In the United States, an individual whose income exceeds a certain threshold (the sum of the standard deduction and personal exemptions) is required to file a tax return at the end of the year. Under a return-free tax system, at least some taxpayers are not required to file a tax returns at the beginning of the next year. In many countries, taxpayers pay their tax obligations entirely through withholding throughout the year, for example. In several countries, the tax authorities prepare tax returns for eligible individuals.
The goal of tax policy is to raise revenue in an equitable, efficient, and simple manner. The individual income tax is a progressive, broad-based tax. Many observers believe the current system is overly complex, making the costs of complying with the income tax excessive.
The U.S. has attempted to reduce taxpayer burdens by simplifying the tax law and tax forms. Another approach taken by over 30 countries is a return-free filing system. In most of these countries, taxpayers meet their tax obligations entirely through tax withholding payments. The report provides information on a number of issues that must be considered in evaluating options.
Most countries with return-free systems use exact withholding. Exact withholding systems typically apply a PAYE (“pay as you earn”) tax withholding plan for wage income. Cumulative systems aim to withhold exactly the right amount of taxes at each point in the year. Final withholding systems (such as those used in Germany and Japan) make adjustments to the final paycheck in the tax year to achieve exact withholdings. Many countries also maintain a filing requirement for taxpayers who have more than one job.
In 1996, Michigan enacted a “no-form” option for wage earners. Participants could not have more than $100 of non-wage income ($200 if filing jointly) In 1997, only 94 Michigan taxpayers chose the no-form option. In response to low participation, Michigan suspended the No-Form option. Louisiana enacted legislation calling for a no-Form system in 1997. However, the program was not implemented due to Y2K-related problems.
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https://home.treasury.gov/system/files/131/Report-Return-Free-2003.pdf