With filing season in full swing, many of us have already begun submitting our tax returns to the IRS. Truth be told, it’s not a time many of us look forward to. Like skipping dessert or going for a checkup, filing taxes is something we do because we have to, not because we want to. However, there is more to performing our tax compliance responsibility than that.
Voluntary Compliance is one of the basic characteristics of participatory citizenship in the United States, just like voting in our elections or volunteering to serve our country. These are all part of the fabric of American society and culture. So, before we all move on with our busy lives, we want to reflect on the often overlooked but empowering aspects of filing your tax return – what it really means, and why it’s an important event worth valuing and celebrating as Americans.
Taxes are deeply personal. No two tax returns are identical because no two of us are the same. After all, the taxpayer — and only the taxpayer — understands the uniqueness of his or her life and individual circumstances. Only the taxpayer knows the details of his or her family’s living arrangements, employment and importantly, charitable giving and other deductions and credits that for which that taxpayer qualifies and deserves. Family composition alone has dramatically changed in the United States over the last fifty years as has the changing work environment and even the growth of self-employment as a mainstay of household income.
– Leigh Phillips, President & CEO of EARN.org, discusses how our Voluntary Compliance system presents an opportunity for taxpayers to jumpstart their savings by setting aside part of their refund.
Since the founding of the Republic itself, taxation is deeply embedded in defining the relationship between the governed and their government. The importance of that relationship is a paramount issue that traces back to the very beginning of the American experiment. Its importance is perhaps best expressed by our colonial ancestors in a resolution adopted by the Stamp Act Congress of 1764:
“…. It is inseparably essential to the freedom of a people … that no taxes be imposed on them, but with their own consent, given personally, or by their representatives.”
The establishment of the U.S. Income Tax 150 years later in the early 20th century as a Voluntary Compliance Tax System, has its philosophical origins in the principles of the rights and independence of the governed that go back to our national beginning. Viewed from this historical perspective, the empowerment of the taxpayer in determining his or her own taxation is not an incidental, irrelevant or even inconvenient detail. It is actually quintessentially American. It gives us the power to determine – on our own – our financial obligations and our financial health and priorities for the year. For many, it’s the chance to get back some hard-earned money through a refund, which can often be the largest payday of the year.
But even beyond the refunds and individually unique returns, it is important to reflect on what filing one’s taxes really means. It is the one time annually when each of us has to take stock of our whole financial picture. It is a time to reflect on the year that was and to plan for the year that will be. It is a time to look forward, take control of our financial lives and set goals and strategies for the future.
Economists tell us, and indeed warn us, that most American families have been unable to save even $400 to set aside for an emergency. The reality is that for most families, saving is hard if not impossible. And yet, through our tax withholding, most of us have money sitting in the “bank” of the U.S. Treasury in the form of the tax refund we receive each year. Indeed, for that sum of money, the hard job of saving is already done.
Our Voluntary Compliance tax system presents a once-a-year opportunity for taxpayers to choose to set aside and save even just a little of their refunds, perhaps $400 or $500, as a rainy-day fund, or to buy Savings Bonds, or to start a 529 education account for their children and grandchildren. Direct taxpayer participation in this tax-time moment and the opportunity to leverage the economic empowerment that tax refunds can represent can make a real difference in a family’s financial health. And saving even a portion of a family’s annual tax time refund can move the needle on the economic health of the nation as a whole.
At Intuit, our mission is to power prosperity – and that means being on the side of the taxpayers, giving them tools to take charge of their finances, enhancing financial literacy and empowering every taxpayer to make informed decisions about his or her own money.
It is sometimes pointed out that other nations around the world rely on their governments to centralize all aspects of the taxation process, from cradle to grave, for every citizen. But in the United States and our neighbor to the North, Canada, the income tax system is uniquely citizen-centric. And that is empowering.
So take a moment to celebrate filing season – because the citizen’s right to Voluntary Tax Compliance, like the right to vote – is not just an obligation. It is founded in the principle of taxpayer empowerment and celebrates the unique opportunity and right we have in this country to be stewards of our own future.