I'm sure those aren't the only reasons. Quite a lot of people get away with tax fraud. If the IRS really knew everything and filing taxes was just a pointless exercise, why is fraud so prevalent?
Speaking from a European country, employers are reporting salaries to the revenue service. The banks are reporting capitial gains from taxable accounts.
So basically the only reasons for filing taxes are for exotic revenues (for example crypto !) or to ask for exemptions. Free lancers still have report their revenue themselves but I would say that for a very very vast majority of people, they already have all the information needed.
Actually we receive our forms with some fields (salary for example) pre filled, you only have to check if this is correct.
The tax form is just some kind of confirmation, most of the time.
Believe it or not, those really are the main reasons why taxes still suck in the U.S.
There's a recent Planet Money podcast on it. The regulatory lock in for tax filing is ridiculously profitable, and companies like Intuit certainly rent-seek to solidify their revenue stream.
Massive social engineering mean the IRS would need every financial and legal transaction you've ever participated in. Which they clearly do not.
For example, we don't have a simple tax system based on a percentage of salary. The amount they want as a tax depends on your marital status, how many kids, how much your spouse earns, and if you itemize deductions it gets even worse WRT every medical provider's bill you've ever paid and weird details of interest payments on mortgage loans.
Honestly the error rate of trying to gather all that big brother data is almost certain to be higher than the fraud rate of people in general.
Also people push agendas, so if you want to spread the idea that fraud is rampant, if I get free coffee at church and starbucks has proven 52 coffees per year is about five hundred bucks, not declaring that coffee as income is fraud; with paper money and barter the IRS can't get all "weird" about little details, but with digital currency if you buy a donut, there will be a reckoning simply because its possible.
It's not just a matter of the paperwork being too burdensome; free coffees at church are simply not income. Neither is $20 in a birthday card from your grandma. Of course, there are grey areas where it's much harder to draw the line, but it's wrong to suggest that the IRS would tax every transaction if it could.
It doesn't necessarily tax everything but the IRS does seek God-level knowledge/insight into every transaction - and then it just exempts certain things based on size or other factors. If you are deducting charitable contributions to the church they actually do expect you to subtract out the value of coffee, meals, etc. Donate $100 to some non-profit that sends you a t-shirt as a thank-you? Your deduction is $87, not $100, because the t-shirt has to be valued at $13 or something similar that they consider reasonable. Somewhere they actually have federal employees tasked with determining this year's acceptable minimum value for a t-shirt.
The $20 gift from grandma is exempt, but not because they don't demand insight into intra-family transfers.. it's only non-taxable because of its size. If you have a rich grandma and she gives you $20k, that needs to be reported.. even if no tax is ultimately due, it probably reduces the future value of her estate tax exemption. Dying is a very complex taxable event!
If you want to follow the thousands of pages of rules to the letter - sufficient to sign a letter declaring under penalty of purjury, etc - the tracking and compliance burden on many US taxpayers is enormous, even with assistance from the commercial closed-source SW packages that you are more or less forced into buying each year because they won't let you e-file with them directly over HTTPS+JSON or whatever.
Sure, taxes couldn't be fully automated, but those are the reasons the IRS won't just send you a pre-filled form with the information they have, and instead makes the taxpayer duplicate that information.
