CalFile


CalFile


CalFile is the current tax preparation program/service of the California Franchise Tax Board (FTB).

ReadyReturn is the former tax preparation program initiated by the FTB as a pilot in 2005, tax returns for the 2004 tax year, based on their 2003 tax data, went out to 51,850 taxpayers receiving a "pre-populated" form based on financial information reported to the FTB by employers and banks. Recipients were single, no-dependents, standard-deduction, only-wage-income, one-employer, with a maximum adjusted gross income of $139,917. The purpose of ReadyReturn was to make it easier for taxpayers to file their returns, and to make the filing process more accurate and faster.

CalFile and ReadyReturn at one point coexisted for different taxpayer categories. In 2015, ReadyReturn's best features were included in CalFile, and ReadyReturn was no longer a separate program.

ReadyReturn

Background

More than 20 other countries implement prepopulated returns for some of their taxpayers. Denmark began a prefilled return program in 1988, and has an 80-percent participation rate. Chile, Finland, Malta, New Zealand, Norway, and Sweden have similar programs available to most taxpayers. Singapore, South Africa, Spain, and Turkey have similar programs available to at least 30 percent of taxpayers. Australia, Estonia, France, Hong Kong, Iceland, Italy, Lithuania, and Poland have similar programs available and are used by some taxpayers.

In the 1990s, Michigan offered return-free filing but dropped the program due to lack of participation, Louisiana planned but dropped implementation due to Y2K problems, and Minnesota proposed but did not enact return-free filing.

In March 2017, the effort to establish ReadyReturn in California was the subject of an episode of NPR's Planet Money podcast.

Origins

In 2004, the FTB staffers told Joseph Bankman, a leading scholar in the field of tax law, a clinical psychologist, and professor of law and business at Stanford Law School, that they realized that they had all the data they needed to fill out Californians' tax returns for millions of Californians whose entire income came from one job.

In 2005, Joseph Bankman worked with the state of California to create ReadyReturn, a pilot study with a completed tax return prepared by the state (not an individual or tax professional) that was available to single, no-dependant, standard-deduction, one-employer, wages-only taxpayers for the 2005 filing season.

When the FTB launched the ReadyReturn website, Intuit sued and lobbied California legislators to kill the program.

Methodology

In the pilot, taxpayers were allowed to file the return as given to them, to modify and then file it, or to ignore it and file however they normally would. Of the 50,000 participants in the pilot, 38,500 chose to ignore the return and approximately 11,500 filed it. A survey of pilot participants found more than 90 percent said they saved time using ReadyReturn and that it was more convenient than the system they had used previously. 99 percent said they would use it again the next year. 0.3 percent of ReadyReturn filings contained errors versus 3.1 percent of non-ReadyReturn filings.

Opposition

Between 2001 and 2010, Intuit Inc., maker of the tax-preparation software TurboTax, spent more than $1.7 million (equivalent to $2.38 million in 2023) on lobbying in an attempt to kill ReadyReturn. A bill to provide explicit statutory authorization for ReadyReturn and to make the program permanent died without a vote in the 2006 session of the California State Legislature. California State Controller Steve Westly said he was stunned by the response from taxpayers who used the program as part of the pilot project, about 96 percent of whom said it is a service government should provide, and one they would use again,

"I absolutely have come to believe that ReadyReturn is the right thing to do".
—California Controller, Steve Westly

No ReadyReturn forms were used for the 2006 tax year, but the FTB revived it on their own for the 2007 tax year, expanding it to cover one million Californians.

Reception

In 2012, 88,652 California taxpayers used the system, and, with paper returns costing more than seven times a ReadyReturn return to process, it saved the state an estimated $125,000. 99 percent stated they were satisfied with ReadyReturn, 97 percent stated this is the type of service government should provide, 96 percent stated it was more convenient than how they filed in the past, 95 percent stated it saved them time, and 98 percent stated they would use it again.

CalFile

CalFile is the current free tax preparation program, initiated by the FTB, to file state tax returns online directly to the FTB. It is available to single users with incomes under $203,341 and married users with incomes under $406,687 and takes 20 minutes to complete a return for most users, with direct deposit refunds usually within 7 to 10 days.

History

CalFile became available in 2003. In 2011, 6.4 million filers were eligible. Some features of ReadyReturn are now part of CalFile.

Economics

Dennis J. Ventry Jr. professor at UC Davis School of Law, who specializes in tax policy and legal ethics, describes it as a "a reliable, voluntary, safe and free way to calculate and file [...] taxes". The FTB says CalFile annually saves taxpayers somewhere between $4 million and $10 million in tax preparation fees, and the state of California saves approximately $500,000 in digitization overhead and administrative costs.

Opposition

CalFile has faced lobbying campaigns by market competitors in private tax-preparing software like Intuit. These lobbying campaigns have dissuaded the Internal Revenue Service (IRS) commissioner from implementing a free online federal tax preparation program. ProPublica notes that Intuit's product TurboTax "rests on a shaky foundation, one that could collapse overnight if the US government did what most wealthy countries did long ago and made tax filing simple and free for most citizens".

References

External links

ReadyReturn
  • ReadyReturn website (2014-05-02)
  • "ReadyReturn – Frequently Asked Questions" (PDF). California Franchise Tax Board. Archived from the original (PDF) on June 19, 2010.
  • "Q&A with Stanford Law School Professor Joseph Bankman about ReadyReturn and CalFile" (PDF). California Franchise Tax Board. Archived from the original (PDF) on June 19, 2010.
  • Franchise Tax Board Report to the Legislature: ReadyReturn, California Franchise Tax Board, April 23, 2009
  • Pivoting Away from Paper, California Franchise Tax Board, Internal Revenue Service Oversight Board Public Forum, May 13, 2014
  • Ready Return Pilot: Tax Year 2004 Study Results, California Franchise Tax Board, April 2006
  • Policy Analysis of “Return-Free” Tax System, Boisture, Lauber, and Paz, April 2006, commissioned by the Computer and Communications Industry Association
  • Pre-Completed Income Tax Returns: Evidence from the California ReadyReturn Program, Erard, 2011, commissioned for the Fraser Institute
  • Lam, Bourree (April 18, 2016). "The Fight Over Making Taxes Less Awful". The Atlantic.
CalFile
  • CalFile "File directly with us – for free."
  • "Help with CalFile". California Franchise Tax Board.
  • "FTB's Free e-file Program, CalFile, Now Available in Spanish". Business Wire. March 24, 2008.
  • "File Your State Taxes for Free in California, Maine, Massachusetts, Pennsylvania, and Other States". The Balance.
  • "States' Free Online Tax Filing Services Often Overlooked". pew.org.
  • Klein, Ezra (April 15, 2015). "What Denmark, Sweden, and Spain could teach America about taxes". Vox.
  • Manjoo, Farhad (April 15, 2015). "Would You Let the I.R.S. Prepare Your Taxes?". The New York Times.
  • Stevens, Daniel (April 12, 2015). "Is Money in Politics to Blame for Complicated Tax Returns?".
  • Free Electronic Filing - Minnesota Revenue
  • "States' Free Online Tax Filing Services Often Overlooked: 23 States offer free online filing as of 11 April 2013". pew.org.
  • Map: State Web-Based Electronic Filing Methods (pre-filled & FreeFile), 21 January 2015
Academic
  • Bankman, Joseph (December 2008). "Using Technology to Simplify Individual Tax Filing" (PDF). National Tax Journal. 61 (4, Part 2): 773–789. doi:10.17310/ntj.2008.4S.01. S2CID 41850659. Retrieved January 13, 2021.
  • Bankman, Joseph; Nass, Clifford; Slemrod, Joel B. (2015). "Using the 'Smart Return' to Reduce Tax Evasion". SSRN Electronic Journal. doi:10.2139/ssrn.2578432. S2CID 39787971. SSRN 2578432.
  • "Point & Counterpoint: Joseph Bankman (Stanford) and James Edward Maule (Villanova) debate tax-filing simplification proposals: data-retrieval and pro-forma return". ABA Tax Times. 35 (4). Summer 2016.
  • "Free Articles: Bankman, Joseph". Tax Notes. Tax Analysts. Retrieved January 13, 2021.
  • Litan, Robert E.; Eisenach, Jeffrey A.; Caves, Kevin W. (2008). "The Benefits and Costs of I-File" (PDF). SSRN Electronic Journal. doi:10.2139/ssrn.1159844. S2CID 168131799. Retrieved January 13, 2021.
  • "Tax industry group is 'trying to chill my research,' Professor Ventry tells N.Y. Times". UC Davis School of Law - News. November 13, 2018. Retrieved January 13, 2021.
  • Ventry, Dennis J. Jr (July 21, 2010). "Intuit's end-run". Los Angeles Times.
  • Ventry, Dennis J., Intuit’s Nine Lies Kill State E-Filing Programs and Keep ‘Free’ File Alive (August 30, 2010). State Tax Notes, Vol. 555, No. 57, 2010, UC Davis Legal Studies Research Paper No. 227
  • Ventry, Dennis J. (July 16, 2018). "The Failed Free File Program Should Be Reformed, Not Codified". Tax Notes. 160 (3): 317. Retrieved January 13, 2021. Reprinted from Tax Notes
  • Ventry, Dennis J. (February 10, 2020). "The Fix Was In: Mitre's "Independent" Review of Free File". Tax Notes Federal: 827. Retrieved January 13, 2021.
  • Ventry, Dennis J. (November 4, 2019). "False Claims in Fight Over California's False Claims Act". Tax Notes State: 395. Retrieved January 13, 2021.
  • "Free Articles: Ventry, Dennis J., Jr". Tax Notes. Tax Analysts. Retrieved January 13, 2021. Dennis J. Ventry Jr. is a professor at the University of California, Davis, School of Law and former Chair of the IRS Advisory Council.
  • Walker, David I. (2020). "Tax Complexity and Technology". SSRN Electronic Journal. doi:10.2139/ssrn.3685329. S2CID 226735641. SSRN 3685329. Boston Univ. School of Law, Law and Economics Research Paper No. 20-28
  • Schwebke, Jason; Brink, William; Hansen, Victoria; Kelliher, Charles (January 2019). "Analyzing the role of trustworthiness in tax filing and tax compliance behavior through an automated return" (PDF). University of North Texas College of Business. Retrieved January 13, 2021.
  • Duncan, Denvil; Li, Danyang (2018). "Liar Liar: Experimental Evidence of the Effect of Confirmation‐Reports on Dishonesty". Southern Economic Journal. 84 (3): 742. doi:10.1002/soej.12244. Retrieved January 13, 2021. Although there has been discussions about the merits of a pre-populated tax form in the US, the State of California is the only US government to have implemented them under their ReadyReturn initiative. ReadyReturn has since been cancelled, but its primary feature – pre-populating tax forms with pre-existing information – is still available with CalFile.
  • Valencia, Rebecca (Spring–Summer 2011). "Get Ready for the Return! How to Make Filing Tax Returns More Efficient: Applying the State of California Franchise Tax Board's ReadyReturn to the Federal Tax System". Rutgers Computer and Technology Law Journal. S2CID 62017885.

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Text submitted to CC-BY-SA license. Source: CalFile by Wikipedia (Historical)



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