State Tests Program to Fill Out Tax Returns

Paying taxes may never be fun, but it may soon get easier.

Under a pilot program, the state of California will volunteer to fill out the annual income tax returns for 10,000 residents with lower incomes and uncomplicated finances.

If the test works, as many as 3 million of the state’s 14 million taxpayers could be eligible for the program. Taxpayers with deductions and dependents, however, will still have to file the old-fashioned way.

“Filling out a tax return is a pain in the neck,” said California Controller Steve Westly, who proposed the pilot project. “This pilot program will give taxpayers a choice, and a chance to spare themselves the hassle and the headache that comes with tax paperwork.”

The pilot program will be launched in February and will target single taxpayers with the simplest returns. Using public information provided by employers and banks, the state will send chosen participants a pro forma return in the mail, said Denise Azimi, a spokeswoman for the Franchise Tax Board.

This return will fill in the taxpayer’s wages and investment income, based on information reported to the tax board from employers, banks and brokers. The taxpayer must review the form for accuracy and make any necessary corrections. If it’s correct, it simply can be signed and returned.

“We will send a letter with the return explaining what we did,” Azimi said. “It will be up to the taxpayer whether to use the return, dismiss it or tear it up. But we think people will be excited about it.”

Tax preparers were cautiously optimistic about the idea.

The program should make life easier for some taxpayers who find filing intimidating, said James H. Riven, a certified public accountant in Woodland Hills. But, he said, those who could potentially itemize deductions shouldn’t fail to do so just because this is easier.

Phil Holthouse, a partner with the Santa Monica tax firm of Holthouse Carlin & Van Trigt, said at the very least it should encourage more people to file returns. “The people with straightforward returns are often intimidated by filing,” he said.

A similar program has already been used with roughly 30,000 non-filers, Azimi added, and about 32% of the non-filers who received pro forma returns signed them and filed. That’s a significantly better response rate than the tax board has gotten when it simply sent notices to taxpayers, she said.

Tax officials will evaluate the program next summer to determine its future.