Amidst the Covid pandemic, Arizonans and all Americans may face the most complicated tax season in history. However, instead of encouraging taxpayers to rely on accountants or tax experts to ensure they are getting all the tax credits and benefits they are entitled, some members of Congress are proposing a return-free filing (RFF) system. The truth is an RFF system would be disastrous.
It would bury the IRS in paperwork and eliminate the role of taxpayers, accountants, and other private entities from the tax filing process. This would allow the IRS total jurisdiction over each American’s taxes. Given the IRS’ less-than-stellar performance regarding the disbursement of stimulus checks and PPP loans, how do we expect the IRS to operate effectively with this far greater level of responsibility?
The short answer is—we can’t. The IRS is currently fixing its own backlog of unprocessed and suspended returns, and it’s costing the federal agency billions of dollars for fiscal 2020 alone. Some try to excuse the agency’s poor performance by blaming the pandemic, but Erin M. Collins of the independent Taxpayer Advocate Service does not agree. Rather, she argues the IRS’ problems stem from a lack of technological advancement.
Collins said, “Although the IRS plans to modernize its systems to reduce the dependency on paper, it is moving toward that goal slowly due to a lack of adequate, multiyear funding. IRS modernization is not a luxury or an option anymore. The 2020 filing season highlighted the result of the IRS’s continued reliance on antiquated technology.”
Even though the agency lacks the technological resources to function efficiently, an RFF system significantly amplifies the IRS’ already-substantial workload. This would, unsurprisingly, weaken America’s tax system. According to a 2020 report conducted by the Progressive Policy Institute (PPI), an RFF system would decrease the accuracy of tax calculations, allow for potential tax evasion, complicate the tax system (which is already complicated enough), fail to educate Americans about their own finances, and create a lack of compliance. Certainly not a ringing endorsement from PPI.
Former Senator Bob Kerrey (D-NE)—who previously worked on tax-related issues in Congress—also opined on the issue during a recent podcast.
“I think [return-free filing is] likely to reduce the number of people who are complying because they’re going to disagree with the conclusion the government has reached, and they’re going to be unwilling to give the government even more information than they’re currently collecting,” Kerrey said.
As America works to rebuild the economy following the brutal impact of Covid, it is crucial that actions are taken to revive the livelihoods of individuals and small business owners in Arizona. Although it is widely agreed upon across the political spectrum that an RFF system would be detrimental to America’s current tax system, members of Congress must make their voices heard and stand against this harmful system if proposed as legislation.
Nancy Hall is a certified public accountant and the owner of a successful accounting firm in Arizona.