With less than a week left before the April 18 deadline to file tax returns this year, Sen. Elizabeth Warren, D-Mass., is to introduce a bill Wednesday that would change filing procedures in coming years and hit major for-profit tax filing industry players.
Warren’s bill, the Tax Filing Simplification Act of 2016, seeks to establish a free online tax preparation and filing service that would give citizens access to tax return information provided by third parties like employers and allow them to file directly file with the federal government. The bill is taking aim at the Internal Revenue Service, seeking to prevent it from entering into agreements with third parties that block its own ability to provide free online services.
As part of the Free File Alliance, the IRS works with private services like H&R Block, Intuit and Jackson Hewitt. A report issued by Warren's office details the powerful lobby of for-profit tax filing companies that have opposed making tax filing easier. Estimates from the Sunlight Foundation and OpenSecrets.org found that Intuit (known for its TurboTax software), H&R Block and Jackson Hewitt have spent almost $41 million since 1998 on federal lobbying opposing return-free filing.
The bill would amend the 1986 tax code by having the secretary of the treasury establish an online tax preparation and filing software by 2018. It would also enable taxpayers to “download third party-provided return information relating to individual tax returns for taxable years beginning after 2016.” The bill seeks to give taxpayers access to information from the U.S. Treasury website in a timely fashion and in formats that can be downloaded or printed to be used later to file tax returns.
A group of 41 academics, including economists and legal scholars, have signed a letter supporting Warren’s proposed bill, describing the American tax filing system as “one of the most confusing and expensive” in the world that provokes anxiety due to its complexity.
“The government already receives nearly all of the information it asks salaried taxpayers to provide. This includes wage, interest, dividends and property and stock sales data,” the letter said. “The Tax Filing Simplification Act allows taxpayers and their preparers to access this information.”
The bill's supporters argue that no one would have supported a system 30 years ago where paper returns were available only through for-profit companies.
“No citizen should have to pay for the software necessary to file taxes, nor should they be required to go through an industry middleman to get their forms to the IRS,” the letter said.
The co-sponsors of Warren's bill include Democratic presidential candidate Sen. Bernie Sanders of Vermont, along with Democratic Sens. Sheldon Whitehouse of Rhode Island, Tom Udall of New Mexico, Jeanne Shaheen of New Hampshire, Al Franken of Minnesota, Tammy Baldwin of Wisconsin and Edward Markey of Massachusetts.
Warren has been a longtime proponent of changing America’s tax policy to ensure major corporations and wealthy people do not take advantage of loopholes. “We need serious tax reform to make the tax code fairer and simpler,” her website reads.