(Author’s note: It’s back! My former “Fix The Tax Code” feature encouraged you, as the reader, to chime in. After a brief hiatus, it’s back. I hope you’ll play along.)  Each tax season, as taxpayers struggle over do-it-yourself returns and grumble about the costs of hiring a tax professional, there are calls to make returns more simple. One idea that’s been rolling around for years is to have the IRS prepare and calculate tax returns.  The idea even got some serious traction in 2011 when IRS Commissioner Doug Shulman hinted at a National Press Club luncheon that one way to reduce the potential for tax fraud was to have IRS prepare returns for taxpayers. Under the plan, commonly referred to as a “simple return,” “pre-filled return” or “ready return,” the IRS would send out tax returns that had already been completed with taxpayer identification and wage information. Taxpayers would merely review the returns for accuracy and sign at the bottom. Taxpayers would have the opportunity to correct any mistakes prior to submitting the returns to the IRS.  A copy of the U.S. Department of the Treasury Internal Revenue Service 1040 Individual Income Tax form for the 2013 tax year belonging to U.S. President Barack Obama and his wife, first lady Michelle Obama, displaying the amount of taxes which were overpaid is arranged for a photograph in Tiskilwa, Illinois, U.S., on Friday, April 11, 2014. President Barack Obama and his wife, Michelle, reported adjusted gross income of $481,098 for 2013, down 21 percent from last year, according to tax returns released today by the White House. The Obamas paid $98,169 in federal taxes, including at least $2,310 imposed by the 2010 Affordable Care Act that he signed. That’s an effective income tax rate of 20.4 percent. Photographer: Daniel Acker/Bloomberg via Getty Images  The plan never materialized on the federal level. However, a version of such a plan was offered in California for a few years. The plan, called ReadyReturn, was free to taxpayers who qualified. The state used information from the prior year’s return along with information from the form W-2 to pre-fill a California state tax return: the return only needed to be reviewed by the taxpayer and signed. That program has since been tweaked and is called CalFile (ReadyReturn no longer exists).  Other countries have, however, seen success with variations on a government-prepared tax return. Denmark, which pioneered a limited pre-filled return program in 1988, boasts participation rates of over 80%. In addition to Denmark, six countries (Chile, Finland, Malta, New Zealand, Norway and Sweden) report that the program is available to a majority of taxpayers; four other countries (Singapore, South Africa, Spain and Turkey) were able to make the program available to between 30 and 50% of taxpayers. Still other countries (Australia, Estonia, France, Hong Kong, Iceland, Italy, Lithuania and Poland) report a “substantial use” of pre-filled returns.  So, the plan can work under some government tax systems. But does that mean it could work in the U.S.? And would you want it to?  So I’m throwing it out to you. Today’s Fix the Tax Code Friday question is:  Should the IRS offer the option of filing your taxes for you? Why or why not?  Want more taxgirl goodness? Pick your poison: follow me on twitter, hang out on Facebook and Google, play on Pinterest or check out my YouTube channel. For cases and tax related docs, visit Scribd.
Would you trust IRS to prepare your tax return? Some countries across the world already have a system that allows taxpayers to simply approve government prepared returns. Would that work in the US?