Around this time every year, Joseph Bankman, a professor of tax law at Stanford Law School and a longtime advocate of using technology to simplify tax filing, gets on the phone with reporters to explain what is wrong with how we do our taxes in the United States. Every year he says pretty much the same thing: No other industrialized country asks its citizens to jump through as many hoops to calculate their taxes as ours.
It isn’t just lawmakers or the hapless-seeming Internal Revenue Service that is perpetuating the annoyance of tax time, he adds. Instead it is the private sector — specifically, the software company Intuit, which makes TurboTax, the most popular tax program in the country.
For more than a decade, Mr. Bankman and a small group of tax experts have called on the government to create a tax preparation method that they say would vastly reduce the time and cost of tax-filing for most people. Intuit has been a primary obstacle to the effort.
The reform plan would work like this: Today, employers, banks, brokerage firms and pretty much every other financial organization in the country send the federal government detailed records about our economic activity every year. These organizations also send you, the taxpayer, a similar set of documents, which are forms with names like W2 and 1098. After you file your taxes, the government matches its two sets of documents to make sure you have filed correctly.
To Mr. Bankman, this double documentation doesn’t make much sense. If the government is already collecting financial data from employers and banks, why can’t the I.R.S. use that information to precalculate our tax returns for us? At the very least, why can’t tax software just connect to the government’s database to download all the information that the government has collected, saving us all that record-keeping and data entry?
“Imagine if your vehicle registration fee was done the same way,” Mr. Bankman asked in a recent interview. “Imagine if the state said, ‘Go to your car, find your VIN number and then look at this table that has different tax rates to find out how much you owe.’ If they did, people would probably need to hire an expert for that too.” (...)
Dennis Ventry, a professor at the School of Law at the University of California, Davis who has studied the issue, said that while Free File and Intuit’s integrations with private companies were beneficial, they won’t be nearly as helpful as a government program to reform tax filing.
Mr. Ventry said that if return-free filing were operated nationally, tens of millions of people with simple tax situations might have to do just a few minutes of work at tax time every year. The I.R.S. would send them a tax return that had already been filled in with their financial data, and if everything looked in order, they would file it either through the mail or electronically. The return would be completely voluntary. People who disputed the I.R.S.’s calculation would be able to do their taxes the old-fashioned way. Tens of millions of additional taxpayers with more complex returns would be able to save time by downloading all the financial information that the government has collected about them during the year. You would be able to do your return without hunting for every stray W2 or 1099 in your household.
“It can help all 145 million taxpayers,” Mr. Ventry said.
But Intuit’s opposition to return-free filing has been ferocious.
It isn’t just lawmakers or the hapless-seeming Internal Revenue Service that is perpetuating the annoyance of tax time, he adds. Instead it is the private sector — specifically, the software company Intuit, which makes TurboTax, the most popular tax program in the country.For more than a decade, Mr. Bankman and a small group of tax experts have called on the government to create a tax preparation method that they say would vastly reduce the time and cost of tax-filing for most people. Intuit has been a primary obstacle to the effort.
The reform plan would work like this: Today, employers, banks, brokerage firms and pretty much every other financial organization in the country send the federal government detailed records about our economic activity every year. These organizations also send you, the taxpayer, a similar set of documents, which are forms with names like W2 and 1098. After you file your taxes, the government matches its two sets of documents to make sure you have filed correctly.
To Mr. Bankman, this double documentation doesn’t make much sense. If the government is already collecting financial data from employers and banks, why can’t the I.R.S. use that information to precalculate our tax returns for us? At the very least, why can’t tax software just connect to the government’s database to download all the information that the government has collected, saving us all that record-keeping and data entry?
“Imagine if your vehicle registration fee was done the same way,” Mr. Bankman asked in a recent interview. “Imagine if the state said, ‘Go to your car, find your VIN number and then look at this table that has different tax rates to find out how much you owe.’ If they did, people would probably need to hire an expert for that too.” (...)
Dennis Ventry, a professor at the School of Law at the University of California, Davis who has studied the issue, said that while Free File and Intuit’s integrations with private companies were beneficial, they won’t be nearly as helpful as a government program to reform tax filing.
Mr. Ventry said that if return-free filing were operated nationally, tens of millions of people with simple tax situations might have to do just a few minutes of work at tax time every year. The I.R.S. would send them a tax return that had already been filled in with their financial data, and if everything looked in order, they would file it either through the mail or electronically. The return would be completely voluntary. People who disputed the I.R.S.’s calculation would be able to do their taxes the old-fashioned way. Tens of millions of additional taxpayers with more complex returns would be able to save time by downloading all the financial information that the government has collected about them during the year. You would be able to do your return without hunting for every stray W2 or 1099 in your household.
“It can help all 145 million taxpayers,” Mr. Ventry said.
But Intuit’s opposition to return-free filing has been ferocious.
by Farhad Manjoo, NY Times | Read more:
Image: Stuart Goldenberg
