Coming soon: The IRS will do your taxes for you

By Matt Lewis

Imagine this scenario: The IRS may soon just do your taxes for you — and send you the bill.

If this sounds farfetched, it’s not.

With a new congressional “super committee” tasked with finding $1.5 trillion in cuts by November, creative ways to find additional revenue are in high demand. And allowing the IRS to prepare you taxes could be one solution.

The idea has been around for a while, but has been picking up steam in recent years. In 2006, Senate Finance Committee Chairman Max Baucus (D-Mont.) argued it would close a $345 billion annual difference between what the government believes taxpayers owe them and what the IRS actually collects, which he calls the “tax gap.”

“I think the solution [to the tax gap problem] is to get rid of the middle-man and no fees required,” he said.

Obama’s former Chairman of the Council of Economic Advisers Austan Goolsbee made a strong case for it in a 2006 New York Times op-ed, explaining, “… the revenue service could send you a tax form already filled out with the information it has for you — a Simple Return — rather than a blank tax form. You would simply check the numbers against your W-2 and 1099 and then sign it.”

But this isn’t just an idea floated by senators and presidential advisers. While running for president, then-Sen. Barack Obama touted it during a 2007 speech at the Tax Policy Institute: “The government already collects wage and bank account information,” he said, “so there’s no reason the IRS can’t send Americans pre-filled tax forms to verify.”

While the notion of allowing government to encroach on yet another aspect of our lives might sound like a hard sell, members of the Computer and Communications Industry Association (CCIA) believe this is a very real threat.

“There is a fundamental conflict of interest if the tax collectors also become the tax preparer,” said CCIA President and CEO Ed Black. “If you don’t trust the fox to guard your hen house, why trust the IRS to do your taxes. It’s the same exact thing. They make it sound so convenient, but it’s really just a convenient way to kiss your deductions and tax credits goodbye.”

Black is among the increasing number of voices who worry the “super committee” might see this as a quick way to raise taxes by $345 billion per year – the amount of the “tax gap” – without a single member of Congress ever having to vote for a tax increase.