 |
| Tax Image Cartoon. Image Credit |
The government could correctly auto-fill an estimated 62 million to 73 million returns with information it already has, according to analysts from the US Department of the Treasury, the Minneapolis Federal Reserve, and Dartmouth College, covering 41% to 48% of taxpayers.
"Our results suggest that pre-populated forms would be correct for a significant portion of US taxpayers," the researchers noted.
The article claims that accuracy is "far greater for low- and moderate-income taxpayers," with errors becoming more probable as itemized deductions increase, based on a random sample of 344,400 individual returns from 2019.
The standard deduction substantially increased under former President Donald Trump's tax rewrite, reducing the number of those who itemize. According to the IRS, nearly 90% of taxpayers took the standard deduction in 2019.
"I completely agree with these conclusions," said Tommy Lucas, a certified financial planner and enrolled agent with Moisand Fitzgerald Tamayo in Orlando, Florida, citing other countries that have automated tax filing systems.
It would spare so many people the stress and headache of finding out what documents they need or how they would pay for their return to be completed, said Tommy Lucas financial advisor at moisand Fitzgerald Tamayo.
"It would save a lot of folks the stress and headache of trying to figure out what documents they need or how they're going to pay for their return to be done," he added.
According to the Tax Policy Center, 36 countries, including Germany, Japan, and the United Kingdom, will have return-free filing by May 2020.
According to the Tax Foundation, countries with a return-free filing can adopt either "exact withholding," in which employers try to set aside exactly what employees owe, or "tax agency reconciliation," which involves a provisional pre-filled return for the taxpayer to accept.
However, it may be more challenging in the United States, which, according to the Tax Foundation, relies on the tax code to deliver social programs, taxes households "as one unit," and levies regular income taxes on some investments that aren't subject to withholding.
Nonetheless, the analysis suggests that automated returns may save time and money for people who file basic forms.
"Pre-population is most successful for taxpayers who are single, young, and have no dependents," the NBER authors stated.
Auto-filled forms may also benefit non-filers, such as those qualifying for the earned income tax credit or the child tax credit, by "potentially motivating them to claim refunds or pay taxes owed."
"The first thing that struck me was that 12 million Americans owed $9 billion in refunds owing to non-filing," Lucas explained.
High school or college students working part-time jobs earning less than the filing threshold, or low-income Americans without the tools to complete returns, are examples, he added.
Despite the fact that about 70% of Americans — those with an adjusted gross income of $73,000 or less — are eligible for IRS Free File, the IRS reports that just 2.6 % used it in 2019.
0 Comments
please do not enter any spam link in the comment box