Why Privacy and Security Hindrances Prevent the Government from Telling You How Much You Owe in Taxes
Many taxpayers wonder why the government does not just tell them their exact tax liability. The reasons are multifaceted, involving the complexity of tax codes, self-assessment practices, and the critical issues of privacy and security. In this article, we will delve into these aspects and explain why the government does not provide specific tax amounts to individuals.
Understanding Tax Codes Complexity
Why it's not straightforward: Tax laws are incredibly complex, consisting of numerous provisions, deductions, credits, and exemptions that can vary significantly from one taxpayer to another. This complexity necessitates a detailed understanding of the tax code and often requires professional assistance to navigate. As a result, it is impractical to provide a simple answer that would be accurate for everyone.
The Self-Assessment Approach
The burden of responsibility: In many countries, including the United States, it is the individual's duty to assess and calculate their own tax liability. This approach allows for greater transparency and ensures that taxpayers are responsible for their financial actions. However, it also means that the government relies heavily on self-reported information, which includes income and potential deductions or credits.
Filing Requirements and Privacy Concerns
Filing returns: Taxpayers are required to file their returns annually, detailing their income and any deductions or credits they claim. The government uses these returns to calculate the specific amounts owed. However, providing a pre-calculation of taxes could lead to significant privacy and security concerns. If the government were to provide such information, it would collect and retain sensitive financial data, putting taxpayers at risk of identity theft or other forms of fraud.
Dynamic Nature of Tax Laws
Constant changes: Tax laws are not static and can change frequently. These changes are often influenced by political and economic factors, making it even more challenging for the government to maintain accurate and up-to-date information about an individual's tax liability. The government may not have the latest information on your financial situation until you file your return, further complicating the process of providing pre-calculated amounts.
Examples and Conditions of Tax Liability
Situations where the IRS can issue a bill: There are rare instances in which the IRS can "just mail you a bill." For instance, if you do not file a return or file a fraudulent return, and there are insufficient records from which to determine your income, the IRS can make its own determination of your income using available information such as bank records, assets, and spending patterns. They can then file a return for you and send you a bill for the amount due.
Investments and Future Needs
Investment flexibility: You can invest money for a household's basic needs foundation, but you do not pay taxes on these investments until they are used later. This is a voluntary step, and the government does not necessarily know what investments you make for future basic needs. If the government were to provide pre-calculated tax amounts, it would be difficult to account for these types of voluntary investments.
Conclusion
While some may argue that it would be beneficial for the government to inform taxpayers of their exact tax liability, the complexities of tax codes, the self-assessment approach, and the critical issues of privacy and security make this impractical. Instead, the government relies on individuals to prepare their tax returns and ensures transparency and accountability through the annual filing process.