Automatic Tax Filing: Simulating a Pre-Populated Form 1040
Each year Americans spend over two billion hours and $30 billion preparing individual tax returns, and these filing costs are regressive. To lower and redistribute the filing burden, some commentators have proposed having the IRS pre-populate tax returns for individuals. We evaluate this hypothetical policy using a large, nationally representative sample of returns filed for the tax year 2019. Our baseline results indicate that between 62 and 73 million returns (41 to 48 percent of all returns) could be accurately pre-populated using only current-year information returns and the prior-year return. Accuracy rates decline with income and are higher for taxpayers who have fewer dependents or are unmarried. We also examine 2019 non-filers, finding that pre-populated returns tentatively indicate $9.0 billion in refunds due to 12 million (22 percent) of them.
We thank participants at the Office of Tax Analysis Annual Research Conference and the Georgetown University Law Center Tax Law and Public Finance workshop for helpful comments. The views expressed in this paper do not necessarily represent the official position of the U.S. Department of the Treasury, the Federal Reserve Bank of Minneapolis, the Federal Reserve System, or the National Bureau of Economic Research. The authors declare that they have no relevant financial interests that relate to the research described in this paper.