If it was automatic, income would be missed. The government would be revealing what it doesn't know about, and people would not supply the missing information.

Under the current system, people aren't sure what the government is aware of. Because we get in trouble for leaving things off, we are more likely to report everything.

This is why the Australian system is better.

Make people file a tax return, but auto-populate it with the data the government already knows. And at the end include a tick box clause that essentially says "I have included everything and reviewed the autofill info, and if I have omitted anything later discovered I will be prosecuted".

20 seconds to file your taxes if there's nothing unknown. Very easy to add extra info. Covers the tax departments back of you intentionally mislead them.

Same here in Europe, my tax form is auto-filled I only have to check the numbers and confirm, with same warning and laws to back it up in case you decide to hide income.

We know what the IRS knows because the majority of people get the same forms as the IRS as far as income goes: W2, 1099, 1098, ... Unless you’re self-employed, the IRS only misses some deductions or foreign income.

Ever performed a lot of stock trades in a single year and had the IRS believe that you owe them $5 million in income taxes because they assume every sale you made was all profit? That's always fun, especially when they think they're right and they're entirely wrong.

The IRS information is at times comically incorrect in fact.

If you're trading more than $20 million a year in stocks, you are in the vast minority that everyone here acknowledges would need to adjust and file your taxes manually.

99.999% of the US population is not trading $20 million a year in stocks, and everyone else here is merely talking about the 95% of the population that has straightforward tax returns.

Cost basis reporting from brokers to the IRS has been around for several years.

Which is why most countries have a system that shows you what they think, and you can accept or not. It’s not like the majority of people are in such a situation, and likely over time that will become less common as its often a byproduct of legacy systems / mergers that lose the original transaction.

Rarely do I have income not on a W2 or 1099. Should automated.

> They know all of your income down to the cent

If you have a W-2 job and all your investments are in a bank or brokerage, but they still don't know your filing situation, dependents, other income, or deductions.

Not that I'm justifying the current system. It's just that the IRS only knows the big picture for most people. The rest is complicated.

Or if you work overseas and send regular payments to your bank account in the States, you need to make sure you file your Foreign Exclusion Tax form. Which is even more complicated. -.-

Don't they know that from the W-4? Or does that not go to the IRS

I'm not sure if it does or not, but you can have one W-4 per paycheck, so I thought it was just used to figure out your withholding. The amount withheld shows up on your W-2.

W-4s are not filled with the IRS. Employers are required to maintain them for inspection whenever the IRS wants though.

There's no reason why they couldn't go to the IRS though. They could quite easily maintain this information and make it easy for you to update it come tax time if it's changed.

Completely agree. Tax preparation is actually work the government should pre-fill. Australia does this. You can do your taxes online free and/or get an accountant or an army of accountants if your affairs are that complex. Frankly, the government should do the initial assessment for you generated automatically from the many, many existing surveillance systems already in place. They are watching all financial transactions and you might as well assume they are.

To even imply otherwise, and I've seen other comments say they shouldn't / don't have this already in place... even when social media companies are slurping data every way they can... seems absurd.

All that said, you should go through each item and correct their mistakes. Those matching systems aren't perfect.

Everyone who replied to this with "But what if...?": we are not talking to you. To a first approximation, literally everybody else does not have your problem -- they have W2 income and their filing status is very probably the same as it was last year. If you got married you filed a marriage license; if you had a kid your name was likely on the birth certificate. The IRS could guess everybody's taxes and be right at least 80% of the time, quite probably more like 95%. It really would be an existential threat to H&R Block, and good riddance.

The IRS will intentionally not give you any deductions and the cost basis for any capital gains will be $0 regardless of what you paid. The intent of the "return" they file for you is to get you to file a real once since their version will say you owe a lot of money.

This is all explained in the letter they send you should you fail to file.

What they don't know is my charitable deductions. My charitable deductions greatly reduce my taxes. If I went with their automagical tax filing process I'd lose out on those deductions.

That could be automated too largely. In Austria charities submit this information to the government and it automatically gets added to your prefilled tax filings.

Things don’t really work that way in the USA. I can take a bunch of stuff to a place like Goodwill. They will give me a little slip of paper that is “proof” that I donated, but they don’t keep records of my donation. The only way the government could know about it is if I tell them at tax time.

True, this was a very nice suprise on my last tax filing. I had even almost forgotten myself about those donations!