Fill in the Blank? A Discussion of Prefilled Tax Returns in the U.S.

ABSTRACT The U.S. tax system imposes a substantial cost of preparation on individual taxpayers. Prefilled tax returns, in which the government prepares tax returns and provides them to taxpayers for any necessary revisions or approvals, would fundamentally overhaul this practice. Such a program has long been debated in the U.S., including multiple recent legislative proposals of a “Tax Filing Simplification Act.” In this paper, we consider a prefilled tax return system for the U.S., concluding that it offers the opportunity to improve the tax filing experience of many Americans by reducing their involvement in an activity widely perceived as unpleasant. However, effective implementation will require careful design. We draw on the implementation and design of programs in other developed countries, along with relevant academic research, to provide insight into the potential design of a prefilled tax return program in the U.S.