There have been calls to improve the process for filing taxes with the Internal Revenue Service (IRS). Proponents want the IRS to create its own free tax preparation and filing system, claiming this will reduce the burden on taxpayers while also decreasing the balance of unpaid taxes owed to the government. TechNet recently commissioned a white paper examining the reality of what it would take (in terms of time, money, legislative prioritization, and executive branch support) for this to happen. As it turns out, simplifying income tax filing is anything but.
The evidence shows that shifting the focus of tax filing from individuals to the IRS is impractical from a budget, time, governance, security, and culture standpoint. As a result, this change would be unlikely to achieve the results its proponents seek. Most of the arguments for shifting the burden of filing from citizens to the IRS, according to the report, ignore a key realization from other digitization efforts we’ve seen: automating tax filing usually only achieves limited results. If implemented, the IRS would still have a cumbersome and unwieldy process that would likely add cost and complexity to an already challenging process.
No one wants the tax filing process to be harder and more complex. The opposite is true. Almost anyone who has filed a tax return wishes the process was easier. But the report shows that easing the burden of tax filing is a function of tax law simplification, not adding extra responsibilities for the IRS. To make the process easier and more productive, the process itself must change, starting with tax law.
Congress and the Administration should focus on real business process changes at the IRS – and ignore the temptation to put a band-aid over the complexities of shifting tax filing responsibility. Those changes must begin with modernizing the IRS so it can carry out its core functions of tax collection and audit. The IRS’ current technology modernization plan kicked off in 2019 but has only received about half the funding requested to date. This initiative must be fully supported, fully staffed, fully funded, and focused on delivering real benefits for all of the various stakeholders in the IRS ecosystem.
While we all want the tax filing process to be easier, any effort to have the IRS prepare Americans’ tax returns would be operationally impractical, prohibitively expensive, and likely fail to deliver the promised benefits. Instead, supporting and funding real changes at the IRS through simplified process and innovation improvements will deliver the benefits and improvements Americans seek.
To read the full study, go here.