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Could Technology Save the Tax System? Or Are We Doomed?

taxes

Technology has opened our world up in ways that many of us never thought possible. But the one place that it hasn’t been quite as successful is in simplifying the tax process. Of course, you can e-file your taxes, but when it comes to deciphering tax laws, or calculating deductions, technology hasn’t been much help. No, I’m not bringing this up because tax day is looming. I’m bringing this up because filing your taxes doesn’t have to be as difficult as it is. What you might not know is that the IRS could potentially create a free, online filing system that requires you to do very little every year. Why? Because the government would essentially prepare your taxes for you.

Now maybe that sounds scary, but what other options do you have? You know all those annoying W-2 forms that your company mails to you? Your employer is obligated to send a copy to the IRS. The same goes for investment tax forms, 1099s and any other official paperwork. Essentially, the IRS could use technology as a way to help you pre-fill out your taxes. They could also use technology to send you the information you need online, and then you would have the ability to file as is, or make adjustments accordingly. That sounds great, doesn’t it?

It certainly does, so what’s the problem? ProPublica initially reported on this in 2013, and the reason was that there are too many for-profit tax preparation services who have lobbied against this kind of service. But it was also ProPublica who reported earlier this week that there is a possibility of a bipartisan bill that would make it illegal for the IRS to ever provide this kind of service, so it seems like those of us in the United States are out of luck.

There are many countries in the world – including Japan and Canada that employ a tax withholding system. If you have a job, the company that you work for deducts the appropriate amount of taxes that you’re supposed to pay and files it for you. While these systems might not be perfect, you at least know at the end of the year how much you owe, or don’t owe. While it’s crummy to have taxes taken off your pay check directly, it makes for a much more seamless process.

The big question is whether or not you would trust the IRS to do this work for you? It’s not necessarily about whether they would be honest or not, but the fragility of the system itself. Last year, the IRS had to extend its filing deadline after its system nearly crashed trying to handle all the last minute files. This particular glitch left almost 5 million Americans at a loss right before the deadline. Sure, they shouldn’t have waited that long, but a deadline is a deadline.

It’s hard to say if technology would fix this kind of problem, but it seems to be working in other countries. The bigger issue seems to be how much private businesses are able to lobby the government, and essentially get themselves any kind of perks or advantages. If that system could be fixed with technology then we would be a lot farther ahead than we are right now. Don’t forget to file your taxes!