There's Already a "Postcard Tax Return" -- So Why Don't More People Use It?

There's Already a "Postcard Tax Return" -- So Why Don't More People Use It?

On Thursday, the House of Representatives passed its tax reform plan. One of the goals that House Speaker Paul Ryan has stated numerous times is that taxpayers should be able to file their returns on a postcard, and he's even gone so far as to produce a 14-line sample of what a postcard tax return might look like under the proposal.

Yet the challenge of tax reform isn't producing a form that fits on a postcard but rather one that people can actually use while still taking full advantage of all the potential tax breaks available to them. There's already a 14-line tax form that millions of taxpayers use, called IRS Form 1040EZ (opens PDF). Unfortunately, only a small fraction of the American public can use that form and claim all the deductions and credits for which they're eligible. Any new form under the current tax reform proposal will inevitably have exceptions, eligibility requirements, and other complications that will make a postcard tax return as difficult to use as the current 1040EZ form is. A closer look at the proposal and Form 1040EZ will help you understand more about what's really at stake.

In his Better Way tax policy paper in 2016, the House Speaker presented a strategy for simplifying taxes that eventually formed the backbone of the current House proposal. The return called for investment income to be taxed at half the rate of ordinary income, allowed certain deductions for retirement contributions, and the election of either a standard deduction or the use of mortgage interest and charitable contribution deductions.

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Source: Fool.com