Why Can’t The IRS Do Your Taxes?

Zoe —  Apr 1 2013 @ 9:24am
by Zoe Pollock

For most Americans, it could:

Imagine filing your income taxes in five minutes — and for free. You’d open up a pre-filled return, see what the government thinks you owe, make any needed changes and be done. The miserable annual IRS shuffle, gone. It’s already a reality in Denmark, Sweden and Spain. The government-prepared return would estimate your taxes using information your employer and bank already sent it. Advocates say tens of millions of taxpayers could use such a system each year, saving them a collective $2 billion and 225 million hours in prep costs and time, according to one estimate.

But the TurboTax lobby is strong: 

[Maker of the tax software] Intuit has spent about $11.5 million on federal lobbying in the past five years — more than Apple or Amazon. Although the lobbying spans a range of issues, Intuit’s disclosures pointedly note that the company “opposes IRS government tax preparation.” … Roughly 25 million Americans used TurboTax last year, and a recent GAO analysis said the software accounted for more than half of individual returns filed electronically. TurboTax products and services made up 35 percent of Intuit’s $4.2 billion in total revenues last year.

Paul Waldman adds:

For many people, this wouldn’t work. Let’s say you have a lot of investment income, which varies from year to year. Or you’re a freelancer, and your income comes from multiple sources and your expenses also vary. But many people just have one source of income (their job) and a stable set of deductions, and this kind of thing would work perfectly well, saving them the $40 or so it would cost for Turbo Tax, or the even greater expense of going to a tax preparer.