Using Technology to Simplify Individual Tax Filing
61 National Tax Journal 773-89 (December 2008)
Compliance costs of individual tax filing have been estimated at roughly ten percent of the taxes raised. This figure does not include hard–to–monetize costs of anxiety, aggravation and the like. This article analyzes two related technology–based programs that promise to reduce these costs. Both programs rely on the fact that the government already receives the bulk of data required to populate a tax return. The first program would allow the taxpayer or her preparer to retrieve such data from the government. Under the second program, the government would give taxpayers with simple returns the option of receiving not only tax data, but a pro–forma or tentative tax return based on the data. In a California pilot program, 50,000 of these pro–forma "ReadyReturns" were sent to taxpayers in 2004 and 2005. Participants gave high ratings to the ReadyReturn pilot; however, a number of criticisms were levied against the program. The major difficulty with either the data retrieval or pro–forma return program is ensuring the timely availability of data.