by Susan Wenger
Winsights No. 101 (January/February 2008)
Photograph courtesy of Elan Sun Star
How long does it take the average American to fill out his personal income tax forms? Of course it varies, depending on the complexity, the number of subsidiary schedules, whether he uses tax preparation software, professional assistance, etc.
For everyone I know, it’s a time-consuming and harrowing ordeal. Even the simplest EZ form is a nightmare for many people who use it without knowing if they’re doing it right, or who aren’t great shakes at arithmetic.
The Internal Revenue Service receives nearly all of the same information that the taxpayer receives: statements of earnings from employers, statements of dividends and interest, profit/loss statements from investments, etc. When an individual files his income tax return, IRS checks it against the information they already have to ensure compliance. Since the IRS already has just about all the information the citizen has, and it is all computerized, it makes sense now for the IRS to take the first step to compute tax liability and send it to the individual for corroboration, corrections or additions. This would alleviate the burden on the citizen for figuring out all the numbers.
The individual would be held responsible for supplying any missing data, including unreported income as well as for adding additional deductions and any information that would help lower his taxes. The exception would be the Schedule A for itemized deductions, but I think Schedule A is the only one that the individual would need to be concerned with, and everything else would be done for him.
Of course, under this plan even Schedule A would only be filled out by the individual if he chooses to do so; otherwise he would receive the benefit of the standard deduction schedule. The individual would then either fill in changes or not, and sign the document and return it to IRS with a check for money owed, or a request for money due back.
Elimination of the paperwork calculation burden alone would make this a very welcome reform, and would save most taxpayers the cost of hiring professionals to do their taxes or purchasing tax preparation software to weave through the increasing complexity of tax forms.
In addition, though, it would reduce the element of dread from the process. People who are afraid that they might overlook some item and GET IN TROUBLE would be relieved of that dread. They would still be responsible and liable for reporting unreported income, but that is a diminishing small load for the average citizen.
I think that any political candidate who promised to push such a change would get a lot of support, regardless of his position on seemingly larger issues.
Note that this proposal does not affect any provisions of the tax code, does not open or close any loopholes or exemption categories — it merely shifts the preparation from the individual to the IRS, which does all that calculation anyway, to ensure compliance.
If the IRS did it first instead of having the taxpayer do it first, it would simplify the process for millions of taxpayers, who would not waive any rights to re-do it and make any changes to their return that they see fit to make.
It would become a state-by-state issue whether the numbers provided by the IRS and ratified by the citizen would satisfy state income tax returns as well, but I’m sure that if the IRS took the lead to do the initial paperwork, most states would accept a copy of that for their own needs as well, supplemented again by the individual’s right to make changes relative to their state return.
What a LOAD of time, work, frazzled nerves, and agony this would save!