Paying taxes is our civic duty. The government’s duty is to make it as easy and inexpensive as possible for us to pay our taxes. But for too long, Congress has failed to shoulder that responsibility, instead favoring corporations that profit from our need to file taxes.
A bill recently introduced in Congress would solve this problem. A range of Democratic Senators and Representatives (including North Carolina’s GK Butterfield) co-sponsored the Tax Filing Simplification Act, which would create a simple, free way for Americans to file their taxes. All other members of Congress should embark on this common-sense reform.
Currently, it costs the average taxpayer about 13 hours and $240 a year to file a federal tax return, according to figures from the Internal Revenue Service.
People bear these costs and hassles even though, for many of them, the IRS already has all the information in hand to determine their tax bill. Do you receive a W-2 from your employer showing how much you were paid? Tax too. Do you get a Form 1099 from the bank telling you how much interest you earned? Tax too. The reality is that people often spend time and money just telling the IRS what it already knows.
For some families, the harm is greater. The cost and complexity of filing taxes deters many Americans who struggle to get by on low wages from filing taxes. While their low incomes may mean they don’t have to file a tax return, it also means they lose tax credits designed to help their families make ends meet. In doing so, they miss out on several thousand dollars that would make their lives and their children’s lives a little easier.
The problem of families who do not claim tax credits, even though they are entitled to them, is worst in oregon than almost all other states. North Carolina fares only slightly better.
The Tax Filing Simplification Act would require the IRS to give people easy access to salary and other data needed to file a tax return that the agency already has in its possession. Such a system of pre-populated tax returns is not new; other countries are already doing it this way, making filing taxes a zipper for their people.
There is more. This legislation would also allow taxpayers with simple returns to choose to have the government fully prepare their tax returns. And that would direct the IRS to create its own free online tax preparation and filing service. Yes, free.
Why doesn’t our country allow people to file their tax returns for free and easily? Because a few big companies are taking advantage of the current dysfunctional system.
In 2002, the Bush administration proposed creating a free tax filing system, but a massive lobbying campaign by Intuit – owner of TurboTax – killed the idea. Instead, the IRS has agreed to allow a handful of companies, in theory, to provide free tax filing software to 70% of filers.
In practice, few people access the free service. In 2021, less than 3% of filers used the free service. Intuit, for its part, ensured that users could not find the free service, while directing low-income taxpayers to its paid service. Earlier this year, the company paid $141 million to settle a claim he had tricked users with promises of free tax returns – a slap on the wrist for a company that made billions in profits during that time.
Ultimately, the deal between the IRS and corporate tax preparers fell apart after the IRS was set up. measures to curb corporate shenanigans. H&R Block pulled out of the deal in 2020, followed by Intuit release in 2021.
It is high time to put the interests of the American people above those of a few giant corporations profiting from our civic duty to pay taxes. The Tax Simplification Act would save people money and hassle, while allowing many low-income families to claim tax credits that improve their well-being.
It’s great that some members of Congress are already fighting for this common-sense reform. The rest should come on board.