1. Politics. Funding the IRS sufficiently is, sadly, controversial. Additionally, tax filing is a multi-billion dollar industry, and they lobby politicians very heavily to make it hard to file taxes.
2. The IRS doesn't have everything, it has about 90% of what the average person needs to file taxes. Most people could answer about 5-10 simple questions and the IRS would have everything they need (this is basically how tax filing firms/software get it done after you give them all of the information that the IRS already has). A minority have more complex tax situations, but these people likely already have a personal accountant, or are running a business.
> The IRS doesn't have everything, it has about 90% of what the average person needs to file taxes.
Well, not quite. The IRS knows 100% of what the average person is going to put in their tax return. So just automate that.
There is a small percentage of people with more complex tax situations. Yes, they will need to file a tax return. Percentage-wise, it is very few people.
Your tax office wouldn't automatically know about self employment, investment earnings, your private business expenses, collected rent, profit from reselling things, etc, and they'd expect you to declare them via some form of self-assessment.
The US takes one step further by allowing a plethora of non-earning items to be declared as deductions on your return (mortgage interest, healthcare expenses, kids, etc) which the IRS needs to be told about.
They do know your investment earnings (brokerages report that) and your mortgage interest (loan companies report that) and your kids.
That covers, just about everyone.
Sure, a few people have personal businesses and rent incomes and all kinds of complex things. So the rational thing to do is build an automated system that covers the needs of 99+% of people, and for the few ones that it doesn't work, let them opt out and do a traditional tax return filing.
2. The IRS doesn't have everything, it has about 90% of what the average person needs to file taxes. Most people could answer about 5-10 simple questions and the IRS would have everything they need (this is basically how tax filing firms/software get it done after you give them all of the information that the IRS already has). A minority have more complex tax situations, but these people likely already have a personal accountant, or are running a business.