Bill Overview
Title: Tax Filing Simplification Act of 2022
Description: This bill directs the Internal Revenue Service (IRS) to establish a free on-line tax preparation and filing service and allows taxpayers to access third-party provided tax return information and information held by the IRS. The bill prohibits the IRS from entering into any agreement that restricts its legal right to provide tax return preparation services or to provide tax return filing services. The bill requires the IRS to establish and operate programs to (1) facilitate claims for the child care and the earned income tax credits, (2) provide software for the preparation and filing of individual income tax returns for taxable years beginning after 2022, (3) allow taxpayers to download third-party provided return information and IRS-held information to their tax returns, and (4) allow taxpayers to elect to have their tax returns prepared by the IRS. The bill also requires verification of taxpayer identity and requires the IRS to conduct an outreach campaign to provide the public with information about this bill's programs and software.
Sponsors: Rep. Sherman, Brad [D-CA-30]
Target Audience
Population: People who file individual income tax returns
Estimated Size: 152000000
- All U.S. taxpayers will have access to a free online tax preparation and filing service, affecting those who file tax returns.
- Individual taxpayers who rely on third-party tax preparation services may choose to use the IRS service if it is easier or more cost-effective.
- Taxpayers eligible for child care and the earned income tax credits may find it easier to claim these benefits through IRS-facilitated programs.
- The IRS's outreach campaign will potentially inform all taxpayers about the new programs and services available.
- Self-employed individuals and small business owners who file individual income tax returns may also be impacted by the new IRS services, especially if they use online software for tax filing.
Reasoning
- The Tax Filing Simplification Act targets all U.S. taxpayers who file returns, directly impacting those who currently rely on third-party tax preparers.
- The policy aims to provide a cost-free alternative to these taxpayers, particularly benefiting low-to-middle income groups and those eligible for specific tax credits.
- Due to budget constraints, the rollout might be slower or less comprehensive, possibly affecting immediate accessibility or service quality.
- The IRS's outreach efforts will influence awareness and uptake, potentially expanding impact over time.
Simulated Interviews
Teacher (New York, NY)
Age: 34 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- I think having a free option from the IRS would be really helpful, especially for claiming child-related credits.
- Currently, I'm spending about $80 on software that doesn't always make its clear on how to claim all benefits.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 5 |
Engineer (Houston, TX)
Age: 45 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 0.5 years
Commonness: 18/20
Statement of Opinion:
- I'm generally satisfied with my tax preparer but I'm curious to see if the IRS can offer something equally efficient for free.
- Free service from the IRS could save us some money, but I'm concerned about the convenience factor.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Freelancer (Los Angeles, CA)
Age: 29 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- Filing taxes is a headache every year because of all the paperwork and calculations involved.
- A simplified free option might be less daunting and I hope it makes claiming the EITC easier.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 6 | 3 |
| Year 5 | 7 | 3 |
| Year 10 | 8 | 3 |
| Year 20 | 6 | 4 |
Retired (Miami, FL)
Age: 63 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 12/20
Statement of Opinion:
- I don't really do much with my taxes, and I like how I currently file online for free already.
- It seems like this would benefit people with more complicated taxes than me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Small Business Owner (Chicago, IL)
Age: 39 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 8/20
Statement of Opinion:
- Managing business finances is tough, and tax filing is the worst part.
- If the IRS can actually handle business incomes well, it might save us money and anxiety, but I'm skeptical.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 5 |
Software Developer (San Francisco, CA)
Age: 27 | Gender: other
Wellbeing Before Policy: 8
Duration of Impact: 2.0 years
Commonness: 14/20
Statement of Opinion:
- I prefer efficient digital solutions, and if the IRS's option is as tech-friendly as the paid services, I'd consider using it for sure.
- The main draw is the cost savings, but I'm already happy with how I file taxes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 7 | 8 |
| Year 10 | 7 | 8 |
| Year 20 | 7 | 8 |
Farmer (Rural Kansas)
Age: 52 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 1.0 years
Commonness: 6/20
Statement of Opinion:
- Filing taxes is very complex with all my deductions and variables in agriculture.
- Unless the IRS service can match what my accountant does, I doubt it'd be useful for me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Nurse (Seattle, WA)
Age: 47 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 10/20
Statement of Opinion:
- Every tax season is just an added stressor, so if I can simplify any part of that, I’m all for it.
- I’m intrigued if this service might save time or money while still addressing my needs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Bartender (Atlanta, GA)
Age: 30 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 7.0 years
Commonness: 14/20
Statement of Opinion:
- Money is tight, and every year I have to set aside funds just to pay someone to do my taxes.
- Free filing sounds promising, especially if it's easy to claim the EITC.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 5 |
| Year 5 | 8 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 7 | 5 |
University Professor (Boston, MA)
Age: 58 | Gender: female
Wellbeing Before Policy: 9
Duration of Impact: 0.0 years
Commonness: 16/20
Statement of Opinion:
- I'm really comfortable with my current provider, but exploring a free version would be interesting.
- I suspect the difference might not be significant since my returns are straightforward.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Cost Estimates
Year 1: $150000000 (Low: $100000000, High: $200000000)
Year 2: $175000000 (Low: $125000000, High: $225000000)
Year 3: $180000000 (Low: $130000000, High: $230000000)
Year 5: $200000000 (Low: $150000000, High: $250000000)
Year 10: $220000000 (Low: $170000000, High: $270000000)
Year 100: $270000000 (Low: $220000000, High: $320000000)
Key Considerations
- The transition period for implementing the online system may involve initial complications or inefficiency that could temporarily affect taxpayer satisfaction.
- Ensuring robust cybersecurity measures will be critical to protect sensitive taxpayer information, which may increase costs.
- The policy could face opposition from sectors involved in the current tax preparation industry, which could influence legislative and public support.