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Monday, May 10, 2010

Tax Administration and the Internet

We do a lot of things with the Internet - search and find lots of information, order goods and services, pay bills, transfer funds, apply for a job or for college, and e-file. With respect to tax administration, we can probably do more. For example, our W-2 and 1099s are computerized. Why can't they be transmitted to the recipient's tax file so they are already on our electronic return - whether that return is self-prepared or to be given to a paid preparer? Why are we typing information into tax prep software that has already been stored elsewhere electronically?

The IRS has been doing more with the Internet. For example, did you know about their website for checking whether you received an economic recovery payment - here? At the site, a person is asked to input their Social Security number and date of birth. They can also call a toll-free number if they prefer.

The IRS Strategic Plan for 2009-2013 includes: "We must become more technologically sophisticated to meet increased taxpayer expectations and maintain data security – modernizing our systems, improving our training, and continually enhancing our safeguards."

A recent report from Pew Internet - Government Online (4/27/10) states that 61% of American adults have used the Internet to get information from the government. The report notes that government use of social websites can further increase participation.

It would not just be the IRS that could make better use of secured Internet tools, but also state tax agencies. Why don't states create software for their citizens to help them track their online purchases for which sales tax was not collected, but is owed, with that software producing a year end statement of use tax owed (and the citizen would have an option to add in its mail order and travel sales for which use tax is owed). Privacy would not be an issue because the state would just provide the software, it would not monitor or operate it.

How else might tax administration be improved and simplified via the Internet, assuming it can be done securely? What do you think?


Peter Gardner said...

The states are trying to do something like what you suggested. The Streamlined Sales and Use Tax Agreement has brought 23 states together to collect sales and use tax on the Internet. They establish protocols for providing tax data and provide simple ways for merchants to calculate, collect, and remit sales tax.

It's pretty interesting legislation, if you are into that sort of thing.

Just yesterday I stared a Google Group for people with questions about the Streamlined Sales and Use Tax agreement. I don't claim to be an expert, but I work in that area and am interested in creating a dialogue.

Peter Gardner said...

Forgot the link,

Professor Nellen said...

Thanks for the post. Yes, the SSUTA is a good example of thinking of more modern compliance than we've had for the history of today's tax systems.

I looked for the SSUTA group and found it at a different email. It is

Annette Nellen
(21st Century Taxation blogger)

Peter Gardner said...

I'm just learning about SSUTA, so I find things out all the time. One thing that I am impressed with about the SSUTA is the turn-around time. I don't know the exact numbers off the top of my head, but given that all the transactions are dealt with electronically, money from your sales tax transaction can be in the hands of your local community in a very short period of time. I believe it's less than sixty days.