What if you could skip filing your tax returns altogether?
Here’s how it would work: the IRS would use data about your income and tax payments from your employer, banks and other sources to estimate your tax liability. When tax time rolled around, you’d could voluntarily verify and adjust the data and hit submit. It would be free and fast.
If that sounds like a Utopian experience to you, return-free filing is your friend.
So why isn’t it here yet? Over at ProPublica, Liz Day has a fascinating story about the campaign against return-free filing being waged by the maker of tax prep software Turbo Tax, Intuit, which views return-free filing proposals as a threat to its business model.
According to Day, the company is behind a “grassroots” letter writing campaign to pressure lawmakers to squash return-free filing bills.
Intuit and the trade association Computer & Communications Industry Association(CCIA) are spending millions, not just on lobbying, but on efforts to recruit community advocates like pastors, community leaders and small town mayors into a letter writing campaign:
One letter-writer, Richard Smith, the president of the NAACP Delaware State Conference, was approached by a longtime acquaintance with information about how return-free filing would take dollars out of poor people’s pockets. Smith felt so strongly he fired off a letter to Sen. Tom Carper, D-Del., and encouraged other local NAACP leaders to do the same.
Smith said the acquaintance, Anne Farley, told him that if return-free filing was adopted, the government would stop offering free tax filing help to low-income communities. (In fact, none of the bills on return-free filing propose that.)
It’s difficult to imagine who wouldn’t want to make filing taxes easier, quicker and free. On average, the fees for filing federal taxes with the help of an accountant can cost hundreds of dollars.
Doing it yourself with tax preparation software is less expensive, and for many tax payers it can be free, but it still requires wrestling with 1040s, 1099s, and W-2s and a host of other forms.
According to Pew Research, 63 percent of Americans either hate, dislike or are ambivalent about doing their taxes. The 5 percent who love it are probably accountants, no?
But the reality is that it’s difficult to estimate just how many people would be saved from an annual tax-induced headache by return-free filing. Return-free filing is best for people with the simplest returns, not for those who itemize their deductions, according to the non-partisan Tax Policy Center.
An estimate in a 1996 Government Accountability Office report found that at around 45 percent of taxpayers actually could benefit from return-free filing. Those are people who would be eligible for the service, but they are not necessarily people who would actually use it and miss out on itemizing their deductions.
A more conservative guess could put the percentage at low as 2 percent, if we infer that the people who are eligible to e-file for free in the current system—about 3 million out of 133 million returns filed in 2012—also choose to use a return-free system.
At the same time, this idea has been kicked around in Washington since the 1980s. And there’s a new bill in play. Rep. Bill Foster (D-Ill.) in introducing the Autofill Act of 2013, which would put in place a return-free system, put it this way:
“Our tax code is complicated enough, we shouldn’t be asking taxpayers to submit information the IRS already has,” Foster said in a statement.