Some analysts have argued that return-free filing systems, such as those used in other countries and in California, could substantially reduce the costs for many individual taxpayers with relatively simple returns at little or no net administrative cost to the government. There is substantial uncertainty as to how a federal return-free system would affect the costs of government and individual tax filers. California’s program appears to have reduced the state’s administrative costs, but the net savings are largely attributable to e-filing rather than to the return-free system itself. The vast majority of California’s eligible filers have declined to use it (only 3.2 percent do), suggesting that most people believe the savings they would realize in time and out-of-pocket spending would be outweighed by the costs, including risks to privacy and security. A return-free tax system would increase third-party tax compliance costs - those of employers, financial institutions and other payers of income to individuals - largely because reporting deadlines would have to be advanced in order to provide timely returns and tax refunds. Calculations of such costs range from $500 million to as much as $5 billion, offsetting or exceeding any potential savings for taxpayers or for government. Added costs would fall disproportionally on small businesses. Return-free filing would introduce policy concerns including: conflict of interest for the IRS in functioning as tax preparer and enforcer; increased risks of error; taxpayers becoming less cognizant of the tax code and their personal finances; taxpayers unwilling to challenge an IRS document retaining liability for errors; privacy; security; and reduced incentives for investment in innovation.