Economic Development

Easy Ride: California Will Figure Out Your Taxes For You

As tax season rolled around for Californians this past April, residents got an unexpected present from Uncle Sam: a pre-prepared state tax return.
by | June 2005

As tax season rolled around for Californians this past April, residents got an unexpected present from Uncle Sam: a pre-prepared state tax return.

For 50,000 residents with the simplest of tax histories, the state implemented a pilot program called "ReadyReturn." It mailed tax returns already filled in with refund or payment amounts to a sampling of residents. Those who received the form met specific criteria: They are single, claim no dependents, take standard deductions, have only one employer and receive no income other than wages. With ReadyReturn in hand, the taxpayers could then check the document for accuracy and return it, go to the state Franchise Tax Board's Web site and e-file or ignore the ReadyReturn and file the conventional way. Nearly 8,000 Californians chose to file ReadyReturn, and the feedback has been almost universally positive.

The program is designed to spare taxpayers the hassle and headache that come with filling out tax forms, and it could eliminate mathematical errors made by the taxpayer. But of even greater value to the state, ReadyReturn may be the key to getting more taxpayers to ante up. The FTB estimates that California has a "tax gap" of $6.5 billion between what the state is owed and what it collects.

"If we keep it simple, then we can keep people in the system," says Russ Lopez, communications director in the state controller's office. "We estimate that 800,000 Californians don't pay their taxes every year."

Tax-preparers worry that the program could cut into their business, especially as other states and the Internal Revenue Service look into the program. If California officials decide to expand the project in 2006, as many as 3 million of the state's 14 million taxpayers could qualify.

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