Filing Taxes in Japan Is a Breeze. Why Not Here?
The New York Times by T.R. REIDAPRIL 14, 2017 (Original article had a different illustration)
IRS Taxpayer Service Hit All-Time Low In 2015. Joe Raedle/Getty Images
Ah, the blithe joys of springtime in the United States. Azaleas in bloom at the Masters, breezy picnics on balmy afternoons, Easter egg hunts — and the annual ordeal of tax forms, with helpful I.R.S. instructions like this: “Go to Part IV of Schedule I to figure line 52 if the estate or trust has qualified dividends or has a gain on lines 18a and 19 of column (2) of Schedule D (Form 1041) (as refigured for the AMT, if necessary).”
Americans will spend more than six billion hours this year gathering records and filling out forms, just to pay their taxes. They will pay some $10 billion to tax preparation firms to help get the job done and spend $2 billion on tax-preparation software (programs that still require hours of work). Millions will subsequently get a notice from the I.R.S. saying they got the figures wrong, or put the right number on the wrong line or added wrong in calculating line 47 — which means more hours of work or more fees to the tax preparer.
And here’s the most maddening thing of all: It doesn’t have to be this way.
Parliaments and revenue agencies all over the world have done what Congress seems totally unable to do: They’ve made paying taxes easy. If you walk down the street in Tel Aviv, Tokyo, London or Lima, Peru, you won’t see an office of H & R Block or a similar company; in most countries, there’s no need for that industry.
In the Netherlands, the Algemene Fiscale Politiek (the Dutch I.R.S.) has a slogan: “We can’t make paying taxes pleasant, but at least we can make it simple.” It is certainly simple for my friend Michael, a Dutch executive with a six-figure income, a range of investments and all the economic complications that come with an upper-bracket lifestyle.
An American in the same situation would have to fill out a dozen forms, six pages long. Michael, by contrast, sets aside 15 minutes per year to file his federal and local income tax, and that’s usually enough. But sometimes, he told me, he decides to check the figures the government has already filled in on his return. At this point, Michael was getting downright indignant. “I mean, some years, it takes me half an hour just to file my taxes!”
In Japan, you get a postcard in early spring from Kokuzeicho (Japan’s I.R.S.) that says how much you earned last year, how much tax you owed and how much was withheld. If you disagree, you go into the tax office to work it out. For nearly everybody, though, the numbers are correct, so you never have to file a return.
When I told my friend Togo Shigehiko in Tokyo that Americans spend hours or days each spring gathering records and filling out tax forms, he was incredulous. “Why would anybody want to do that?” he asked.
What’s going on in these countries — and in many other developed democracies — is that government computers handle the tedious chore of filling out your tax return. The system is called “pre-filled forms,” or “pre-populated returns.” The taxpayer just has to check the numbers. If the agency got something wrong, there’s a mechanism for appeal.
Our own Internal Revenue Service could do the same for tens of millions of taxpayers. For most families, the I.R.S. already knows all the numbers — wages, dividends and interest received, capital gains, mortgage interest paid, taxes withheld — that we are required to enter on Form 1040.
The I.R.S. sends out a letter called a CP2000 Notice by the millions every year. This is the form that says: You entered $4,311 on Line 9b, but the reports we have on file say the figure should have been $4,756. I get these letters now and then — the revenue service is always right — and it makes me mad. If the government already has all this stuff, why did I have to spend hours digging through receipts and statements and 1099 forms to report what the I.R.S. already knows?
Questions like that have prompted some members of Congress — including Senator Ron Wyden, Democrat of Oregon; Elizabeth Warren, Democrat of Massachusetts; and Dan Coats, a former Republican senator from Indiana — to champion pre-filled forms. But their bills never went anywhere because the tax-preparation industry lobbies strenuously against them. The “Tax Complexity Lobby,” as it has been called, includes big national preparers like H & R Block and tax-prep software companies.
Intuit, the maker of the top-selling program TurboTax, has reportedly spent millions over the years to persuade members of Congress to “oppose I.R.S. government tax preparation.” In an annual report, the company warned investors that “government encroachment” — the I.R.S. filling out the forms for you — would be a significant competitive threat, which is why it has to fight the idea. So you do more work, they make more money.
This year, though, the president and Congress have pledged a thorough reform of America’s absurdly complex tax system. They’ve promised to make life easier for the beleaguered taxpayer. A useful step — one that other advanced democracies have already taken — would be pre-filled forms. And then April 15 would be just another sunny spring day.
T. R. Reid is the author of “A Fine Mess: A Global Quest for a Simpler, Fairer, and More Efficient Tax System,” from which this essay is adapted.