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April 4, 2013

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Imagine filing your income taxes in five minutes—and for free. You’d open up a pre-filled return, see what the government thinks you owe, make any needed changes and be done. The miserable annual IRS shuffle, gone.

It’s already a reality in Denmark, Sweden and Spain. The government-prepared return would estimate your taxes using information your employer and bank already send it. Advocates say tens of millions of taxpayers could use such a system each year, saving them a collective $2 billion and 225 million hours in prep costs and time, according to one estimate.

The idea, known as “return-free filing,” would be a voluntary alternative to hiring a tax preparer or using commercial tax software. The concept has been around for decades and has been endorsed by both President Ronald Reagan and a campaigning President Obama.

“This is not some pie-in-the-sky that’s never been done before,” said William Gale, co-director of the Urban-Brookings Tax Policy Center. “It’s doable, feasible, implementable, and at a relatively low cost.”

So why hasn’t it become a reality?

Well, for one thing, it doesn’t help that it’s been opposed for years by the company behind the most popular consumer tax software—Intuit, maker of TurboTax. Conservative tax activist Grover Norquist and an influential computer industry group also have fought return-free filing.

Intuit has spent about $11.5 million on federal lobbying in the past five years—more than Apple or Amazon. Although the lobbying spans a range of issues, Intuit’s disclosures pointedly note that the company “opposes IRS government tax preparation.”

The disclosures show that Intuit as recently as 2011 lobbied on two bills, both of which died, that would have allowed many taxpayers to file pre-filled returns for free. The company also lobbied on bills in 2007 and 2011 that would have barred the Treasury Department, which includes the IRS, from initiating return-free filing.

Intuit argues that allowing the IRS to act as a tax preparer could result in taxpayers paying more money. It is also a member of the Computer & Communications Industry Association, which sponsors a “STOP IRS TAKEOVER” campaign and a website calling return-free filing a “massive expansion of the U.S. government through a big government program.”

In an emailed statement, Intuit spokeswoman Julie Miller said, “Like many other companies, Intuit actively participates in the political process.” Return-free programs curtail citizen participation in the tax process, she said, and also have “implications for accuracy and fairness in taxation.”

In its latest annual report filed with the Securities and Exchange Commission, however, Intuit also says that free government tax preparation presents a risk to its business.

Roughly 25 million Americans used TurboTax last year and a recent GAO analysis said the software accounted for more than half of individual returns filed electronically. TurboTax products and services made up 35 percent of Intuit’s $4.2 billion in total revenues last year. Versions of TurboTax for individuals and small businesses range in price from free to $150.

H&R Block, whose tax filing product H&R Block At Home competes with TurboTax, declined to discuss return-free filing with ProPublica. The company’s disclosure forms state that it also has lobbied on at least one bill related to return-free filing.

Proponents of return-free filing say Intuit and other critics are exaggerating the risks of government involvement. No one would be forced to accept the IRS accounting of their taxes, they say, so there’s little to fear.

“It’s voluntary,” Austan Goolsbee, who served as the chief economist for the President’s Economic Recovery Advisory Board, told ProPublica. “If you don’t trust the government, you don’t have to do it.”

Goolsbee has written in favor of the idea and published the estimate of $2 billion in saved preparation costs in a 2006 paper that also said return-free “could signi?cantly reduce the time lag in resolving disputes and accelerate the time to receive a refund.”

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April 4, 2013

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IRS & TurboTax

Since the IRS has to do the work anyway, let 'em do it in advance to be approved or corrected by taxpayers.

But once they're doing it, yeah, they might want to crowd out competitors: IRS agents are just as human as TurboTax workers, just as greedy, perhaps even a bit more power-hungry on average just in the nature of things.

Prove it? The IRS wanted to force mom-and-pop tax preparers to get IRS approval--and this was just fine with H&R Block (???and TurboTax???)--big companies cronying up with big government, like Tennessee-American Water Company having a monopoly on water supply in a river town surrounded by other water districts, instead of allowing competition.

So every law, every ad and every form had better make clear that competing with the IRS is legal and always will be.

Can we trust D.C. about this? No, but I'd hate to clutter the Constitution with an amendment guaranteeing this right. I'd settle for an explicit law, referring to the existing guarantees of freedom of association to petition for redress of grievances, freedom of press (to create and print alternative tax worksheets), and freedom from slavery.

Wendy Dibble-Lohr more than 1 years ago

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