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: Sen. Warren, Elizabeth [D-MA]
Target Audience
Population: Individuals who file federal tax returns
Estimated Size: 155000000
- The bill impacts individuals who are required to file federal taxes in the United States.
- According to the IRS, it received approximately 160 million individual tax returns in 2021.
- The bill specifically affects taxpayers eligible for the child care and earned income tax credits.
- Taxpayers who utilize current free file services from third-party providers may switch to the new IRS service.
- There are U.S. residents living abroad who also file federal taxes, but the large majority are residents within the U.S.
Reasoning
- The target population mainly includes individuals who file federal taxes, totaling approximately 155 million in the U.S.
- Among these individuals, those who utilize third-party tax filing services may be particularly affected since they now have a direct option with IRS.
- People eligible for tax credits like earned income tax credit will benefit from simplified claim processes.
- The policy is unlikely to affect those who prefer using professional CPAs due to complexity or personal preference.
- U.S. citizens living abroad might find it easier to file due to the online service option.
- Considering the budget, the IRS will focus initial efforts on digital infrastructure and public outreach to maximize policy reach.
- Wellbeing could improve significantly for those who face challenges with current tax filing processes.
Simulated Interviews
Software Developer (New York, NY)
Age: 34 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- I usually file my taxes online using a third-party service.
- The IRS offering this directly could save me some money.
- I would worry about how user-friendly the IRS system would be compared to what I'm used to.
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 | 7 | 6 |
| Year 20 | 7 | 6 |
Freelance Writer (Austin, TX)
Age: 28 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 8/20
Statement of Opinion:
- I have two kids, so claiming tax credits is a bit of a hassle.
- This new policy could streamline everything.
- It might be easier to handle deductions and credits.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 5 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
Accountant (Chicago, IL)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 3/20
Statement of Opinion:
- I don't think this will affect my business much because most of my clients require detailed tax advice.
- However, the free service might be good for individuals with simple tax situations.
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 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Construction Worker (Miami, FL)
Age: 39 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 10.0 years
Commonness: 7/20
Statement of Opinion:
- I rely on the earned income credit every year, but filing taxes isn't easy for me.
- If the IRS can make it simpler, that's a good thing.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 7 | 4 |
| Year 5 | 8 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 8 | 5 |
Retired (Phoenix, AZ)
Age: 66 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 5/20
Statement of Opinion:
- I don't have to deal with a lot of deductions, but online filing with the IRS could be useful.
- I mainly rely on paper filing now.
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 | 7 | 6 |
| Year 20 | 7 | 6 |
Teacher (Seattle, WA)
Age: 24 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- Filing taxes is usually more confusing for me.
- The IRS service could make the process easier to understand.
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 | 7 | 5 |
Small Business Owner (Denver, CO)
Age: 52 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 6/20
Statement of Opinion:
- I prefer having my accountant prepare business taxes.
- For personal taxes, the IRS service might be a better fit.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Artist (Brooklyn, NY)
Age: 60 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 2/20
Statement of Opinion:
- Making tax filing easier is always a plus.
- Living abroad part-time, online services can be very useful.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Film Producer (Los Angeles, CA)
Age: 37 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 1/20
Statement of Opinion:
- I doubt I'd use an IRS online service since my taxes are pretty complicated.
- Having my CPA handle things is just more practical for me.
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 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Marketing Specialist (Atlanta, GA)
Age: 31 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- I handle my taxes annually through software; a direct IRS service could be helpful and cheaper.
- I'm open to trying it out, especially if it makes credit claims easier.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Cost Estimates
Year 1: $200000000 (Low: $150000000, High: $300000000)
Year 2: $180000000 (Low: $140000000, High: $260000000)
Year 3: $160000000 (Low: $120000000, High: $240000000)
Year 5: $140000000 (Low: $110000000, High: $210000000)
Year 10: $120000000 (Low: $90000000, High: $180000000)
Year 100: $80000000 (Low: $60000000, High: $120000000)
Key Considerations
- The policy could face opposition from existing third-party tax service providers.
- Initial implementation may face technological challenges and require significant IT investment.
- Public perception and understanding of the new system will affect its adoption and effectiveness.