[NovemberWhiskey]

You proceed from a fallacy.

The IRS doesn't know how much tax you owe because Congress has created a massively complex system that includes using deductions to incentivize certain types of behavior, as well as using the tax system as a mechanism to deliver means-tested benefits.

[bb611]

90% of US taxpayers used the standard deduction in 2018, up from 70% in previous years.

This has been a major topic of discussion in tax circles for decades, the vast majority of Americans do not benefit from deductions and the federal government's direct knowledge of your income is essentially identical to your own (because of mandatory reporting from employers, banks & other financial service entities).

Specific deductions are written by and for high income individuals, and supported by lobbying from the tax industry which wouldn't exist without them, but they're not used by the vast majority of Americans, especially with raised SALT limits and doubled standard deduction.

[NovemberWhiskey]

Refer to my response to another comment below; it is absolutely wrong to assume "this person takes a standard deduction so they haven't any tax forms to fill".

And this is not just limited to the Earned Income Tax Credit.

There are also Child Credits, Child and Dependent Care Credits, Adoption Credits, Residential Energy Credits (for those who got solar), Low-Income Housing Credits (for low-income home owners), American Opportunity Tax Credits (for those with low/middle incomes paying college expenses) ... and all of these are relevant to non-itemizers.

P.S. there are also above-the-line deductions available which reduce your AGI even if you take the standard deduction - an important one being the one for Student Loan Interest.

[coderintherye]

You assume everyone itemizes deductions. There is a thing called the "standard deduction" which renders your point moot for the people using it which I suspect has a lot of overlap with the people who would like the IRS to do the calculation.

[NovemberWhiskey]

No; I am not assuming that. The standard deduction does cover a lot of people; but a lot of the people that it covers end up filling out other forms as part of their returns for tax credits.

For example, the Earned Income Tax Credit is a means-tested benefit program that's delivered through the tax system. This is not a niche program - 25 million families benefit from it.

It requires filers to identify how many qualifying children they have, which in turns depends on things like the educational status (is this child in school, college, are they a full-time student) and residency (child must generally live with you, but with exceptions for overseas military service, etc).

In cases where multiple filers can claim a qualifying child (e.g. cohabiting single filers), you're required to make an election as to which return will claim the qualifying child.

The EITC also encourages reporting of informal income (because it's only available to people who earned an income) which might not be on a W-2 / 1099, e.g. baby sitting, to qualify.

None of that stuff is known to the IRS from W-2s, 1099s etc. and they are dependent on the filer to provide it every year, especially as circumstances change; and filers are strongly incentivized to provide it as the credit is refundable.

[AnimalMuppet]

Yeah. For example, one year I bought double-pane windows for my house, which were eligible for a tax deduction (on the grounds of promoting energy conservation). Either I have to tell the IRS that I bought those windows, or the IRS has to know that I bought windows. The second option is too close to dystopian nightmares for my taste.

[jandrese]

Nobody is calling for a completely omniscient IRS.

What should happen is you log in to irs.gov and see everything they know (number of kids, income, interest, reported charitable giving, etc...), you fill out the missing pieces (energy credits, when you bought and sold stocks, charitable giving not reported to them, etc...), and they run the calculation. It should take almost no time at all for people with simple returns and only a few minutes of inputting some basic figures for most everyone else, with of course a handful of people who have terminally complex returns and need an accountant.

Instead you have to manually enter all of the information the IRS already knows because otherwise nobody would pay for TurboTax or H&R Block. Only real accountants would be necessary for those special cases where people have complex holdings.

[NovemberWhiskey]

Precisely. For those playing along at home, that would be the Residential Energy Efficient Property Credit, Form 5695.

[Ekaros]

No system handles that kind of case. But they do handle one where person doesn't take the deductions. And is happy without them.