Obligatory annual tax gripe

Yesterday evening I finished up processing six (count 'em) tax returns — Federal and state for me and Greta, and for each of the kids’ college funds.

What boggles my mind is why the Powers That Be still require that we pay a fee to file our taxes electronically. It would have cost $16.95 per return (state included) for me to file the taxes online though TurboTax: that’s over 50 dollars, in addition to the massive checks I already had to write to pay the actual taxes.

I know, I know, there are probably cheaper ways to submit online compared to the default TurboTax option, but I’m already not thrilled that I have to trust a private company with this data. Should I put my trust in a “bargain-basement” online tax submission firm?

For some reason, the government has decided that private industry should be charged with handling the process of submitting taxes electronically. Of course, private industry wants to get compensated for this service. Therefore, we get saddled with the bill. Yet surely the IRS saves boatloads of money when returns are submitted electronically compared to the old-fashioned way. Why can’t they pass these savings on to taxpayers? We should be getting paid to submit our taxes electronically, not the other way around.

Here’s a modest proposal: the IRS could pay companies for providing returns online — say, $2 per return. Companies get bonuses for complying with privacy and record-keeping requirements, as well as for customer evaluations of their service level. They can make up to, say $10 per return if they run a smooth operation. Companies should be prohibited from charging customers for e-filing.

This way, it’s in private industry’s best interest to provide good service and keep their costs low. The IRS, for a small cost, increases the efficiency of tax-gathering. Since customers file online for free, more people are likely to file online.

This is the way things should be done, but since it isn’t, I printed my tax forms this year, and I’ll be headed to the post office later today to mail them off. Maybe next year the IRS will get it right.

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4 Responses to Obligatory annual tax gripe

  1. Josh says:

    I recently read an article in which a critic of this process compared the current electronic system to one in which the IRS had voluntarily agreed not to print out paper forms and had instead given that ability exclusively to a few private companies.

  2. dave says:

    That’s an excellent analogy, Josh. I’d love to see the original article.

  3. Josh says:

    http://www.npr.org/templates/story/story.php?storyId=9112083

    Took me way too long to find that, and NPR still requires the Real Player (what is that about?) but at minute 1:45 you’ll hear Nina Olsen saying roughly what I reported. I heard this on either NPR’s Story of the Day podcast or their NPR Shuffle podcast. Either one I recommend for busy NPR admirers.

    And while I was going through all the online media I’ve consumed over the past month looking for that link, I also re-read this link that everyone should read, if only so they can hate me for linking to it:
    http://www.defectiveyeti.com/archives/001961.html

  4. dave says:

    wow, thanks for the link to the NPR report. Sounds like next year’s rather optimistic for reform on e-filing.

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