Why I Refuse to Use Electronic Tax Filing

In yesterday’s post, I wrote about how I go about filing taxes and why I file paper tax returns instead of electronic tax returns. Now I’ll explain why I go this route. I am opposed to government effectively subsidizing the accounting industry. I have a somewhat personal view of this.

Years ago I worked on the pilot project that initialized and tested the electronic filing of tax returns at IRS. It was clear from early on that each electronic return would cost far less to process than a similar paper return. But back then, only a couple of preparers had qualified for electronic filing. The cost savings for the IRS were so significant that I questioned why IRS didn’t simply provide this service free of charge. The answer, it turned out, was that when electronic filing was conceived, powerful politicians made deals with the accounting and tax law lobbies that the government would never threaten their customer base.

Thus, IRS today provides free electronic filing for a limited group of taxpayers — mostly those with simpler tax situations. But the rest of us have to pay a qualified preparation firm to electronically submit our taxes. If IRS can provide this service free to some taxpayers, there is no logical reason that IRS cannot do so for all taxpayers —(only political reasons exist for this). It would actually save the government money.

Instead, we have a system that effectively subsidizes the accounting and tax law industries. I rebel against the system by filing paper returns, which actually cost the IRS more to process than if they simply let me file electronically for free. But at least I’m not paying a tax preparer that is made necessary only due to political dealing.

The tax preparing industries are not your friends in tax matters. They do not want any kind of actual tax law simplification. And they spend a lot more lobbying our politicians than do taxpayer activist organizations.

You’d think that my retired parents’ tax returns would be relatively simple to figure. And they would be easy were it not for my folks’ unfortunate investment in a registered tax shelter a decade and a half ago. Although the shelter really doesn’t make much difference in total tax liability, the contortions one must go through to figure everything properly rises to the level of Rube Goldbergian absurdity. The accounting lobby loves this sort of thing.

True tax simplification would be nice, but it’s not currently on the radar of anyone with real political clout. Only a few on the fringe pay any attention to the various tax reform proposals that are out there. It’s as if most taxpayers (60% pay someone to prepare their returns) have given up. I guess the cost isn’t high enough to cause a revolt. Leviathan appears to have won this battle. So I have to be satisfied with my private (admittedly minimal) paper return rebellion.