The more infamous it is, the more complicated it is When It costs money
..And it gets worse If there is a delay
And backlog, making it especially difficult to reach the Internal Revenue Service for assistance.
But for me this raises an important issue. Why do taxpayers have to navigate the boring and costly tax filing system?
In the case of “simple return”
In 1985, President Ronald Reagan said, “Free returnsA tax system in which half of all Americans never fill out tax returns. Under this framework, taxpayers who file a simple tax return will automatically receive a refund or letter detailing the unpaid tax. Taxpayers with more complex tax returns will use today’s system.
In 2006, President Barack Obama’s Chief Economist, Austin Gourdsby, suggested:Simple return, ”, The taxpayer will receive a completed tax return for review or correction.Goolsby estimated that his system would save more taxpayers. US $ 2 billion annually for tax preparation costs..
Although never implemented, the two suggestions show that we all know. No one enjoys filling out tax returns..
So why should we do that?
As U.S. tax expert, I see the costly and time-consuming tax filing system in the United States as a result of its relationship with the commercial tax reserve industry, which encourages Congress to maintain the status quo.
Expensive and time-consuming system
Return-free filing is not difficult.
At least 30 countries allow returns-free declarationsIncludes Denmark, Sweden, Spain and the United Kingdom.
In addition, 95% of US taxpayers 30 types of information will be returned It informed the government of their exact income.The return of this information will provide everything the government needs. Fill out most taxpayers’ tax returns..
U.S. system 10 times more expensive Than the tax system of the other 36 countries with strong economies. However, these costs are no longer a non-return system. Americans spend 2.6 billion hours preparing taxes each year.
You may be wondering if Congress is out of date, even though you are unaware that Congress can free us from tax preparations. wrong.
Commercial tax preparation
About 20 years ago, Congress instructed the IRS to provide low-income taxpayers with free tax preparation. The agency said in 2002, “Free filesA public-private partnership between the government and the tax preparation industry.The IRS did not agree as part of the transaction Compete with the private sector In the free tax reserve market.
In 2007, the House of Representatives rejected the law it provided. Free government tax preparation For all taxpayers.And in 2019, Congress Legally ban IRS From providing a free online tax filing service.
only Public protests changed the course..
The public part of the Free File consists of an IRS that directs taxpayers to the Commercial Tax Preparation website.The private part is made up of those commercial organizations Diversion of taxpayers For expensive alternatives.
Private partners use computer codes, according to the Treasury Department of the Internal Revenue Service, which oversees the activities of the IRS. Hide free websites Take unsuspecting taxpayers to pay sites.
Private preparers if taxpayers find alternatives to free preparations Imposing various restrictions Use of various forms as an excuse to return income and taxpayers to paid preparations.
As a result, of the more than 100 million taxpayers eligible for free assistance, 35% are tax prepared. 60% don’t even visit free websites..Instead of 70% of Americans getting free tax preparation, commercial Companies reduced that percentage to 3%..
Tax evasion and tax evasion
Perhaps you speculate that there is effective policy justification for avoiding government and empowering the private sector. Judge those discussions for yourself.
One argument from the sales tax creator is that taxpayers Miss valuable tax savings If they rely on free government preparation.
In fact, government software reflects the same laws used by paid authors who have the same access to tax deductions or deductions.In addition, tax authorities like H & R Block promise to pay All taxes and interest due to audit failure.. As a result, these services have all the incentives to take a conservative parent tax position.
The second argument is that government-prepared tax returns encourage tax evasion.
With a no-return system Government reveals knowledge about taxpayer income Before the taxpayer file. So the debate goes on, taxpayers know if the government has missed something and there is reason to make a mistake.
However, taxpayers already know what information form the government has. Because you will receive a copy of those forms. Taxpayers avoid weeks of tax preparation, so there is no increased incentive to lie.
Finally, there is anti-tax debate on tax refunds: Keep tax refunds uncomfortable to fuel anti-tax sentiment.
In the past, Republicans have opposed high taxes.But after decades of tax cuts, Americans No longer influenced by that argument..
According to this debate, frustrating tax preparation helps to keep anti-tax fever high.And that Fuel the public’s hatred of the government And tax system.
Unfortunately, the anti-tax delegation’s desire to force Americans to spend time and money on tax preparation is the tax preparation industry’s desire. The desire to collect billions Of the fee dollars.
Tax preparation company lobby to parliament keep Cost and complex tax preparation..
In fact, Intuit, the maker of TurboTax, a tax preparation software, is preparing for government tax. Threat to its business model..
One example is Earned income tax credit, A government program for low-income earners.Credits are so complicated 20% of qualified people never file, So you’re missing out on thousands of dollars in savings.
If the government prepares a tax return for everyone, 20% of it Get government support.. Nonetheless, Intuit lobbyed lawmakers, complicating credits and thereby driving more taxpayers into paid preparatory services.
In other words, the tax preparation industry seems to keep the system complex due to the enormous potential costs in terms of loss of income.
I believe that only public protests can change the system.
This article will be republished from conversation, A non-profit news site aimed at sharing ideas from academic experts. It was written by: Beverly Moran, Vanderbilt University..
Beverly Moran does not work, consult, own shares, or receive funds for any company or organization that benefits from this article.