Academic journal article Rutgers Computer & Technology Law Journal

Get Ready for the Return! How to Make Filing Tax Returns More Efficient: Applying the State of California Franchise Tax Board's ReadyReturn to the Federal Tax System

Academic journal article Rutgers Computer & Technology Law Journal

Get Ready for the Return! How to Make Filing Tax Returns More Efficient: Applying the State of California Franchise Tax Board's ReadyReturn to the Federal Tax System

Article excerpt

I. INTRODUCTION

Every year before April 15th, Americans take time out of their busy schedules to fulfill their duty to pay income tax. (1) The average American dislikes this time of year because the tax return process is complex, costly, and anxiety-provoking. (2) The United States government taxes individuals based on their income, which equates to consumption plus changes in wealth. (3) The concept sounds simple, but the process is not. With hundreds of filing forms to decide among, (4) those taxpayers who cannot understand the process may feel compelled to seek paid, professional help by visiting a Certified Public Accountant (CPA) or a tax preparation provider, such as H&R Block or Jackson Hewitt. (5)

As technology has improved, new online tax services have launched, and the task of filling out tax returns has become less burdensome. (6) For example, the popular software package "TurboTax" provides a computerized, step-by-step process for filling out tax returns and then offers the option to "e-file." (7) Customers are drawn to TurboTax because of its ease and convenience. (8) Understandably, a constant demand exists for user-friendly computer programs that make complex tax filing processes simpler. However, companies with profit incentives are not the only entities that realize this--the government is also stepping into the arena. Recently, the California Franchise Tax Board instituted an online tax filing process called "ReadyReturn" that sidesteps commercial tax preparers and software providers by enabling taxpayers to e-file their California income taxes using income and tax liability information pre-calculated by the state." (9)

This Note posits that the federal government, via the IRS, should offer an equivalent of ReadyReturn to federal income tax fliers. It begins by reviewing ReadyReturn's development in California and explaining its operation within the state. It continues by examining whether ReadyReturn can be applied at the federal level and analyzing the legal implications of such a government-run tax-filing scheme. In evaluating ReadyReturn's pros and cons, the Note concludes that a national implementation of ReadyReturn would benefit both taxpayers and government in improved efficiency and compliance.

II. HISTORY OF READYRETURN

ReadyReturn has been a controversial proposition since its conception. The idea of a federally funded tax return program has garnered support from both the Democratic and Republican parties, (10) but simultaneously has battled some nonpartisan opposition. (11) Not surprisingly, one of its most strident opponents is Intuit, the manufacturer of TurboTax. (12) After successful pilot programs in 2004 and 2005, California was ready to implement ReadyReturn, but was sidelined by Intuit's attempts to block it. (13) The TurboTax developer spent a million dollars on lobbying efforts. (14) At first, the legislature ceded to Intuit's pressure and let the program die. (15) Subsequently, however, outgoing State Controller Steve Westly and his successor, John Chiang, recognized that the California Franchise Tax Board ("FTB") had the authority to effectuate the tax program on its own. (16) Stanford Law Professor Joseph Bankman, (17) a strong supporter of ReadyReturn, (18) helped diminish Intuit's influence by investing $30,000 of his own money to hire a business lobbyist. (19) Finally, on December 4, 2006, the FTB decided unilaterally to move forward with ReadyReturn despite legislative uncertainty. (20)

III. READYRETURN IN CALIFORNIA

The FTB introduced ReadyReturn to its taxpayers as a pilot program in 2005 and made it fully available in 2008 for the 2007 taxable year. (21) The program's objective, in shifting the majority of tax preparation work from the taxpayer to the government, was to alleviate the burden of filing taxes. (22) ReadyReturn uses information about the taxpayer already available to the state to generate a pre-filled tax return for the taxable year, which the taxpayer then must approve and submit. …

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