The Internal Revenue Service (IRS) recently apologized for flagging 75 conservative groups that used terms such as “tea party” or “patriot” in their filings. With this in mind, how good do you feel about giving the agency more power? If some in the Obama administration have their way, the IRS will be taking even more control over your tax returns.
Under a so-called return-free system, the IRS would send you a pre-filled tax return. You would either accept the IRS’s determination and enclose a check or receive a refund, or file your own alternative return. Simple, easy, and voluntary — they say.
Unfortunately, the rosy scenario the IRS and its allies tout runs head-first into reality. The IRS is charged with collecting taxes and enforcing the law when taxpayers don’t comply. The agency has an incentive to maximize the revenue it collects from a given taxpayer. A taxpayer, meanwhile, has an incentive to minimize his or her tax burden by taking deductions and credits to the full extent of the law. If the IRS got into the tax preparation business, there would be a conflict between its interests and taxpayers’ interests.
Advocates of return-free filing claim that such a system would be “voluntary” — if you didn’t like the IRS’s determination, you could simply disregard its version of your return and file your own. However, the IRS isn’t known for its warmth and fuzziness. It’s a safe bet that many Americans who received a notice from the agency would fear challenging the determination.
Even if the IRS had only the purest of motives, in many cases the agency wouldn’t have enough information to file a complete return. The IRS derives income information from W-2s and 1099s, but it depends on taxpayers to report their non-wage income and claim deductions and credits for transactions that the IRS has no way of knowing about, like charitable donations and moving expenses.
The claim that return-free filing would save time also doesn’t hold water. Since taxpayers are responsible for the accuracy of their returns, under a return-free system they would have to take the time to verify the accuracy of the IRS’s determinations. Not doing so would expose them to the possibility of underpayment or prosecution. Contrast this with a private sector tax preparer who — unlike the IRS — shares liability with the taxpayer for an erroneous return.
All of this is to say nothing of the fact that to implement such a scheme, the IRS would need to hire thousands of new employees and build a massive new system to crunch the data and generate millions of tax returns — another massive expansion of government by the Obama administration.
Don’t let President Obama’s IRS fool you. A return-free tax filing program is a bad idea that could double the size of the IRS and expose taxpayers either to a de facto tax increase or liability for tax evasion. More power is the last thing we should be giving the Internal Revenue Service.
Al Cardenas is the chairman of the American Conservative Union.