Pre-Filled Income Tax Returns?

There appears to be the start of a movement to minimize the amount of effort, time and money that is currently spent in completing one's federal income tax forms. The movement is primarily for those whose income is from work and bank interest; perhaps 40% of taxpayers fall into this category. The government does have this information and could fill out the 1040 for these people. Some governments - Chile, Denmark, Finland, Malta, New Zealand, Norway, and Sweden - generate a completed tax return (or its equivalent) in electronic and/or paper form for the majority of taxpayers required to file tax returns. Others - Singapore, South Africa, Spain, and Turkey - do it for some taxpayers.

When the taxpayer receives the pre-filled forms from the government, he has a choice to accept it or fill out his own form. Austan Goolsbee provided a detailed proposal for how prefilling might work for the United States in a July 2006 paper,"The Simple Return: Reducing America's Tax Burden Through Return-Free Filing." He wrote:

"Around two-thirds of taxpayers take only the standard deduction and do not itemize. Frequently, all of their income is solely from wages from one employer and interest income from one bank. For almost all of these people, the IRS already receives information about each of their sources of income directly from their employers and banks. The IRS then asks these same people to spend time gathering documents and filling out tax forms, or to spend money paying tax preparers to do it. In essence, these taxpayers are just copying into a tax return information that the IRS already receives independently."

There is a possible problem in implementing the pre-filled return here. The IRS doesn't get the information about wages and interest payments from the previous year quickly enough to prefill income tax forms, send them out, and get answers back from people by the traditional April 15 timeline.