April 12, 2019

Senator Warren Leads Colleagues in Reintroducing Legislation to Simplify and Decrease the Costs of Tax Preparation and Filing

Taxpayers spend an average of 11 hours preparing and filing tax returns and pay $200 for tax preparation services

Washington, DC - United States Senators Elizabeth Warren (D-Mass.) along with Senators Jeanne Shaheen (D-N.H.), Sheldon Whitehouse (D-R.I.), Tammy Baldwin (D-Wis.), Bernie Sanders (I-Vt.), Tom Udall (D-N.M.), Edward J. Markey (D-Mass.), Tammy Duckworth (D-Ill.), Maggie Hassan (D-N.H.), Jeff Merkley (D-Ore.), Cory Booker (D-N.J.), and Richard Blumenthal (D-Conn.) today reintroduced the Tax Filing Simplification Act to ease the tax filing process for millions of American taxpayers and reduce their costs. Last tax season, American taxpayers spent an average of 11 hours and around $200 preparing their tax returns -- a cost equal to almost 10 percent of the average federal tax refund. Representative Brad Sherman (D-Calif.) is reintroducing a House companion along with Representatives Eleanor Holmes Norton (D-D.C.), Don Beyer (D-Va.), Jamie Raskin (D-Md.), Tim Ryan (D-Ohio), Katie Hill (D-Calif.), Alexandria Ocasio-Cortez (D-N.Y.), Earl Blumenauer (D-Ore.), and Jackie Speier (D-Calif.).

Along with lowering costs and eliminating red tape for all taxpayers, return-free filing and other improvements in the Tax Filing Simplification Act would ensure that more eligible people -- including millions of low-income Americans -- receive important tax refunds, like the Earned Income Tax Credit. The legislation would dramatically simplify the filing process for individuals with simple tax situations, direct the Internal Revenue Service (IRS) to develop a free, online tax preparation and filing service that does not require the sharing of private information with third parties, and prohibit the IRS from entering into agreements that restrict its ability to provide these services.

"Taxpayers waste too many hours and hundreds of dollars on tax preparation each year, which disproportionately burdens low-income and minority taxpayers," Senator Warren said. "This bill will require the IRS to offer easy, free, online tax-filing for all taxpayers. This is a simple idea with a long history of support from both Republicans and Democrats, and it's time to make it a reality."

"As Tax Day approaches and millions of Americans prepare to file their taxes, we're reminded that too many people struggle to navigate an exceptionally burdensome tax system. Paying taxes doesn't have to be this complicated," said Senator Shaheen. "The average American will pay $200 and spend 11 hours to prepare their tax return -- money and time they will never get back. While Congressional Republicans promised and failed to simplify the tax system in the tax bill they rushed through Congress, this common-sense legislation will help make the process simpler and cheaper. This bill would positively impact hardworking, taxpaying Americans in every community throughout the country -- I urge members on both sides of the aisle to join in support of this effort."

"I agree with the Rhode Islanders who think they ought to be able to easily file their taxes directly with the IRS for free," saidSenator Whitehouse. "This bill would make that better, simpler, cheaper system a reality."

"Our current tax filing system is far too costly and time-consuming for everyday Americans," Senator Duckworth said. "I'm proud to support Senator Warren's legislation that helps consumers keep more of the tax return they have earned by offering a free, online preparation and filing option, while also enhancing fraud protections and simplifying the process."

The Tax Filing Simplification Act makes several commonsense changes to simplify and decrease the costs of the tax filing process for millions of American taxpayers by:

  • Prohibiting the IRS from entering into agreements that restrict its ability to provide free online tax preparation or filing services;

  • Directing the IRS to develop a free, online tax preparation and filing service that would allow all taxpayers to prepare and file their taxes directly with the federal government instead of requiring that they share private information with third parties;

  • Enhancing taxpayer data access by allowing all taxpayers to download third-party-provided tax information that the IRS already has into a software program of their choice;

  • Allowing eligible taxpayers with simple tax situations to choose a new return-free option, which would provide a pre-prepared tax return with income tax liability or refund amount already calculated;

  • Mandating that these data and filing options be made available through a secure online function and requires any participating individual to verify his or her identity before accessing tax data; and

  • Reducing tax fraud by getting third-party income information to the IRS earlier in the tax season, allowing the agency to cross-check this information before issuing refunds.
First introduced in 2016 by Senator Warren and reintroduced in 2017, this approach to tax filing has been endorsed by tax scholarsand a bipartisan set of policymakers. The bill is endorsed by the National Consumer Law Center (on behalf of its low-income clients), the Institute for Taxation and Economic Policy, Americans for Tax Fairness, Economic Security Project Action, the Hispanic Federation, Americans for Financial Reform, and Public Citizen.

"Millions of Americans each year who are eligible for cash refunds like the Earned Income Tax Credit don't claim them -- either because tax filing is too complicated, or they don't know they're eligible," said Adam Ruben, director of Economic Security Project Action. "This creates a system where only the wealthiest Americans can afford to take advantage of the tax breaks and deductions available to them. Senator Warren's Tax Filing Simplification Act is a commonsense improvement that would make tax filing easier and more fair, and mean millions more hardworking Americans will get the refunds like the EITC they're entitled to."

Senator Warren has repeatedly drawn attention to the issue of tax preparers' influence at the IRS, including with her Tax Maze report, which details how the tax preparation industry blocks government from making Tax Day easier. In May 2016, she urged the IRS to select consumer advocates, as well as other members representing the needs of low-income, elderly, disabled, and non-English speaking taxpayers, to serve on its Electronic Tax Administration Advisory Committee.