Elizabeth Warren Rips Tax Prep Industry, Proposes Return-Free System

For anyone still struggling with their last-minute tax preparations, Elizabeth Warren might have a life-saver of a bill. The idea is simple — have the IRS do your taxes for you — and it’s already getting some high-profile endorsements.

Employers already send W-2 information to the IRS, detailing how much each employee is making, according to the Huffington Post. Likewise, the IRS calculates how much each taxpayer owes. That means for millions of Americans, there really isn’t much reason to file a tax return at all, unless they’ve got a complicated list of obscure credits and deductions to claim.

Still, a lot of time and money is used to file returns in America.

Elizabeth Warren claimed, “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.”

Her bill would end a lot of that effort, allowing the IRS to prepare returns themselves. Similar systems are already implemented in Sweden, Denmark, and Spain. In Sweden, taxpayers receive their return already filled out. After reviewing the contents, they send it in as a confirmation.

President Barack Obama also said that the amount of time and energy (or as he put it “headache and heartburn”) is unnecessary and should be fixed.

Elizabeth Warren’s bill would start small, only allowing the IRS to do the returns of single people with simple finances, but it has provisions to allow the Treasury Department to slowly expand the program to more complicated households in 2018.

Warren would also require the IRS to make its free tax preparation software available to everyone. Currently, only a few people are qualified for the service.

The IRS reform bill is already making its way into the presidential race, according to Boston.com. Vermont senator and candidate Bernie Sanders is a cosponsor for the bill, and released a statement on its merits.

“Tax Day has become an opportunity for corporations to profit off of confusion over our complicated tax code. That is wrong … We must make tax filing as easy as possible, not direct profits to private companies at the expense of working families.”

Hillary Clinton also supports Warren’s bill, and released her own statement.

“This proposal will help take the headache out of Tax Day, saving Americans both time and money. Special interests who benefit from the system’s current complexity need to stop standing in the way of progress.”

Even Ronald Reagan bemoaned the unnecessarily complicated tax day routine back in 1985. So why, with so much support from so many powerful people, have returns remained such a burden.

It turns out there is a special interest fighting to prevent reforms according to Elizabeth Warren and the numerous supporting politicians.

Elizabeth Warren’s staff even wrote a report, titled “Tax Maze: How the Tax Prep Industry Blocks Government from Making Tax Day Easier.” Warren’s report explains that her bill is nothing new, in fact, a law from 1998 requires the Treasury Department to create a “return-free” filing system by 2008.

The department obviously failed to do so, for the most part.

Elizabeth Warren’s report explains, “Despite its legal obligations, the IRS has surrendered to industry pressure and other efforts to block access to free and accurate return-free tax filing.”

Firms like Intuit, which makes TurboTax, spent $11.5 million to lobby the federal government over the past five years on a range of issues, including the opposition to return-free filing. The result is a free filing system that only 3 percent of Americans actually use.

Elizabeth Warren hopes that now, after decades of effort, the government can get past the barriers to make life easier for Americans on tax day, but that might be easier said than done.

[Photo by Win McNamee/Getty Images]