TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, April 13, 2016

Senator Warren Introduces Bill To Simplify Tax Filing Endorsed By Dozens Of Tax Profs And Economists

Tax MazePress Release, Senator Warren Introduces Bill to Simplify Tax Filing:

United States Senator Elizabeth Warren (D-Mass.) today introduced the Tax Filing Simplification Act of 2016 to simplify and decrease the costs of the tax filing process for millions of American taxpayers. This year, taxpayers will spend an average of 13 hours preparing and filing their returns, and will pay $200 for tax preparation services — a cost equal to almost 10 percent of the average federal tax refund.

The legislation introduced today would 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.

In conjunction with the introduction of the Tax Filing Simplification Act, Senator Warren released a staff report [fact sheet] that describes how - for decades - the tax preparation industry has blocked the IRS from implementing laws that would make tax preparation and filing easier for taxpayers. Corporate capture of the filing process means that taxpayers have to absorb billions of dollars in costs and share their personal information with third parties just to file their taxes.

The legislation has been endorsed by dozens of law professors and economists including Austan Goolsbee of the University of Chicago, Emmanuel Saez of the University of California - Berkeley, and Joe Bankman of Stanford University.

The Act was introduced with original cosponsors Senators Bernie Sanders (I-Vt.), Sheldon Whitehouse (D-R.I.), Tom Udall (D-N.M.), Jeanne Shaheen (D-N.H.), Al Franken (D-Minn.), Tammy Baldwin (D-Wis.), and Edward J. Markey (D-Mass.).

"Congress should be making it easier for Americans to file their taxes each year, not bowing to the interests of the tax prep industry," said Senator 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."

https://taxprof.typepad.com/taxprof_blog/2016/04/senator-warren-introduces-bill-to-simplify-tax-filing-endores-by-dozens-of-tax-profs-and-economists.html

Congressional News, Tax | Permalink

Comments

Do I trust the IRS to calculate my taxes correctly and give me every deduction for which I qualify? No way.

I actually do my own taxes, but if I didn't, I'd want to consult someone with my interests foremost. That is most emphatically not the federal government.

Posted by: Michael W. Perry | Apr 13, 2016 7:23:45 PM

I take it you commented without reading the proposed legislation? It allows you the option to "check the box" to accept what the IRS has calculated as your tax due based on information already available to them. You are still free to consult with someone "who has your interests foremost" before checking that box to determine if that is the best option or even not checking the box at all and filing on your own.

Posted by: Jonathan | Apr 14, 2016 1:02:17 AM

This thankfully isn't IRC 6020(b) Automated Substitute for Return for all. That combined with a presentment model might result in folks just paying what they're shown. Although within existing authorities it would be a mess without further data reporting crackdowns.

Posted by: Lieutenant Blantyre | Apr 14, 2016 3:31:40 AM

Right idea. Wrong blame.

The real problem is politicians like Ms. Warren et al using the tax code for social engineering. I dare any of these talking heads, including Profs. Bankman and Saez to work VITA and figure out the ObamaCare tax forms.

Until we return the tax code to its original premise, i.e., funding the federal government and massively simplify the damn thing, there is not a snowball's chance in hell the IRS will be able to prepare 100 million plus tax returns.

Posted by: Dale Spradling | Apr 14, 2016 5:55:30 AM

Jonathan-
Except you know full well the figures will not be in the best interest of the taxpayer (which is quite a large conflict of interest). Say by the IRS calculations, an unsophisticated taxpayer (who this is 100% directed at) is entitled to a refund of $2,500, but if they did it themselves or hired someone, they actually are entitled to a refund of $4,000 because of a bunch of credits that the IRS system did not calculate because the information isn't on wage and income. These taxpayers will likely not know they could get more money if they just looked at it themselves and will accept the good looking refund. We all know this isn't done for any benevolent purpose, its done because the government knows full well most people will accept their figures which will result in greater revenue to them.

That said, I do not think there is anything wrong with making filing taxes easier, more convenient, and cheaper.

Posted by: Michael | Apr 14, 2016 7:00:08 AM

I am much more comfortable sharing my personal information with third party tax preparers than I am with the IRS. Over 700,000 taxpayers had their personal information hacked at the IRS. Millions of others have had their identities stolen from the IRS and had their refunds stolen. In fact, it was the IRS's own system to allow taxpayers to get prior return information that was the vehicle used by the hackers to steal the information! They will spend billions on a system that will be a nightmare for taxpayers because it won't work and it won't be done when it's promised. This is a vehicle to get people to take their attention off of how much the government is costing them.

Posted by: Karen Walby | Apr 14, 2016 7:22:48 AM

I know this has been discussed before with President Reagan and others. Some thoughts:
• Why even consider this? Let’s make anyone who earns less than $48,745 (that’s an arbitrary number like $15 per hour is) just pay 5% flat tax or even ZERO tax. No filing needed. At the same time, do away with EITC and many other credits. The money saved in credits will pay for those under the threshold to not file and pay no tax.
• Senator Warren seems to have made it a mission to attack any industry attached to a consumer dollar. But a Harvard salary is ok because students their make a great living when they graduate. (Except the six who come to my office.)
• It devalues those of us who took the time to get an education about tax preparation and provide a real and legitimate service without RACs and RALs.
• It will remove thousands of tax preparations in an assault on free enterprise forcing many to lower wage jobs or unemployed.
• It will transfer many of those jobs to the IRS because the IRS will have to develop a process to handle self-prepared returns.
• The IRS will spend hundreds of millions of dollars developing software to manage the process. And then do it again because it doesn’t work like the millions handed out last year to Obamacare victims and their 1095A. We screwed up, keep the refund.
• While I despise Intuit Turbo Tax and H&R Block and a few others, they are providing a service which apparently is needed. And many who file their own tax return have great troubles with the use of a computer. Thus basic skills are needed beyond tax skills.

Posted by: Dennis | Apr 14, 2016 7:25:20 AM

We don't need tax filing simplification. We need tax simplification. Tax preparers are not the problem; the convoluted tax code is the problem.

Posted by: Karen Walby | Apr 14, 2016 7:32:05 AM

Thankfully, the chief isn't on a committee where she can move this proposal.

Posted by: TheTurk | Apr 14, 2016 10:19:40 AM

I've got an idea! Why doesn't Congress just simplify the income tax? If they simplify the income tax, then preparing a return will be simpler.

Posted by: Nathan | Apr 14, 2016 10:55:15 AM

No offense Karen, but you're wrong. Ms. Warren is a Cherokee Indian Harvard law professor United States Senator, and you're just a Buckeye living in a place that is not Boston or DC.

Posted by: Mike Petrik | Apr 14, 2016 12:40:11 PM

@Karen. The IRS already HAS your information. Giving it to a third party prep does not keep it safe. In fact, what do you think the prep is doing with the info you give him or her? They are charging you a bunch of money to send the info to.....the IRS. BTW, simplifying the tax code pretty much means removing many of the tax credits and exemptions that American tax payers have gotten used to - like the earned income credit, child tax credits, no cap gains on personal home sales, etc. Think about it.

Posted by: Tina Van Rikxoord | Apr 24, 2016 4:50:49 PM