Why isn't it easier to prepare and file your tax returns?
Because, according to new report (pdf) from the office of Sen. Elizabeth Warrren (D-Mass.), the tax preparation industry has successfully lobbied the Internal Revenue Service (IRS) to keep it that difficult, ensuring corporate profits and unfair expenses and hassle for taxpayers.
This tax season, the report states, "[t]axpayers will spend, on average, 13 hours preparing and filing their returns, and will pay $200 for tax preparation services—a cost equal to almost 10% of the average federal tax refund." Using these services also means sharing personal information with third parties.
But a better way—one that would make the filing process take just minutes, not to mention save money, is possible, especially for those with a simple tax situation. And it could help as many as 60 million households.
Though the IRS was supposed to implement a "return-free" filing system—one that would use taxpayer information employers, banks, and other entities already submit to the agency so the government can pre-prepare and users can verify or edit the return—by 2008 , "the IRS has time and again acquiesced to industry demands" to block it, as it would be "a fundamental threat to [the industry's] operations."
The industry, which has "a vested interest in a more complex, more expensive tax filing system," has spent "millions of dollars lobbying Congress against return-free filing and mounting fake 'grassroots' campaigns against return-free filing," and has even had the help of supposed anti-tax groups for who champion a simpler process, the report states.
To tackle these issues, Warren introduced on Wednesday the Tax Filing Simplification Act of 2016 (pdf). It would, a press statement from Warren's office summarizes,
direct the Internal Revenue Service (IRS) to develop a free, online tax preparation and filing service that taxpayers can use to prepare and file their taxes directly with the federal government, if they choose to do so, and would prohibit the IRS from entering into agreements that restrict its ability to provide free online tax preparation or filing services. The Act would give all taxpayers the right to download third-party-reported tax information that the IRS already has, and would provide those with simple tax situations with a return-free option.
"Congress should be making it easier for Americans to file their taxes each year, not bowing to the interests of the tax prep industry," stated Warren. "The Tax Filing Simplification Act is a commonsense bill that would help taxpayers all across this country file their taxes with less stress and fewer costs, and it would push the IRS to use the authority it already has to simplify Tax Day for all Americans."
Among the co-sponsors of the legislation is Sen. Bernie Sanders, who added that the legislation "would end the absurdity of Americans having to pay private companies hundreds of dollars to pay their taxes." "Tax Day has become an opportunity for corporations to profit off of confusion over our complicated tax code," he said.
Dozens of professors and economists have voiced their support for the legislation as well.