January 24, 2010 Why Can’t the I.R.S. Help Fill in the Blanks? By RANDALL STROSS NY Times
http://www.nytimes.com/2010/01/24/business/24digi.html?ref=technology&pagewanted=print IN the digital age, filing income tax returns should be a snap. The important data from employers and financial institutions have already been sent to the government’s computers. Yet taxpayers are still required to perform the anachronistic chore of preparing a return from scratch. And, in many cases, they pay a software company for the privilege. Requiring taxpayers to file returns without being told what the government already knows makes as much sense “as if Visa sent customers a blank piece of paper, requiring that they assemble their receipts, list their purchases — and pay a fine if they forget one,” said Joseph Bankman, a professor at the Stanford Law School. Many developed countries now offer taxpayers a return containing all information collected by the taxing authority — to “get the ball rolling by telling you what it knows,” Mr. Bankman says. It’s a stunningly reasonable idea. When you prepare your return, why can’t you first download whatever data the Internal Revenue Service has received about you and, if your return is simple, learn what the I.R.S.’s calculation of your taxes would be? You’d have the chance to check whether the information was accurate, correct it as needed and add any pertinent details — that you’re newly married, for example, or have a new child — before sending it. Far better to discover problems early with the I.R.S., whose say matters more than third-party software’s best guess. The I.R.S., however, isn’t rushing to offer returns that are already filled in. In the 2009 report to Congress of its Taxpayer Advocate Service, it noted that during the 2008 presidential campaign, Barack Obama proposed giving taxpayers “the option of pre-filled tax forms to verify, sign and return.” The report said “it is not feasible at this time” because the agency receives W-2 data from the Social Security Administration and 1099 data from financial institutions too late in the filing season, “much later than most eligible taxpayers would be willing to wait.” A solution isn’t hard to devise: move up the deadlines as needed. Start with Social Security, which tolerantly sets March 31 as the deadline for employers to submit their W-2 forms. The state of California, which collects wage data more speedily from employers — with a Jan. 31 deadline — shows what is technically possible. With little money to finance the project, and over the objections of the tax-preparation software lobby, the state began a small pilot project to offer a pre-filled state tax return, called ReadyReturn, to a small sample of taxpayers with simple returns for the 2004 tax year. Invitations went out to about 52,000, and fewer than 12,000 ended up participating. The program has grown modestly but remains little-known. Last year, about 60,000 returns came in through ReadyReturn from the two million taxpayers who were eligible. (Participants must have income only from wages and have just one employer, among other restrictions). An astonishing 99 percent of ReadyReturn participants said last year that they would use the program again. On a comment page for last year’s users, one glowing testimonial follows the next: “Filing my taxes has never been easier! I love this service!” “Takes the stress out of taxes!” “Love it, love it, love it!” “This was great! The federal NEEDS to do this, too!” One ReadyReturn participant told of catching an error in what the state government had been told the taxpayer had earned, and of having the government’s database corrected easily. It costs California $2.59 to process a paper return, and only 34 cents to process a ReadyReturn, the state says. For the coming fiscal year, it expects that the program will save about three times as much money as it costs to operate, and that’s assuming that only 160,000 of the two million eligible taxpayers use it. “Publicity remains one of the most formidable obstacles,” said John Chiang, the state’s controller. California has budgeted only $10,000 for getting word out. The meagerness of the funds allotted for the ReadyReturn program reflects the strength of its political opponents, Mr. Chiang said. The most vigorous opposition comes from companies that sell tax-preparation software, “principally, Intuit,” he added. INTUIT, which publishes TurboTax, does not dispute this description. “We’re a California company and actively participate in the political process,” said Julie Miller, a company spokeswoman. “Our position has consistently been that ReadyReturn duplicates what is already available.” Intuit is a proponent of the I.R.S.’s FreeFile initiative, which provides links on the I.R.S. Web site to 20 private tax preparation services — including TurboTax — that supply a free federal tax return to the lowest-income taxpayers with simple needs. FreeFile also provides free state returns in 20 participating states, but not in California. FreeFile, however, is not really comparable to ReadyReturn. FreeFile does not provide taxpayers with the information that the government already has nor does it use I.R.S. software to perform tax calculations. Intuit argues however, that FreeFile is preferable because it would be a “conflict of interest for government to be both tax collector and tax preparer.” But doesn’t a preloaded return just make transparent what the government does anyway? Read it, hit send. The 60-second tax season. ------------------- Randall Stross is an author based in Silicon Valley and a professor of business at San Jose State University. -- ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 Mail: antunes at uh dot edu *********************************** * POST TO [email protected] * *********************************** Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
