Sen. Elizabeth Warren has introduced the Tax Filing Simplification Act, which is anything but simple. This proposal would lead to a bloated and confusing tax filing system by taking private experts out of the process and trusting the Internal Revenue Service (IRS) to act efficiently, which it has never done.
The Tax Filing Simplification Act would direct the IRS to create a new program and website where taxpayers could theoretically enter and file their returns. That sounds great in theory, but when we actually look at the IRS’s track record, we can see that the likely outcome of this massive undertaking will be a catastrophic failure.
The IRS is not equipped to handle any new program as they are currently buried under a mountain of unanswered returns from the 2021 and 2022 tax filing season. According to a report issued in May of 2022, the IRS has a backlog of 21.3 million unprocessed tax returns which represents millions of dollars that have yet to be returned to hard working taxpayers across the country. Communication from the IRS to taxpayers has been virtually non-existent regarding a timeline for when they can expect to receive their returns. Likewise, the IRS has not been vocal with their own internal timeline to remedy the backlog.
The IRS additionally already has a free option available to all taxpayers, the Free File program. The current system is a result of an agreement between the IRS and the Free File Alliance (FFA), a nonprofit coalition of tax software companies. Sen. Warren claims these companies are detrimental when they are in fact voluntarily assisting millions of taxpayers filing their tax returns for free. The File Free Program offers free, online federal tax preparation for anyone earning $66,000 or less. The system is a relative success having processed more than 53 million returns since its inception in 2002. The FFA is directly responsible for saving taxpayers $1.6 billion in filing costs. By comparison, the IRS estimated that the 1040EZ form, a simplified income tax form which was eliminated for the 2019 filing season, had imposed an out-of-pocket cost of $40 per filer.
Congress should focus on holding the IRS accountable for their incredibly large backlog and working with the private sector to bolster existing free-to-file services. Warren’s plan to grow the size of the government and expand the authority of the IRS would be a disaster for taxpayers.