Free Tax Return Preparation

[Chief]

IRS won't automatically be doing your tax return anytime soon, despite calls by leading presidential contenders to do just that. Democrats John Edward and Barack Obama want the Service to process W2's and 1099's and send out proposed 1040s to folks with simple tax situations.

The idea faces too many obstacles. Since w2 and 1099 forms aren't due until the end of January, IRS wouldn't be able to get returns out for several more weeks. That would delay refunds for a lot of taxpayers who normally file return in January. Plus, many folks would keep quiete if they noticed that their IRS-prepared return left off some income.
copied Kiplingeer Tax Letter, vol 82, no. 21

These two individuals have a good idea. It will not come about unless one of them is elected president.

1) The IRS prepared returns would be more accurate than the ones done by Vita and TCE programs. Often they have ill trainted voluteers who are not checked. My introduction to tax preparation was with TCE and I have several years of experience with that organization.
2) No government agency is capable of competence or efficiency of their work. The government is so large that it has become a giant uncontrolled or tamed . It makes no difference which political party is in power the governent is so large and powerful that it answers to no one.
3) These financial institutions and other firms who profit all RALs are so powerful that the government will do nothing about their operation or cut into their profit. Idiots who use them get what they pay for.
4) People already have unreported income and will continue to have no matter who or how they returns are prepared.

[Jiggers]

Free tax return preparation

How is the IRS to know that your only income is from W-2's and interest/dividends? What about self-employed, rentals, farms, capital gain sales, etc.

These two individuals want to run the country but have no clue as to what is going on.

[ED SMITH]

Plus, many folks would keep quiete if they noticed that their IRS-prepared return left off some income.

Do you want to bet that there will be a statement on the form that the tax payer will still be responsible, plus P&I, for any omissions on the IRS prepared return.

Then who is gong to prepare the state returns?

[snowbird]

Surprise?

These two individuals want to run the country but have no clue as to what is going on.

That should not surprise you! They are both lawyers. I bet neither has done a tax return. They think someone who has an income of $200K is rich. A lawyer with $200K probably has disposable income close to that amount. A small businessman with $200K is probably cash poor if he had to purchase any capital equipment or increase inventory. And, we know who creates the jobs!

[Bees Knees]

These two individuals have a good idea. It will not come about unless one of them is elected president.

1) The IRS prepared returns would be more accurate than the ones done by Vita and TCE programs. Often they have ill trainted voluteers who are not checked. My introduction to tax preparation was with TCE and I have several years of experience with that organization.

Actually, these two individuals are naïve.

A little known secret that only IRS and tax professionals understand is that our system of taxation is voluntary.

What I mean by voluntary is that the level of revenue collected by our government is vastly greater under a system where taxpayers voluntarily disclose their income than if the government calculates the tax and sends us the bill.

Politicians whine about the huge amounts of uncollected tax due to people failing to report all their income. Will a system where government prepares the returns solve that? Of course not. It will do the opposite.

Right now only a small percentage of people fail to report all their income. Yes, that costs the government a lot of money. But if taxpayers are given the option of not having to voluntarily disclose all their income and only pay tax on the amount the government knows about, many honest individuals will see this as government saying you no longer have to report your income that we don’t know about.

The revenue collected due to taxpayer’s voluntarily disclosing income far exceeds any lost revenue due to under reporting and incompetent Vita and TCE tax preparers. If the general public understood what we professionals understood, our system of taxation in this country would collapse. The IRS cannot possibly police the entire country and calculate the correct tax for everyone without the help of tax professionals doing their job for them.

No question about it. These two politicians are naïve.

[Bees Knees]

Democrats John Edward and Barack Obama want the Service to process W2's and 1099's and send out proposed 1040s to folks with simple tax situations.

Trying to come up with a good illustration.

I get a proposed 1040 revealing only income IRS knows about and have the option of paying that tax, or voluntarily reporting additional income I now know IRS does not know about.

In other words, the IRS is tipping their hand.

That would be like the highway patrol tipping their hand and placing signs along the highway saying these are the only locations we are placing our patrol cars. Any stretch of highway not posted is where we won’t have any clue as to what your speed is.

You think that will improve speed limit compliance? Or will that turn vast stretches of freeway into the autobahn?

[dsi]

Clearly the proposal hasn't a chance because the idea simply will not work.

I do not believe in the volunteer programs either. I do believe that if the taxpayers can't afford to retain a tax preparer, then the gov should appoint one. Futhermore, if one of us is appointed, then we should also be paid by the gov for our time and expenses. It's as simple as that. Only tax professionals should be allowed to prepare tax returns, not volunteers. ;>)

That's my story and ....

[Luis Mopeo]

Clearly the proposal hasn't a chance because the idea simply will not work.

I do not believe in the volunteer programs either. I do believe that if the taxpayers can't afford to retain a tax preparer, then the gov should appoint one. Futhermore, if one of us is appointed, then we should also be paid by the gov for our time and expenses. It's as simple as that. Only tax professionals should be allowed to prepare tax returns, not volunteers. ;>)

That's my story and ....

I don't understand why people automatically assume that VITA and TCE folks are going to mess up tax returns, but the IRS is going to get it right. I know highly qualified people who work with VITA. Are the volunteer services going to have a higher rate of errors than paid preparers? Of course. But if you put the VITA rate up against the IRS, I'll bet you're making a mistake if you think the IRS is going to be in a higher class in terms of accuracy.

How far below 50% correct answers was the IRS the last study that was done?

I remember an IRS pronouncement a few years ago that was bragging about answering 1/3 of taxpayer's questions correctly.

You want the government to pay for you to prepare low-income tax returns? I don't believe you would like that. Every dollar of money from the government comes with a dollar's worth of control. If you think it's a mess trying to comply with tax law and regulations as it is, try doing it with a bunch of bureaucrats telling you how to do it. Not to mention that a fee of $200 to prepare a return would probably cost taxpayers $1,000.

[dsi]

I will never be conviced that these volunteer programs are in MY best interest. Just like a court appointed attorney for those who can't afford one, so it should be with tax preparation as well. I do plenty of pro bono work during tax season. I do it because I know these folks can't even pay me a single dime. There fault? Perhaps some of them could have done better in life. Others are victims of ...all kinds of things.

My software providers continue to raise my costs. I could use all the $$ I can get. So, if the gov can pay me even a small $25 - $50 for a return that I would have done for free, that would go towards offsetting some of my costs.

These free programs could kill a small business person who is simply trying to make a reasonable living.

[Luis Mopeo]

I will never be conviced that these volunteer programs are in MY best interest. Just like a court appointed attorney for those who can't afford one, so it should be with tax preparation as well. I do plenty of pro bono work during tax season. I do it because I know these folks can't even pay me a single dime. There fault? Perhaps some of them could have done better in life. Others are victims of ...all kinds of things.

My software providers continue to raise my costs. I could use all the $$ I can get. So, if the gov can pay me even a small $25 - $50 for a return that I would have done for free, that would go towards offsetting some of my costs.

These free programs could kill a small business person who is simply trying to make a reasonable living.

My position is that over the years tax professionals have allowed themselves to become de facto revenue agents by becoming more responsible for enforcement (advocating the government's position) and less responsible for representing the client (advocating the taxpayer's position). It is an adversarial relationship between taxpayers and the IRS, although an increasing number of tax professionals are failing to recognize the reality. You can bet that the IRS recognizes it. It wasn't always like that.

Government payment for tax preparation would be the final step. We're already IRS auditors and enforcers, why not just become full-fledged government employees?

Personally, I wouldn't want to work for the government. My independence would be eliminated, and I would no longer be able to be an effective advocate for my clients against the IRS.

[Golden Rocket]

The Sharpest Preparer

...used to be the preparer who could find deductions that everyone else forgot about, save people hundreds, maybe thousands, in taxes, and thus be looked upon as a local hero.

Mopeo says this has changed. The picture presented above can still be true, but in particular since 1986 the complexities which associate with knowledge seem to be in favor of the IRS. And becoming more and more so.

All interest used to be deductible, period. Now, only mortgage interest, and the preparer cannot even deduct what's on the 1098 without wondering if all the interest qualifies or if the taxpayer's basis in the home equals the mortgage. No burden on the issuer of the 1099 or on the taxpayer to know -- only the tax preparer.

This is just one example. Additional regulations result in income, and additional regulations limit deductions. Thus the more you know, the less advantageous tax position your client can enjoy. Those of us who know less often get bigger refunds.

Luis is right.

[dsi]

I don't view it as "working for the gov". Contraire, I see it as getting paid for my services. I will ALWAYS be on the side of my clients, and I will always search for the best tax position on their behalf. I think your position is not accurate.

[Luis Mopeo]

I don't view it as "working for the gov". Contraire, I see it as getting paid for my services. I will ALWAYS be on the side of my clients, and I will always search for the best tax position on their behalf. I think your position is not accurate.

You'll always be on the side of you clients, even if that means you won't get paid?

You believe that money from the government would come with no strings and no control over how you did your job?

I don't think that's realistic.

[dsi]

Luis, you are probably right on all accounts. I'm not having a great day today, and perhaps some of what you are reading is my venting. I appreciate your posts, and look forward to more of your posts on tax topics. Your contribution to this board is truly appreciated by me. As for the way I'm feeling, "it is what it is" and I'll get over it.