That Crazy American Tax System
First, for those unfamiliar with American tax customs, let me explain a little about how we do things. Like people in many other nations, we Americans annually fork over varying percentages of our incomes to our government, because governments generally run better when they have money and an income tax can be a pretty effective way to get them money (although that mostly would be in an ideal world where economists know both A) what the Laffer Curve actually looks like and B) where the assorted nations of the world are located on it at the present moment). But Americans have a special place in their bile ducts for the income tax system, and this may seem bizarre to those who haven't experienced it firsthand.
It's probably because our tax system seems at times to be like the rules for Brockian Ultra Cricket, and indeed, some of us are surprised the U.S. tax code hasn't undergone gravitational collapse already. And just as the Hitchhiker's Guide to the Galaxy says the best way to assemble a good team for Brockian Ultra Cricket is to find one good player and clone him a few times, many Americans find our tax system so daunting that they decide the best way to handle it is to hand over responsibility to someone who's already good at it.
Most of this is because the IRS Form 1040 (the form most Americans traditionally fill out which computes both their "official" income and the amount of tax they owe) can be a headache at times - I've filled out a couple misleadingly-named "1040EZ" forms, which are the dumbed-down version for those of us who don't like math or don't make much money, and I hate the things. You have to collect your W-2 forms (you get one of them from each of your employers, listing who they are, that you worked for them, and how much they paid you, along with some other pertinent information), figure out how much actual money you made, how much money you got from various other types of income, how much you spent on allowed expenses, how much you're allowed to ignore because you gave money to charities or politicians or any of ten thousand other things, and then if you've got kids you can probably figure some deduction for them...you get the idea. There are so many things you possibly can add, deduct, or fiddle with that it makes strong men weep. So it's no wonder that Americans turn in droves to the easy solution and create a nicely-paying industry for folks who are willing to figure out their taxes for them.
But the IRS is no longer the cold monster it used to be - for a while now they've been trying to be a "kinder, gentler IRS", and this year they've introduced TeleFile. It's probably not part of that whole "kinder, gentler" thing, but anything that simplifies the income tax process is a kindness in the eyes of many Americans.
How TeleFile Works
So what is this thing? Well, according to the FAQ, TeleFile is
"completely "paperless"; there are no forms to mail. It is an interactive computer program that automatically calculates your tax and begins the electronic filing process over the telephone."
Isn't that neat? I didn't know about this until I got my tax booklet in the mail. At first I was a little startled, since I was expecting the usual headache I associate with filing my taxes. Instead, I found I was supposed to fill out a short (four lines!) worksheet and then call their toll-free number to do everything else. So I said, "Why not? Anything's better than slaving over the 1040!" and picked up the phone.
I was greeted by a cheerful, sing-song kind of recorded female voice, which welcomed me to the IRS' TeleFile system and warned me that if I wanted to file my state income tax return as well as my federal income tax via TeleFile I could, but would have to do both during the same call. I didn't want to do my state taxes just yet, so I ignored that. Then it asked me for some identification; I entered my Social Security number and date of birth, and then was prompted for an additional (unique) five-digit number which appears in my TeleFile booklet. Once that was through, I performed the telephonic equivalent of marking a few checkboxes (things like whether I wanted to donate $3 of my tax payment to a fund for Presidential election campaigns, whether I was claimed as a dependent on someone else's return, etc.) and waited for the hard part to start.
But the actual filing was pretty simple; I punched in three relevant numbers from my W-2 form, verified they had been entered correctly, and then was asked to wait a moment while the computer calculated my tax. About three seconds later, it read me some numbers which I was asked to write down, and identified them as my taxable income, tax owed, and refund. It then asked if I'd like to have my refund (if any) deposited directly into my bank account. I suppose it would have asked for some bank information, but I didn't want that so I don't know. The final step was to make it official and let the computer file my return for me with the numbers it had just generated. This is the part where, on a traditional 1040 form, one finds a statement of the form "I swear on penalty of perjury that the information provided in this return is accurate to the best of my knowledge", and it asks for your signature agreeing to that statement. The recording read me the statement, but in lieu of a signature, it asked me to press "1" on my telephone if I agreed to the statement and "2" if I did not, warning me that this would constitute my legally binding signature (which was slightly surprising, but more on that in a minute). So I pressed "1", and it gave me a ten-digit confirmation number. And then I hung up, done with my income taxes for another year.
Pros and Cons of TeleFile
The benefits of TeleFile as an option to file your tax returns are pretty obvious. With TeleFile, us poor taxpayers no longer have to struggle through the Form 1040 (or at least some of us don't; there's a checklist on the front of the booklet that you go through to figure out if you're eligible for TeleFile). Where filing a traditional Form 1040 could be a real hassle, involving figuring out the right calculations to perform, the right numbers to put into them, and a quick prayer that you hadn't overlooked anything, TeleFile removes most of the difficulty, simply asking for a few pertinent numbers and doing all the math for you.
However, there are also some pretty obvious drawbacks. For example, there's security: the service checked my ID by asking for my Social Security Number, my date of birth, and a five-digit number that was printed inside my TeleFile booklet. While that is three different numbers, two of them are obtainable by just about anyone; the only number that uniquely identifies me is really the five-digit code in the booklet, and using that assumes that the U.S. Postal Service is reliable. Not to criticize the fine men and women of the USPS, but more than once the neighbors have gotten my mail and vice versa. I'm not sure I'd trust some of those people with the five-digit key to my tax return.
Also, there's the possibility of glitches in the program. I'd sure hate for the software that computes the tax return to have bugs in it. But of course, there's already plenty of tax software on the market, so I guess that's a problem people have already accepted.
The idea that pressing a number on my touch-tone phone could constitute my legally binding signature really threw me for a loop, though. I'm accustomed to click-through licenses on software, but I really don't like them, and it worries me that my government is giving recognition to the idea that I can "sign" something by pressing a button and have that constitute a binding agreement. I'm not sure that the convenience of TeleFile outweighs the problem of making this sort of "signature" legitimate, and of all the concerns I have over TeleFile, this one is the most pressing and most significant.
And of course, there's also the logistics problem - this whole idea is very nice, but can it be expanded beyond the bounds of the current program? Right now you can only use TeleFile if you fall into a carefully-defined segment of the populace whose tax returns won't be too complicated. Could the system could be expanded to serve everyone? I'm not sure, but I do know that the American tax system is incredibly complicated (for example, the H&R Block website, linked above, has a banner claiming there were 440 changes in U.S. tax law in the past year alone), and I wonder if it would even be possible to program a system that could take all of the options into account and calculate the correct tax figure - the sheer number of possibilities must be staggering.
TeleFile is obviously a very convenient system, which could eliminate a lot of the frustration felt by American taxpayers each year as they file their income tax returns. There are, however, some issues with the system at the moment, and it is still in only its first year of (limited) implementation. So for the time being, it's pretty hard to make a concrete judgement about TeleFile overall; I think that whether the IRS can iron out the problems (and, more importantly, whether the IRS chooses to iron out the problems) will be an important point, and that whether TeleFile will work, and whether it (or something similar) could possibly replace the traditional income tax return is something only time will tell.