Wednesday, May 15, 2019

ProPublica and "prefilled filing"

ProPublica and others have advocated the IRS establish "prefilled filing."  Essentially, the IRS pre-fills a tax return and sends it to the taxpayer for signature, which the taxpayer can accept or reject. Supporters say that the IRS already has the data (W-2s, etc.) to do it.

A ProPublica story more than two years ago supported the idea, but complained that TurboTax's maker Intuit, H&R Block, and others in the tax preparation business have objected to it and spent a lot of money lobbying against it. Another ProPublica story published in 2013 did the same.

What's missing from both stories? Both authors were oblivious to the big "elephant in the room," self-employed people. There are millions of them -- small business owners, farmers, plumbers, electricians, lawn workers and landscapers, Uber drivers, restaurant owners, free-lancers, etc. The IRS does not already have the data to do "prefilled filing" for them (see next paragraph). There are also many smaller "elephants" -- filing status change, change in dependents, deductions, credits and maybe more.

Even this Tax Foundation article about pre-filled filing doesn't mention the self-employed, who must file Schedule C (or C-EZ) and Schedule SE along with Form 1040.

Such "prefilled filing" would discriminate against the self-employed. The IRS would provide a free service for those who aren't self-employed. Yet the IRS would force the self-employed to spend hours and/or money to do their own tax returns. It would exemplify unequal treatment before the law.

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