About 60% of tax payers submit a 1040A or 1040ez return. This is a dead simple return. The IRS already has all of the information needed to process these returns. The IRS could trivially set up a website that has two pages: 1. Verify this information is correct. 2. Where should we mail the check.
The _only_ reason they don't is that there is a HUGE industry that exists solely to fill out these trivial forms for intimidated people. HR block, et al will never allow the tax system to be simple.
The tax system is not convoluted and complex due to the influence of the tax preparation industry, they have very little influence on the matter.
Instead, it's the way it is due to many other enormous industries and interests (farms, welfare, support for families and home owners, investors, etc, etc, etc.) I can guarantee you that the reason there's a special section for "fishing boat proceeds" on your W2 is not because H&R Block thought it would be a hoot but because of complex politics around the fishing industry.
1. Why should there be one for all income categories? Some taxes are just plain fundamentally more complex than others. As it is, you can e-file for free through the federal government (I did so 2 years ago, it was no harder than filing out the form).
2. Are you seriously posing the question of why a ponderous government bureaucracy hasn't streamlined a process and made it user friendly? I'll just leave that one be.
Normally I dismiss statements like "the lobby for X is the reason why things suck," but in this case I think you're at least partly right. H&R Block has literally spent millions lobbying against tax reform bills.
I can't speak for why this hasn't happened yet. This idea, though, was a small thing that was very appealing about Obama back in 2008:
> Simplify Tax Filings for Middle Class Americans: Obama will dramatically simplify tax filings so that millions of Americans will be able to do their taxes in less than five minutes. Obama will ensure that the IRS
uses the information it already gets from banks and employers to give taxpayers the option of pre-filled tax
forms to verify, sign and return. Experts estimate that the Obama proposal will save Americans up to 200
million total hours of work and aggravation and up to $2 billion in tax preparer fees.
Not sure about your reasoning why, but I agree with potential fix. Why can't the IRS send me a form that says this is what we have, sign if you agree? For most people this would work. For others it would be a starting point for deductions additional income, etc...
What floored me this year is that after I submitted my taxes the state sent me a letter asking me for my W2 to verify the numbers. My confusion was, why doesn't the state already have my W2?!
"The IRS already has all of the information needed to process these returns"
Almost. They don't have filing status (married/single/etc.) and number of dependents. Unfortunately, those affect your tax rate, so the tax return can't be calculated without it.
If you're a W2 employee, they already have that information. It's on the W4 form that you fill out when you start a job, so that they can deduct the right amount from each paycheck.
Actually the data you put on the W4 doesn't have to have anything to do with your actual status. Moreover, your status may have changed since you last updated your W4.
Just in case you are being sarcastic, it is completely legitimate to put down a large number of exemptions if you know your tax liability will be very low for other reasons, and you want your employer to withhold less money.
In fact you should tune the process - if last year you had a large refund, then this year add more exemptions till your refund is as small as you can make it. (Technically you can go over if you want, and be required to pay, most most people don't like that.)
The easiest way to calculate it is do last years return with varying numbers of exemptions and compare the tax liability number (not the final number which includes payments). Use the real return as a baseline, then keep adding exemptions till the increase in the liability matches your refund, then use that number on the W-9. Perhaps that number minus one.
This isn't hard to handle: you send out the prefilled form with whatever you filed last year, and if you got married/got divorced/had a kid/changed your filing status you fill out the full form.
I don't see how that claim could be true. The IRS has been pushing for simpler taxes for decades, and if they don't have the clout to make it happen H&R Block doesn't either. Taxes are complicated by much larger forces.
I don't know that it's the _only_ reason. I'm guessing another big part of it is that government agency software projects routinely run way past due and over budget, and often end up going nowhere. e.g.,
There is already software out there to handle your federal income taxes for free. However, to use Free File Tax Software.
This program is available if your AGI is $57,000 or less:http://apps.irs.gov/app/freeFile/jsp/index.jsp?ck
There's no reason not to have the e-file stuff directly on the irs.gov website.
Instead, it's farmed out to 3rd party sites who try to trick people into buying add-on services. It's ridiculous, but I'm sure they lobby hard to keep it that way, so it's probably not changing anytime soon.
Again, one more instance of the unhealthy trend in giving for-profit, 3rd-party companies your sensitive personal info, that the US Govt should be handling and be responsible for directly in the first place, making identity-theft and such nefarious activities easier.
Supposedly if you are over that limit you are rich enough to pay for a commercial software. Apparently government does not want to take business completely from the likes of Intuit.
I'm pretty sure most other countries do this. In Sweden when you get your tax papers, you can SMS in a printed code to approve the pre-printed numbers, and your taxes are done.
CA already does this with the ready return. All the information is already filled in with an option to change some information if something is missing.
The _only_ reason they don't is that there is a HUGE industry that exists solely to fill out these trivial forms for intimidated people. HR block, et al will never allow the tax system to be simple.