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1 1 (August 22, 2022)

handle is hein.crs/goveios0001 and id is 1 raw text is: Congressional ____ R ~fesearch Service Prefilled Individual Income Tax Return Filing: What It Is and Policy Issues August 22, 2022 Filing federal income taxes imposes costs on taxpayers, the Internal Revenue Service (IRS), and employers and other payers. According to the IRS, the average individual taxpayer with business and nonbusiness income in 2021 spent a total of 13 hours to prepare and file their income tax return. For those who purchased tax software or paid someone to prepare and file their returns, the average out-of-pocket cost was $240. There is considerable variation among taxpayers in these compliance costs. U.S. policymakers have been looking for feasible ways to reduce filing costs for some time. The IRS Restructuring and Reform Act of 1998 (P.L. 105-206) directed the IRS to develop a return-free filing system that eligible taxpayers could use to file their returns, starting in 2008. The IRS never produced such a system. There is still interest in Congress to implement a cheaper alternative to the current filing system. S. 4508 and H.R. 8368 in the 117th Congress would require the IRS to create a prefilled return filing system that eligible taxpayers could use to file their returns, beginning in 2024, among other things. This Insight briefly explains how prefilled return filing would work and discusses some of the policy issues raised by proposals to use such a system in the United States. What Is Return-Free Filing? In general, return-free tax filing allows taxpayers to meet their income tax obligations without filing a return with their tax agency. In 2020, at least 36 countries (including the United Kingdom, Germany, Japan, Denmark, and Sweden) employed such a system. In general, return-free filing is accomplished in one of two ways: an exact withholding system (EWS) or a tax agency reconciliation system (TARS). In an EWS, a tax agency attempts to ensure that the exact amount of a taxpayer's tax liability is withheld over the course of a year. The main goal of such a system is to keep eligible taxpayers from having to file returns at the end of the year to obtain refunds or pay balances due. An EWS typically requires taxpayers to report the information needed to calculate accurate withholding allowances to their employers or a tax agency at the start of a year. Under a TARS, taxpayers have the option of having their tax returns prepared by a tax agency and sent to them for review. The tax agency calculates tax liabilities based on information it has received from Congressional Research Service https://crsreports.congress.gov IN11992 CRS INSIGHT Prepared for Members and Committees of Congress

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