Monday was the last day to file taxes. For many college students who are learning how to file their taxes for the first time (and even those who are not), the experience can be quite daunting. If that’s you, you’re not alone.
About two-thirds of college students needed to file taxes last year, according to USA Today. Of those, most students preferred to have their parents or guardians do it. Only 38 percent of students filed their own taxes, and even then, most relied on the assistance of software or a tax-filing company.
Unfortunately, there’s probably no way to avoid having to file that first tax return. But in some countries, instead of redoing your taxes every year, you can get a pre-made tax return that you only have to look over and verify. It’s called return-free filing, and it’s already a reality in countries such as Denmark, Sweden and Spain. With this system, the tax agencies of each country take a look at information that your employer and banks send to them and use that to estimate the numbers in your tax return. Then, filing a tax return becomes as simple as proofreading.
That being said, there are caveats to this program. First off, you won’t be able to get away with not knowing how to file taxes. You’ll have to know enough to be able to correctly proofread your tax return, but it can be less of a hassle than filing from scratch. Also, our federal tax code is enormous, clocking in at more than 7,500 pages long. In fact, it has more than 170 tax breaks written in it, with deductions ranging from education to healthcare to having children. Implementing this on a federal level would be very tricky, which is why I suggest that we start by implementing this program at a state level first, where tax codes are generally more manageable.
In fact, California, has already adopted such a measure. In 2005, the state launched ReadyReturn, a pilot program offering return-free filing. For those who are eligible, the system truly is as simple as touted.
The first benefit of a system such as this is in the time saved. According to feedback by users of ReadyReturn in 2011, 96 percent said ReadyReturn was “more convenient than how they filed their taxes in the past,” and 98 percent said they would use ReadyReturn again. Clearly, overwhelmingly high approval numbers like this don’t lie. The program is very popular among those who use it.
Another benefit is that it saves both parties money. Filing a paper tax return costs the state of California $2.59, while a ReadyReturn file costs $0.34, only a fraction of the cost. Furthermore, the service is free to citizens. Although some will maintain that the cost will simply be hidden in the form of an increased tax burden, the increased efficiency of ReadyReturn as opposed to a regularly filed tax return will lower the tax burden, not increase it. One of the reasons for these savings is the increased efficiency and accuracy of the system. Consider this: only 0.3 percent of ReadyReturn files contained errors, while 3.1 percent of tax returns filed in a control group contained errors. It should be no surprise that the professionals at state tax agencies whose job is to know the tax code would know more about the tax code than the average citizen.
Because ReadyReturn is only a pilot program, its scope is rather limited. In 2011, only about 1 million people in California were eligible for this program. Furthermore, the program has an abysmally low marketing budget and has faced many attempts to kill it by tax-filing companies, who no doubt have an interested in keeping such a program out of sight. However, ReadyReturn is increasing in popularity. In 2007, only about 11,000 ReadyReturns were filed, and in 2012, that number grew to 89,000.
I’m absolutely certain that, given the current high levels of user satisfaction with the program, coupled with its impressive performance under such high constraints, ReadyReturn would be a great success if expanded to more citizens. Furthermore, I believe such a system would be feasible in all states, including Illinois, where it would save every time, money and much frustration.
Michael Wang is a McCormick freshman. He can be reached at [email protected]. If you want to respond publicly to this column, send a Letter to the Editor to [email protected].
