5 ms·

You didn't cover the most important—and political—reason: it would delay refunds. 2019 deadlines for 1099-INT/DIV (i.e., the forms you get from your bank or br

by basseq 7y ago

You didn't cover the most important—and political—reason: it would delay refunds. 2019 deadlines for 1099-INT/DIV (i.e., the forms you get from your bank or brokerage) are April 1st. The IRS filing window opened January 29, with 90% of tax returns processed within 21 days. Since the IRS can't reliably pre-populate a tax return without all the required information, it would delay filing (and refunds) by 8 weeks. As the tax refund check is the largest check many Americans receive every year, delaying that payout gets taxpayer advocacy groups up in arms and is tantamount to political suicide. Incidentally, this same gap is where a bulk of tax return fraud happens—equalling billions of dollars. In short, if you file return before the IRS has all the information to validate that return is indeed correct, they'll usually shrug and accept it. By the time they get all the information they need, you've cashed out your refund debit card and are long gone. I haven't seen any analysis that such a system would lower revenues (indeed, it would stop billions of dollars of fraud and tax evasion), or that the deductible system is too complex.

kelnos 7y ago
> In short, if you file return before the IRS has all the information to validate that return is indeed correct, they'll usually shrug and accept it. By the time they get all the information they need, you've cashed out your refund debit card and are long gone. This doesn't really pass the smell test for me. The IRS has, what, 7 years(?) to audit your tax return. They can and will do so, and will send you a bill, with penalties and interest included. (Source: this has happened to me, around a mistake I made with self-employment tax the first year I had non-W2 income.) Not sure how you'd be "long gone", either, unless you're not a US citizen and have since moved out of the US.
- basseq 7y ago
  That's correct, albeit more nuanced than I was getting. My point is that they'll "shrug", accept your return, and issue you a refund. Yes, they may come back later and say, "Actually..." When I say, "you're long gone", I'm referring specifically to taxpayer identification fraud, where you'd file a (fraudulent) return on behalf of someone else (often a dead person or someone from Puerto Rico[1]), receive their refund in the form of a debit card, and "disappear". In any case, it's way easier to avoid paying someone in the first place than try and claw it back later. [1] https://www.irs.gov/taxtopics/tc901 https://www.irs.gov/taxtopics/tc901
- basseq 7y ago
  Other note that I like to make just because it's interesting: actual audits by the IRS are very rare. They send a good number of collection letter every year, and the collection rate on those letter is very, very good. But those collection letters are categorically not audits, and more "friendly reminders". (Such that any letter on IRS letterhead could be considered friendly!)
thfuran 7y ago
>The IRS can't reliably pre-populate a tax return without all the required information Neither can I.
- basseq 7y ago
  The difference is that you know whether you have all your required information. The IRS doesn’t know until it has everything. Example: your only bank sends your 1099-DIV on February 15, so you file your return. You know that no other bank is going to send you a 1099-DIV because you don’t have any other bank accounts. The IRS doesn’t know this. The IRS only knows that you didn’t get any other 1099-DIVs after they’ve received all 1099-DIVs and no more are yours.
  - eridius 7y ago
    The IRS could develop a system where they list what information they've received already, and you can then validate that this represents the complete set of expected information and request that they go ahead and process taxes now without waiting. If they then receive more information later that would affect your taxes, they can bill you, or otherwise just go through the same process they would if you filed your taxes incorrectly under the current system.
    - basseq 7y ago
      Ideally, you'd want the IRS to be able to reliably populate a tax return, where all you do it sign it (or make corrections). A world where the IRS is pre-populating a return that may not be correct starts getting tough, even with such a taxpayer-warrant system.
      - eridius 7y ago
        Ideally, yes. If you need to preserve the ability to get refunds earlier than April 15 then one of two things needs to happen: 1. Move up the deadline for companies to submit tax information to the IRS, or 2. Allow taxpayers to declare that the IRS will not receive any more tax information than what they already have, with penalties for lying (presumably, the same penalties as what happens today if you submit your taxes early and you yourself haven't received all the relevant information yet). Or we could just pay the one-time hit of "you can't get your refund early" and have the IRS process taxes once the existing deadline has passed for companies submitting tax information to the IRS. I say one-time hit because after the first time, any refunds for following years would occur 1 year after the previous year's refund, just like it does today, it would just be at a different point in the year (assuming you even submitted taxes early to begin with; if you didn't, then no change).

by basseq 7y ago

kelnos 7y ago

> In short, if you file return before the IRS has all the information to validate that return is indeed correct, they'll usually shrug and accept it. By the time they get all the information they need, you've cashed out your refund debit card and are long gone. This doesn't really pass the smell test for me. The IRS has, what, 7 years(?) to audit your tax return. They can and will do so, and will send you a bill, with penalties and interest included. (Source: this has happened to me, around a mistake I made with self-employment tax the first year I had non-W2 income.) Not sure how you'd be "long gone", either, unless you're not a US citizen and have since moved out of the US.

basseq 7y ago
That's correct, albeit more nuanced than I was getting. My point is that they'll "shrug", accept your return, and issue you a refund. Yes, they may come back later and say, "Actually..." When I say, "you're long gone", I'm referring specifically to taxpayer identification fraud, where you'd file a (fraudulent) return on behalf of someone else (often a dead person or someone from Puerto Rico[1]), receive their refund in the form of a debit card, and "disappear". In any case, it's way easier to avoid paying someone in the first place than try and claw it back later. [1] https://www.irs.gov/taxtopics/tc901 https://www.irs.gov/taxtopics/tc901
basseq 7y ago
Other note that I like to make just because it's interesting: actual audits by the IRS are very rare. They send a good number of collection letter every year, and the collection rate on those letter is very, very good. But those collection letters are categorically not audits, and more "friendly reminders". (Such that any letter on IRS letterhead could be considered friendly!)

thfuran 7y ago

>The IRS can't reliably pre-populate a tax return without all the required information Neither can I.

basseq 7y ago
The difference is that you know whether you have all your required information. The IRS doesn’t know until it has everything. Example: your only bank sends your 1099-DIV on February 15, so you file your return. You know that no other bank is going to send you a 1099-DIV because you don’t have any other bank accounts. The IRS doesn’t know this. The IRS only knows that you didn’t get any other 1099-DIVs after they’ve received all 1099-DIVs and no more are yours.
- eridius 7y ago
  The IRS could develop a system where they list what information they've received already, and you can then validate that this represents the complete set of expected information and request that they go ahead and process taxes now without waiting. If they then receive more information later that would affect your taxes, they can bill you, or otherwise just go through the same process they would if you filed your taxes incorrectly under the current system.
  - basseq 7y ago
    Ideally, you'd want the IRS to be able to reliably populate a tax return, where all you do it sign it (or make corrections). A world where the IRS is pre-populating a return that may not be correct starts getting tough, even with such a taxpayer-warrant system.
    - eridius 7y ago
      Ideally, yes. If you need to preserve the ability to get refunds earlier than April 15 then one of two things needs to happen: 1. Move up the deadline for companies to submit tax information to the IRS, or 2. Allow taxpayers to declare that the IRS will not receive any more tax information than what they already have, with penalties for lying (presumably, the same penalties as what happens today if you submit your taxes early and you yourself haven't received all the relevant information yet). Or we could just pay the one-time hit of "you can't get your refund early" and have the IRS process taxes once the existing deadline has passed for companies submitting tax information to the IRS. I say one-time hit because after the first time, any refunds for following years would occur 1 year after the previous year's refund, just like it does today, it would just be at a different point in the year (assuming you even submitted taxes early to begin with; if you didn't, then no change).