Dear Rep. Bill Foster (D-IL) do you know what a CP2000 is? May I respectfully suggest that you check this notice out and then go back to the bill you just submitted to Congress and make some revisions or trash the bill completely?
A CP2000 is a notice the IRS sends to taxpayers concerning differences between the information records the IRS has received and what the taxpayer has reported on their tax return. For example, Joe wins a jackpot at a local casino in January of 2013 and is given the W-2G for the win at that time. But by the time Joe does his 2013 return in 2014, he’s forgotten all about it and doesn’t include the winnings on his tax return. About a year later, Joe will get a CP2000 from the IRS pointing out that he left this income off his return and please send them some more money.
Why should Rep. Foster check out this notice and the time it takes for it to be issued? Because he and co-sponsors Rep Mike Quigley (D-IL) and Jared Huffman (D-CA) have introduced a tax reform bill; the Autofill Act of 2013 (H.R. 1532). The idea is that taxpayers will download from a secure IRS website a tax form with the income information already filled in for them. The income reported on W-2s, W-2Gs and 1099s. The taxpayer can accept the return as is, modify the information or do a return from scratch. It’s the Representative’s solution to the complex tax code and the cost of compliance.
Autofill is one of those ideas that sounds good but will be a bear to implement. Part of the problem with this particular bill is the time frame that the sponsors outline for implementation. Basically they want it to start with the 2013 returns that will be filed in 2014. That is a short time to make those kinds of changes to the tax system. And it doesn’t give anyone much time to get the word out to the public about the program and their right to make changes to the Autofill return. Most troubling to me is the section that requires the IRS to have the downloadable forms ready to go by February 15th. That is at least 13 days earlier than W-2, 1098, and 1099 forms have to be filed with Social Security and the IRS. In fact, if the information returns are filed electronically, employers and payers actually have until March 31st. Then Social Security and the IRS need time to process the information. That’s why it takes so long to get CP2000 notices out. They can’t go out until the information is there. Under this bill, the downloadable returns could be incomplete or change as the issuers make corrections. Autofill won’t help if the correct numbers aren’t there.
As for Autofill reducing the costs of tax preparation, it might cost me clients with simple returns. But I can see more amended returns and compliance work due to information filed late or taxpayers wanting to make changes to the filled in return they filed.
Some kind of pre-filled out Federal return might be an option to help taxpayers. However, there are lots of issues which would have to be worked through before it could go live. The biggest issue would be filing deadlines for the information returns the IRS would need. It might mean that April 15th would have to become June 15th to give time for the info to be available and returns filed. The Autofill Act of 2013 needs to go back to the drawing board and take a serious look at how the current system works and what changes will have to be made to get an Autofill return program to be a benefit for taxpayers.