Wednesday, April 18, 2007

Taxes Could Be So Much Easier...

...and they are in California.

Since 2004, the California government provided to a test group of state citizens pre-filled out tax forms which merged in information that is readily available to the government, such as your W-2. For most people who don't own property, stocks, or have any tax deductions, all you would need to do is sign the form and send it back (and pay any money due). And really, that is the majority of people!

The program was actually put on hold for this current tax season because of some opposition. Some people said it was an invasion of privacy. It has also been said that some of the opposition was actually funded by companies like H&R Block, who stand to lose a lot of money if people don't use their services. But, in the end it just worked as a delay tactic and the program should be back in effect for next year's taxes.

Don't get this government program confused with the scams where they tell you they will send you pre-filled out tax forms and you will get back thousands of dollars in refunds. Those scam forms contain fake numbers, such as tax deductions for mortgages even if you don't own a home. They could end up putting you in jail for fraud. The California government issued forms are completely legit and contain real information that can be traced.

Of course, if you want to supplement those government issued forms and make various deductions you are free to do so, but for many Americans, especially low-income tax payers, the burden of filling out tax forms or having a company do it for you is often too expensive or time consuming and often gets looked over. For these people who only fill out simple tax forms they can avoid the IRS filing a lawsuit for tax evasion or having to pay back taxes all at once. Especially when back-taxes compound plus interest and are completely unaffordable.

And you know, really it makes sense to have these pre-filled out forms. When a company wants money from you do they say "tell me how much you think you owe and I will let you know if you are right"? Of course not! Companies send you an invoice or a statement and tell you how much you owe. Of course if you want to dispute the amount owed or have some reason to deduct from the amount due then you give proof of that. But why should the payor have the burden of figuring it all out?

So why don't other states follow suit? Well, it seems that companies that help prepare taxes, such as TurboTax or H&R Block, are going to do everything in their power to stop that from happening. But who knows, maybe in a few years we will see a new efficient way of doing taxes.

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