Monday, April 22, 2013


ACCOUNTING TODAY recently told us that “Congress Introduces Bill to Have IRS Automatically Fill out Tax Forms”.

Here is how it would work -

The Autofill Act of 2013 would create a voluntary tax filing program that would allow individuals to log in to a secure IRS Web site and download a tax form automatically populated with information the IRS already collects from employers, the Social Security Administration and financial institutions.

Taxpayers could simply review the returns for accuracy and sign at the bottom, saving them time, money and anxiety.”

So let me get this straight.  I go to the IRS website and download a Form 1040, or 1040A, already filled in by the IRS based on information it has received from W-2s, 1099s, 1098s, K-1s, etc that have been submitted to the IRS by payers and payees.  I assume, or hope, that I would be able to see the specific details behind the numbers on the pre-prepared return – such as individual W-2, 1099, and 1098 information.  If I agree with the IRS calculation I simply print-out, sign, and mail, or electronically transmit, the return.

I can see one pro and several cons to this proposal.

The pro –

As a taxpayer, or even as a tax preparer, this would allow me to see all of the income and deduction information transmitted to the IRS – so, for example, I would not forget to report income from a 1099 that was lost in the mail but made its way to the IRS.

Some cons –

(1)  This would encourage and facilitate under-reporting.  A taxpayer with taxable income not reported to the IRS by a third party could submit the pre-prepared return that shows only what the IRS has received and not all his/her true income.

(2)  Many taxpayers would simply accept an IRS-generated incomplete pre-prepared return and miss out on legitimate deductions and other tax benefits to which they are legally entitled.

BO put forth a similar idea back in 2007.  He proposed “to direct the IRS to send pre-filled tax forms to 40 million workers who take the standard deduction and have a bank account. They would simply have to sign and return it, which Obama estimates would save more than $2 billion in tax preparation fees and 200 million hours of work.”   

Here is what I said about the idea at the time in my post “A Very Bad Idea” -

Taxpayers should be allowed to determine if they will claim the standard deduction – and not be told, or even suggested, by the IRS that this is what they should do. Individual situations change from year-to-year – how does the IRS know that a taxpayer is better off filing a short-form simply from his W-2 and Form 1099-INT information. Taxpayers should also be allowed to consult a competent tax professional to determine if the standard deduction or a short-form will result in the least tax liability.

Let’s face it.  There are a lot of taxpayers who would save mucho dinero by itemizing or taking advantage of various other tax adjustments or credits – but who would simply sign a short-form and pay a lot more tax then they would or should have to if the IRS sent them a pre-prepared return and requested a signature.”   

There are some practical questions regarding this pre-prepared return concept that would need to be addressed -

·      When would this pre-prepared return be generated and available? 

·      Would it change as additional or corrected information is transmitted to the IRS?  Would the pre-prepared return accessed on February 19th be different than the one that is accessed on March 19th because a brokerage firm issued a corrected 1099 statement? 

·      Would the pre-pared return accessed on March 19th be different, or even available, if I had already submitted the pre-prepared return accessed on February 19th? 

I can forsee all kinds of problems arising.   

The bottom line –

It would be helpful if a taxpayer, or tax preparer, could access the details of what the IRS has received from payers and payees issuing information returns.  But as a reference and not as a pre-prepared return option. 


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