Sunday, January 24, 2010

Good Question: Why Can’t IRS Fill in the Blanks?

NY Times: "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.

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."

HT: TaxProf


At 1/24/2010 12:31 PM, Anonymous American Delight said...

But if they tell you what they already know, they can't "catch" you when your information doesn't match theirs.

The politicians know that raising taxes is unpopular, so "cracking down" on "tax fraud" is one of the few arrows they have left in their quiver.

At 1/24/2010 12:47 PM, Anonymous Entalu said...

I received a letter from the IRS three years in a row saying my return was incorrect and they "corrected it". In the first to years, their "correction" was wrong and I had to fight to get my money back. The third time, I had in fact made a mistake.

What pisses me off is that if they THINK you made a mistake, they just take the money from you.

What we need is a proportional tax with few, if any deductions. Then we could file our tax returns in about 15 minutes.

At 1/24/2010 2:55 PM, Blogger KO said...

I'd love this idea. I voluntarily report income that the IRS has no idea about other than me reporting it.

Of course much non-wage income would completely disappear if they did this. Capital gains on non-financial assets, rental income, Ebay income, etc. are on the honor system to a great extent.

Realistically, this would be used as an excuse to require ever more and more reporting of different types of transactions so that the IRS would have the data to pre-fill the info.

At 1/24/2010 6:49 PM, Anonymous Steve said...

That is a really good point cause they send you back their modifications mid-summer without asking you if their findings are correct or not. They just send the changes and an invoice.

At 1/24/2010 8:01 PM, Anonymous Benny "Tell It LIke It Is Man" Cole said...

If we moved to heavy gasoline taxes, we could eliminate income taxes on people making less $100,000 a year.

Those people could just send in a postcard, saying, "I already paid at the pump."

At 1/24/2010 9:08 PM, Anonymous Anonymous said...

I 've done my own taxes for 28 of the last 30 years or so, the last 3 years with the assistance of tax prep software.

The two times I had a CPA do them, they screwed up - on very simple things too.

I'm convinced that even with lots of experience and with good tax prep software, it's still a crap shoot whether the IRS will send you a little nastygram in the mail claiming you made an error.

My latest error was I asked my wife to make a regular IRA contribution. Well, she decided to do a Roth - without telling me. Surprise!

To the IRS: never assume that an honest but boneheaded mistake is an attempt to defraud.

At 1/25/2010 10:10 AM, Anonymous morganovich said...

create a situation where the IRS has to pay interest on monies improperly deducted or held and i suspect you'll solve most of this issue.

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