paid on you), but the information is incomplete, and it's only reliable for traditional W-2 employees. There are legions of taxpayers that do not fit the regular employment paradigm.

Politically speaking (which is what you asked about in your question), the government is neither your shepherd nor your friend. It is your civic duty to asses your own liability and pay the taxes that you owe. The IRS only collects those taxes. When it comes to the law, the IRS's job is to investigate and prosecute tax evaders, not to enforce tax compliance -- that's your job.

The default position of the government is [supposed to be] that you are a law-abiding citizen who can be trusted to report all your applicable income accurately and deduct only what you are entitled to deduct. If you are suspected of cheating on your taxes, the IRS must begin a formal investigation on you (in the form of an audit), and only then can they investigate your accounting and compare it with the information from other sources to see if they reasonably match up. The government is not allowed (in an ideal world anyway) to abuse their power to verify what you have reported unless they have a valid reason to suspect you of false or incorrect statements on your tax returns.

Your employer files and pays their taxes quarterly, a portion of which is income they withheld from your paycheck on your behalf (if you are a W-2 employee). You file a form W-4 with your employer indicating how much you would like them to withhold, but you are free to have your employer withhold nothing if you choose. Also if you choose, you can opt to not use a tax preparer and simply fill out and mail in the requisite forms yourself (which can get quite complicated if you must deviate from the standard 1040 form -- this is what tax preparers are in business to help you with).

There are many sources of income that you can have, and deductions you can make that the government does not, and can not know about unless you tell them (which you are required by law to do). If the IRS were in charge if retaining all that information and assessing your taxes for you, it would be much larger than it currently is. In the United States, there is still the concept of limited government in which the IRS is supposed to stay out of your way as much as possible, and given how heavy-handed the IRS can be when it does act, it's politically difficult to change that role.

Mailing you a bill for your taxes would be extremely convenient, but would also place the IRS in a role that many Americans don't want the government to play. To quote Ronald Reagan's humorous joke, "The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'"

Wes Sayeed

Posted 2018-04-09T01:02:25.590

Reputation: 11 044

Nits: (1) employers pay payroll taxes and withholding either monthly or semi-weekly, but file the related information after the end of the year. Previously it was Mar. 31 of the next year, which would be a problem for the prefilled form idea, but PATH'15 moved it up to Jan. 31 starting last year (PY17). If the employer has its own taxes (corporation income tax, or excise taxes like 'highway' gasoline and tobacco products) they are done separately. (2) you can choose zero withholding only if you had no tax liability last year and expect none this year. ... – dave_thompson_085 – 2018-04-16T12:04:47.173

... You sign W-4 under penalty of perjury and they can fine you if it's false (in addition to the automatic penalty if you don't prepay enough) but they also can and I believe usually do use a 'lock-in' letter that directs the employer to ignore your W-4 and withhold as the IRS says, and if you want to change it you have to apply and get IRS approval -- which with the backlogs in W&I correspondence could easily take 6 months or more. – dave_thompson_085 – 2018-04-16T12:06:59.467

1

For the W-2 form: There is no guarantee that the W-2 form given to you and the W-2 form sent to the IRS contain the same numbers. The company could tell the IRS that you make much less money than you do, and pocket the difference in tax.

gnasher729

Posted 2018-04-09T01:02:25.590

Reputation: 3 950

8Which you could detect when the bill was sent, as long as it was itemized. – André Paramés – 2018-04-09T08:30:20.373

19Do you have evidence that this is the reason commonly cited for not implementing such a policy? – Sneftel – 2018-04-09T09:08:07.497

The Swedish tax form has an itemized list that includes reported income and tax withheld per payor. Pay slips typically clearly show income earned and tax withheld summed for the calendar year; even if they don't, they will show income earned and tax withheld for the payment in question. At that point, at worst, verifying the numbers comes down to addition. Sure it'd pique the tax agency's curiosity if your tax return shows a significantly different income than does the employer's filing, but if you can produce records supporting your version, it's the employer that likely gets into hot water – user – 2018-04-09T18:19:13.540

5

On the plus side, if you choose to delete your answer, you'll regain the reputation you lost and earn the rare Peer Pressure badge. Only 106 awarded so far!

– Thunderforge – 2018-04-09T19:50:16.793

2Several years ago, I had an employer not actually pay the taxes withheld from my pay to the government. I had no way of knowing that had happened until the IRS came at me with a bill for tax due. – Thomas Carlisle – 2018-04-10T12:33:38.853

Sending different W2s would be so foolish that it doesn't even merit concern IMO. The IRS would learn of the discrepancy as soon as you filed the tax return and your employer would have documented evidence of tax fraud. – None – 2018-04-10T17:16:55.067

Given that scenario, I would say that nicely guarantees that an employer would send only a photo-copy of the W2. This depends on your definition of the word "guarantee", since I suppose there is no such thing as perfect protection from contract breach. – None – 2018-04-10T17:18:39.520

(The answer was at one time rated -3, hence Thunderforge's comment. Although, at the time of this writing, it is rated -2.) – TOOGAM – 2018-04-14T13:54:51.400

1This is a form of fraud that no legitimate business even attempts. Not even Al Capone. It is glaringly obvious to the IRS when a W2 employee's withholding has not been submitted and that is almost never the employee's fault (usually the employee had no idea it was happening.) Failure to turn in withholding creates a discrepancy between the business' books, the business's bank account, and the employee's tax record. Good luck "pocketing" anything such that the IRS won't see it - banks are extremely compliant - unless you're working entirely in cash (a red flag for this very reason.) – OpenSorceress – 2018-10-11T12:05:08.480