I considered posting this article during the actual tax season, but I decided to wait until the rush of actually filing taxes was over.
Almost all of you who live in the US have filed your income taxes by now. Some of you – the self-employed or functionally self-employed, like I am – have filed first quarter estimated taxes as well. Others may have filed business taxes.
We’ve all gone through a process that, at the very least, involves filling out forms and hoping that others have done their part to make it all right. In other cases, like my own, it involves lots of pages of forms, tons of calculations, the near-requirement of buying software or hiring a specialist, and hoping that you didn’t overlook one out of a thousand little things. Because if one thing is wrong, you’re probably going to get fined and audited.
The process of filing income taxes needs to be simplified. Period.
Please note that I’m not talking about political theories and philosophies here. I fully know that some people out there would like to see lower taxes and reduced government programs, while others would see higher taxes and more/better government programs. I also know that some people would shift the tax burden in various ways, reducing taxes on various income brackets and raising taxes on other brackets.
Instead, I’m talking about the unnecessary challenge and risk of filing taxes for most ordinary people.
Here are five simple suggestions that the IRS could follow to make this process easier for everyone – including themselves.
They should make it possible to file taxes using a web form. Just log on to a secure IRS site using some credentials they’ve sent you, fill in the form online, and perhaps print out a confirmation page and send it in with any papers you need to send. The process of filing taxes could easily be handled by a well-designed web form. Not only that, the data would go straight into their database without any fuss and without middlemen.
They should use the best possible security. One concern I’ve always had with filing taxes is with identity theft in the process of filing it. A highly secure online system, while not eliminating identity theft avenues, does reduce them.
They should auto-fill in as much of the information as they possibly can. If they’re doing this web-based filing, they could auto-fill in a lot of your information based on information filed by organizations that paid you as well as information from your previous year’s tax forms. No more typing in or writing everyone’s names, Social Security numbers, employer information, and so on.
They should simplify electronic payment. If you’re going to receive money, give more options for paying out. If you need to pay, make it easier to pay in when you’re filing. A simple electronic transfer from your bank would be a great choice.
They should not charge for these services. Many people will say that you can just buy software to do all of this stuff. You shouldn’t have to pay for software in order to to a basic tax filing.
Of course, this brings up a few additional questions.
Won’t this destroy the tax filing businesses? Not necessarily. Many people with high incomes might very well still hire professional filing services in order to maximize their return. Similarly, people who want to do it themselves might also get assistant software that will help them identify maximum deductions and so forth. The IRS really has no reason to provide such services, as doing so would reduce their income. When you deduct, you pay less, after all. I would certainly use assistant software.
Wouldn’t this increase IRS costs? In the short term, it might. In the long term, they wouldn’t need people to manually process forms, drastically reducing the manpower needed by the IRS over time. Again, this doesn’t necessarily mean job loss; people could simply not have their positions filled when they leave.
How does this solve the problem with taxes in America? As I stated above, it doesn’t resolve any of the outstanding policy debates about taxes. What it does do is make sure that, whatever the outcome of the debates, it’s easier for people to file their taxes and more efficient for the IRS to process returns. That’s something we can all agree on, I think.