Monday, October 20th, 2014

The Obameter

Provide option for a pre-filled-out tax form


Will direct the Internal Revenue Service to "give taxpayers the option of a pre-filled tax form to verify, sign and return to the IRS or online. This will eliminate the need for Americans to hire expensive tax preparers and to gather information that the federal government already has on file."


Updates

No movement on bill to create form

Rep. Jim Cooper introduced a "simple return" bill for the second time in April 2011. It was then referred to the House Ways and Means Committee, where it appears dead.

We checked with Cooper's office, and his spokeswoman told us "it looks unlikely that it"ll move anytime soon.”

"While it's a common-sense bill and is supported by President (Barack) Obama and fiscal experts like Austan Goolsbee, it"s drawn opposition from the Competitive Enterprise Institute, from tax software companies and from CPAs,” Cooper's spokeswoman Katie Hill wrote in an email.

Hill is right that many tax professionals have opposed such a measure, as have anti-tax crusaders, such as Grover Norquist, who fear that making the filing process easier could quell Americans' opposition to tax changes and increases.

The Obama campaign, when we asked about this Promise, didn't admit defeat but said the president continues to advocate for ways to simplify the tax code.

We also checked with G. Barry Wilkinson, a longtime tax attorney and CPA in St. Petersburg, Fla., about whether this promise had been fulfilled. No, he said: "That didn't happen."

If Congress acts on this measure, we will update our rating. But for now, with the bill to create a pre-filled-out form going nowhere, we rate this a Promise Broken.

Sources:

THOMAS Library of Congress website, HR 1069, accessed April 25, 2012

Forbes, "Why Doesn't the IRS Do Your Taxes For You?” April 17, 2012

Forbes, "Are You Ready for Government Prepared Tax Returns?” Jan. 13, 2012

Phone & email interview with Katie Hill, spokeswoman for Rep. Jim Cooper, April 25, 2012

Interview with G. Barry Wilkinson, April 25, 2012

Email interview with Kara Carscaden, Obama campaign, April 25, 2012

Pre-filled tax form bill stuck in committee

It is a simple idea. Rather than spending hours preparing your annual tax returns, why not have the IRS send taxpayers a return with their income details already filled in, based on data reported to the IRS by employers? Taxpayers with uncomplicated returns could then decide to simply sign this form and return it to the IRS, thereby avoiding the need to hire a tax preparer or wade through the details themselves. The program would be voluntary, so if you wanted to file you own return, you could still do so.

During the campaign, Barack Obama pledged to implement the so-called "Simple Return" model. In April 2010, Rep. Jim Cooper, D-Tenn., introduced a bill that would do just that, so we rated the promise In the Works.

After checking to see how the bill is doing, however, we have decided to change the rating. The bill was introduced on April 15, and was referred to the Committee on Ways and Means, the chief tax-writing committee in the House. Bills usually start in committee, but most never make it out. In fact, most are never even debated.

So far, that appears to be the fate of Cooper's bill. There has been no action on the legislation since it was moved to the committee, according to Thomas, the Library of Congress website that tracks legislation. And time is running out.

Each Congressional "session" only lasts two years, and all bills that have not been passed and signed by the president by the time the session ends automatically lapse and have to be reintroduced. The 111th Congress will end on January 3, 2011, and with Congress having its hands full with the expiring Bush tax cuts, there is little chance that Cooper's bill will make it to Obama's desk before January.

We'll keep watching to see how things unfold, but for now, we're changing the rating to Stalled.
 

Sources:

Thomas, Library of Congress, H.R. 5050, accessed Oct. 11, 2010

GovTrack.us, H.R. 5050, accessed Oct, 11, 2010
 

Goolsbee's idea for pre-filled-out tax form not a reality yet

During the presidential campaign, Barack Obama promised to direct the Internal Revenue Service to "give taxpayers the option of a pre-filled tax form to verify, sign and return to the IRS or online. This will eliminate the need for Americans to hire expensive tax preparers and to gather information that the federal government already has on file."

It is almost certain that Obama made this promise at the insistence of Austan Goolsbee, a member of the president's Council of Economic Advisers. Goolsbee has been the chief cheerleader for the idea he dubbed the Simple Return.

Essentially, under Goolsbee's idea, the IRS would send taxpayers a return with their income details already filled in, based on data already reported to the IRS by employers. Taxpayers with uncomplicated returns could then decide to simply sign this form and return it to the IRS, thereby avoiding the need to hire a tax preparer or wade through the details themselves.

"The Simple Return might apply to as many as 40 percent of Americans, for whom it could save up to 225 million hours of time and more than $2 billion a year in tax preparation fees," Goolsbee, then an economist at the University of Chicago's business school, wrote in a 2006 paper. "Converting the time savings into a monetary value by multiplying the hours saved by the wage rates of typical taxpayers, the Simple Return system would be the equivalent of reducing the tax burden for this group by about $44 billion over ten years."

Goolsbee added that "the program would be voluntary. Anyone who preferred to fill out his own tax form, or to pay a tax preparer to do it, would just throw the Simple Return away and file his taxes the way he does now. For the millions of taxpayers who could use the Simple Return, however, filing a tax return would entail nothing more than checking the numbers, signing the return, and then either sending a check or getting a refund."

Regardless of the idea's merits, experts we talked to said they see no progress in making it a reality. So as we watch for developments, we'll rate it Stalled.

Sources:

Austan Goolsbee, "The Simple Return: Reducing America's Tax Burden Through Return-Free Filing" (Brookings Institution paper ), July 2006

E-mail interview with William Ahern, director of policy and communications for the Tax Foundation, Dec. 4, 2009

E-mail interview with Jill Gerber, spokeswoman for the Senate Finance Committee Republican staff, Dec. 3, 2009