How’d that April 15th tax filing deadline work out for you? Have you heard that the federal government has some ideas to make April 15th easier for you?
One such proposal would forever change the way we file taxes. Instead of taxpayers sending their annual return to the IRS, some have suggested that we should instead trust the IRS to fill out our returns themselves.
Ultimately, this would result in an enormous backdoor tax increase on the American people, and a huge conflict of interest for the IRS to be both the tax collector and tax preparer. While proponents of such a system claim it would make filing “easier” for American taxpayers, it would come at the cost of lost deductions and a higher tax liability.
For most taxpayers, the IRS receives basic information in January or February about your previous year’s tax situation. But these forms only tell half the story of what your annual tax bill should be; in fact, this information conveniently (for the IRS) only includes data that raises your tax bill, not lowers it.
Unless we sign away virtually all of our financial privacy, the IRS has no idea if a taxpayer had a child, got married, bought a home, went back to school, had high medical bills, cared for a sick relative, or made donations to charity. All these potential credits and deductions lower one’s tax liability. But under a system in which the IRS just sends you a yearly bill, all of this information would be missing.
Imagine receiving an official letter from the IRS stating how much you owe in taxes. The wealthiest Americans will have the resources to challenge the IRS, but the vast majority of taxpayers will simply sign away money they are entitled to.
All of this assumes that the IRS even has the wherewithal to implement such a system. The IRS has a long and sordid history of bungling technology implementation, cost overruns and general incompetence when it comes to managing America’s tax system. Every tax season, refund checks are delayed as the IRS’ current technology cannot keep up with its regular processing of returns.
An overhaul of the tax code is long overdue, and making it simpler is a laudable goal. But a simpler code should not give license for the IRS to impose its will on taxpayers and prepare taxes as well as collect them. While its advocates praise the concept for its simplicity, its execution would be another government boondoggle, hitting American taxpayers with higher bills and a more complicated filing season.
April 17, 2013