I have become a cosponsor of the Tax Return Choice Act of 2006, which will prohibit the IRS from implementing a "return-free” tax filing system. In a “Return Free” tax model, a government tax agency, such as the Internal Revenue Service, automatically prepares the income tax returns of those taxpayers with the simplest returns. Having already received the W-2 forms from the taxpayer’s employer – which are now used to audit and verify returns – the agency uses government computers to calculate what it believes the taxpayer’s payment or refund should be.
The agency then sends a written determination and a bill to the taxpayer. The taxpayer can accept the government’s calculations, make adjustments, or ignore the determination and complete and submit a separate return. Return Free advocates and tax bureaucrats argue that this is a convenience for the taxpayer.
There are several major reasons why this “taxpayer service” is flawed, dangerous to taxpayers, and should not be a component of federal tax reform. Return Free would make the same agency that collects taxes, writes tax regulations, collects revenues, performs audits, and enforces compliance to now also become the tax preparer. As a result, the tax collector’s interest in maximizing revenue completely overrides the citizen’s interest in minimizing his or her tax liability.
For many taxpayers targeted by Return Free, getting an official “bill” from the Internal Revenue Service can be extremely intimidating, particularly for seniors, low-income and non-English speaking citizens. In some cases, taxpayers who might have additional deductions not reflected on their Return Free tax statement may feel compelled to pay the official government determination without question. In other cases, taxpayers who earned non-wage income may accept the government-prepared bill out of fear of challenging it, and mistakenly underpay and open themselves up to later investigation for tax evasion.
While Return Free will undoubtedly be advertised as a convenient timesaver, taxpayers will still have to independently determine and prepare their own taxes to verify that the Return Free bill is correct and avoid being held liable for filing a false, inaccurate or incomplete tax return. Because the sole responsibility and liability for accuracy and completeness is on the individual, Return Free does not result in a reduction of burden or the substitution of government compliance work for that expected of the citizen.