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Study finds over 60 million tax returns can be filled out automatically

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The IRS may be able to automate nearly half of tax returns. working paper from the National Bureau of Economic Research.

The agency can correctly auto-fill 62 million to 73 million returns with the information it already has, covering 41% to 48% of taxpayers, researchers from the US Treasury Department, the Minneapolis Federal Reserve and Dartmouth College found.

“Our results indicate that pre-filled returns will be accurate for a significant proportion of U.S. taxpayers,” the authors write.

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Based on a random sample of 344,400 individual returns in 2019, the paper says accuracy is “much better for low- and middle-income taxpayers,” with the potential for error increasing as itemized deductions increase.

Former President Donald Trump’s tax signature adjustment nearly doubled the standard deduction, reducing the number of declarants that list. In 2019, almost 90% of taxpayers took advantage of the standard deduction, according to the tax office.

“I absolutely agree with these findings,” said Tommy Lucas, certified financial planner and registered agent for Moisand Fitzgerald Tamayo in Orlando, Florida, pointing to other countries with automated tax filing systems.

This would save many people the stress and headache of figuring out what documents they need or how they are going to pay for their return.

Tommy Lucas

Financial advisor Moisand Fitzgerald Tamayo

“It would save a lot of people the stress and headache of figuring out what documents they need or how they are going to pay for their return,” he said.

Indeed, as of May 2020, 36 countries, including Germany, Japan and the UK, have the option of making irrevocable returns, according to the Tax Policy Center. estimates.

Countries with an irrevocable return can use either “exact withholding” where employers try to highlight exactly what employees owe, or “tax reconciliation” that includes a pre-filled return for taxpayer approval, in accordance with tax fund.

However, it can be more difficult in the US, which relies on the tax code to implement social programs, tax households “as a whole” and levy regular income taxes on some investments that are not subject to withholding, the Tax Foundation says.

However, the paper suggests that automatic returns can save time and money for those with a simple registration.

“Prefilling is especially successful for taxpayers who are single, young and have no dependents,” the NBER authors write.

Moreover, auto-filled returns can be helpful for non-filers, including those who are due for an earned income tax credit or a child tax credit, “potentially pushing them to claim a refund or pay their due taxes.”

“The first thing that caught my eye was that $9 billion was reimbursed to 12 million Americans for non-documentation,” Lucas said.

Some of these may include high school students or part-time students earning less than the income threshold required to apply, or low-income Americans who don’t have the resources to process returns, he said.

While roughly 70% of Americans — those with an adjusted gross income of less than $73,000 — qualify for a free IRS file, only 2.6% used it in 2019. according to the tax office.


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