The End Of The Tax Return?

Could the end of tax return preparation — or so-called "tax season" for accountants — really happen? Or to paraphrase Mark Twain, is the demise of the income tax return greatly exaggerated? Technology is an amazing thing. As governments continue to expand data collection and improve their use of technology, it is not beyond the realm of possibility that the tax return could evolve into something very different than it is today. So, while the income tax return certainly isn't dead yet, its demise may be in the not-so-distant future.

In March 2015, the UK's tax administrator, HMRC, released a discussion document titled Making tax easier: the end of the tax return. The document outlines a bold vision for all UK taxpayers, including small businesses, to have digital accounts. Given that HMRC has access to much data, the document outlines thoughts to make smarter use of that data with a plan to essentially eliminate the personal income tax return.

When I read the UK's discussion document, I immediately turned my mind to Canada and the US. Surely if the UK has thought about this then many other countries must have thought about it too. Well, it turns out they have. In mid-January 2016, the Canada Revenue Agency (CRA) announced its Auto-fill my return program. My quick review of the program indicates that the CRA is at the early stages of developing its technology. What about the US? Well, the IRS appears to have big plans as well. The IRS has outlined its long-term plans under its Future State vision. Many hurdles still exist for the IRS to implement its plans but it is interesting nonetheless.

So, what does all of this mean for taxpayers and tax preparers? Well, it means a lot. Tax law is complicated and calls for simplification have not (yet) borne any meaningful fruit. However, tax return preparation should, in my opinion, be made easier than it is today. Accordingly, the implementation of tools to simplify the process is certainly welcome. One can debate the "Big Brother" aspect of data collection but the simple fact is that governments have always collected data and will continue to do so. Maintaining the privacy and confidentiality of such data is critical and will obviously pose ongoing challenges for tax administrators around the world.

Where does this leave accountants who rely on tax preparation for a living? Well, get ready for significant disruption in that line of business. It is obviously coming.

Given the complexity of tax, there...