Stressed by tax season? UI expert agrees ‘there’s got to be a better way’

It’s a late-winter ritual like the Super Bowl. American taxpayers spend more than $73 billion and nearly 2 billion hours — about $230 per tax return — to tell the Internal Revenue Service how much they made last year and how much they figure they owe for last year’s taxes. Much of it is information the IRS already has.

“Academic studies indicate the government has 42 to 48 percent of the information they would need,” University of Iowa professor Ryan Wilson said. “But there hasn’t been a lot of progress.”

Wilson, accounting chair at the UI Tippie College of Business, tracks efforts to simplify and speed tax filing. More than 30 countries have adopted “return-free” tax filing, under which more precise withholding calculations eliminate the need for an annual return.

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Despite decades of political effort, a simplified filing system hasn’t happened in the U.S. In 1998, Congress directed the Treasury Department to develop a return-free system by tax year 2007.

“There’s been so many efforts from both sides of the aisle,” Wilson said. “President Reagan pushed for it. Elon (Musk) even proposed some kind of similar thing, or said something about it, but it never got anywhere. There’s clearly interest in it from both sides of the aisle at times. On the other hand, there’s legitimate skepticism.”

It’s skepticism earned by experience. For several years, California experimented with a system it called ReadyReturn, but participation failed to meet expectations and the program was discontinued in 2015. The IRS provided free Direct File software to about 100,000 filers in 2023 and ’24 before suspending its program.

“It was just software you use, similar to the private software but you’re filing directly with the IRS,” Wilson said.

The IRS continues to offer Free File, which partners with private providers to deliver free “guided software,” or forms to be filled out by the taxpayer. The IRS estimates more than 65 million Americans have used Free File since 2003, saving about $30 per return, or about $2 billion total.

Free File is available only to those with an adjusted gross income of $89,000 or less, and the IRS website advises taxpayers to “review each trusted partner's offer to make sure you qualify.”

Popular tax-prep software providers such as TurboTax also offer a free option for some users.

“It doesn’t work for a lot of taxpayers,” Wilson said. “If you have a small business and you have trust and estate issues, you’d want to consult a paid preparer.”

TurboTax’s free filing isn’t available to those claiming stock dividends or other deductions. Such deductions and tax preferences — all prized and fiercely defended by their beneficiaries — complicate efforts to adopt a standard system.

“It’s so difficult, even for simple taxpayers,” Wilson said. “If you move, or if you add a dependent, it complicates things. What are the implications for your state filing, and how is that coordinated between the two?”

California’s pilot program also encountered skepticism among taxpayers.

“If the government tells you they have 70 percent of the information they need, how likely are you to tell them the final 30 percent?” Wilson asked.

Still, Wilson thinks there’s potential to simplify the annual chore, which began with passage of the 16th Amendment in 1913. (Congress first adopted an income tax in 1861 to pay for the Civil War; that first national income tax was repealed in 1871).

“This is a great country,” Wilson said. “There’s got to be an easier way, especially for young people and older people (with simpler returns). There’s got to be a better way to push this down the track.”