taxes

Some Countries Do Your Taxes For You. Here's Why the US Doesn't

The IRS checks the info on your tax return against the information it already has on you. So why don't they just fill out your return?

Imagine a world where the government filed your taxes for you for free and all you had to do was sign off on it. This is the way it's done in some European countries, Denmark, Sweden, Spain, the United Kingdom. It's called Ready Return.

Here in the U.S., we aren’t so lucky. Americans on average spend 13 hours and $240 filing taxes, according to a survey done by the IRS in 2021.

Unlike those European countries, the IRS entered into a private-public partnership in 2002 called Free File Alliance, where private software companies create tax filing websites with the promise of providing free options to a portion of Americans.

So unless you fill out the IRS paperwork yourself, you’re going to be paying someone to do your taxes for you, and it’s likely going to be a private software company. That also means we are unlikely to get a public filing program, including something like Ready Return, anytime soon.

NBCLX spoke to Jean Ross, a fellow at American Progress, an independent, nonpartisan policy institute. She once helped test Ready Return in California as executive director of the California Budget Project.

NBLCX: What would a Ready Return filing system look like?

JEAN ROSS: The idea behind Ready Return would be that the IRS would take the information it gets from your employer and your bank, and would pre-fill a tax return. If it all looks correct to you, you would electronically sign it and submit it.

I had been involved in efforts back in California, around a pilot project for filing called Ready File, where the state's tax agency initially took about 50,000 taxpayers and sent them a return with all of the information. People loved it.

Is there the possibility for a Ready Return system?

I'm an optimist, but I actually think there is a moment now to do something. Part of it is this comprehensive effort to modernize the technology of the IRS that's currently part of the so-called Build Back Better Plan that's in Congress. The two largest software companies that were part of the for-profit effort dropped out of the agreement with the IRS for a number of reasons.

With the expansion of the Child Tax Credit, making that credit available in monthly payments through the tax system, making some of the economic impact payments that were done as part of the COVID relief plans — there were some efforts that worked remarkably well, given how fast they were ramped up to do that online that I think make people say, “We could broaden this out to cover tax filing for your entire tax return.” I think the Biden administration's executive order on improving customer service in government shows a real interest in [showing] people that the federal government wants federal systems to work well for people.

Is this something everyone could get behind?

If you go back to the early days in the initial efforts around free filing, it really was bipartisan. The Internal Revenue Service, first under the Clinton administration, then under the Bush administration, had proposals for a public system. Over time, it's been somewhat politicized.

I think there's been a deliberate effort to make the IRS into some kind of a demon that you can't trust with your information. They already have all that information. When you file your taxes now, they run your tax return against all that information they're getting from your employer, they're getting from your bank.

There is an ideological opposition to taxes and what role government plays in our society that’s bigger that’s part of this. But I think it doesn't have to be, and at the end of the day, this should be about: How do we make government work well for all of us as taxpayers?