Advancements in technology, greater availability of third-party information, and tax simplification have enabled tax authorities in many countries to “prepopulate” taxpayers’ returns—that is, the tax authorities at least partially complete tax returns before transmitting the forms to taxpayers. In the United States, however, the IRS does not prepopulate tax returns.
In the late 1980s, Denmark became the first country to prepopulate taxpayers’ returns with available information from independent third parties, such as employers. The return was then sent to taxpayers, who could accept the form as complete or fill in missing information (e.g., self-employment income). By 2020, 28 countries belonging to the Organisation for Economic Cooperation and Development (OECD)—nearly three-quarters of OECD members—prefilled returns with some types of income. In some instances, the tax authorities were also able to fill in some types of deductions.
At the federal level, the United States does not prepopulate returns, although both California and Colorado had short-lived efforts to do so.
The amount of information filled in by tax authorities on personal income taxes varies from country to country. In 2020, nearly all participating OECD countries could prefill returns with wages and salaries. About half could also populate returns with pension and interest income on returns.
Generally, prepopulating does not provide an easy way to handle capital gains, some itemized deductions, most business income, employee business expenses, or contributions to individual retirement accounts. In some instances, those data gaps could be filled by requiring independent third parties to report more information about taxpayers to the IRS—for example, local governments and financial institutions could be mandated to file Form 1099s reporting, respectively, a homeowner’s property tax payments or a saver’s IRA contributions. But even that reporting might not suffice to automatically compute tax liabilities; questions would remain as to the extent the property tax payment or IRA contribution would qualify for preferential tax treatment.
Still, some countries had sufficient third-party information to include dividends, capital gains, and some deductions in prepopulated returns in 2020. In the countries that could prefill deductions, the most common recorded expenses were insurance premiums, pension contributions and saving, health and medical expenses (other than insurance premiums), and donations.
Some countries, such as Denmark and Norway, can prepopulate most information on the tax return, allowing the tax authorities to compute income tax liability for many taxpayers—an approach known as tax agency reconciliation. But doing so sometimes required changes to tax laws. For example, both Denmark and Norway simplified rules for computing income before adopting a prepopulated tax return system. Norway also reduced the number of deductions and allowances.
Updated January 2024
Goodman, Lucas, Katherine Lim, Bruce Sacerdote, and Andrew Whitten. 2023. “Automatic Tax Filing: Simulating Pre-populated Form 1040.” NBER Working Paper 30008. Cambridge, MA: National Bureau of Economic Research.
Organisation for Economic Co-operation and Development (OECD). 2022. Comparative Information on OECD and Other Advanced and Emerging Economies. Paris, France: OECD.
US Department of the Treasury. 2003. Return-Free Tax Systems: Tax Simplification Is a Prerequisite. Washington, DC: US Department of the Treasury.
Vaillancourt, Francois. 2011. Prefiled Personal Income Taxes: A Comparative Analysis of Australia, Belgium, California, Quebec, and Spain. Studies in Budget and Tax Policy. Vancouver, Canada: Fraser Institute.