John Edwards To Take On US Tax Preparation Industry

by Mike Godfrey, Tax-News.com, Washington

11 April 2007

US Democratic presidential hopeful Senator John Edwards has unveiled a new proposal to dramatically simplify the US tax filing system, by having the Internal Revenue Service calculate millions of families' tax bills and mail them on a "Form 1".

In the first in a series of podcasts, Edwards argued that his plan would prevent millions of Americans from needlessly navigating a complex and confusing tax filing system or paying tax preparers to help with their taxes.

According to Edwards, for as many as 50 million Americans, the IRS gets all the information it needs to calculate taxes from employers and financial institutions. As part of Edwards's plan, the IRS would calculate the tax bill and mail it to taxpayers on a Form 1, where they could verify and recalculate it or simply sign and return it. Edwards revealed that Form 1 is a step toward his vision of a tax code that is "simpler and fairer and that rewards work".

Edwards claimed that his plan would make filing taxes easier for taxpayers by sharing information, reducing the need to gather documents, and by creating a free interactive web site that eliminates the need for data entry, calculators and tax tables. He also said that it would help low-income workers by informing working families about their eligibility for the Earned Income Tax Credit.

Edwards's proposal would also take on the tax preparation industry, which, he argues, continues to fight against simplification of the tax system.

"Hard-working families who pay their taxes shouldn't have to pay tax preparers too. With 'Form 1,' there is only one thing you have to do - sign and return it," Edwards commented.

He added: "The American tax code is unnecessarily complicated and full of shelters and loopholes that favor wealth over work. While corporations and wealthy families can hire expensive accountants and lawyers, ordinary families face unnecessary obstacles in calculating and paying their taxes."

"It takes seven hours to complete even the simplest tax form, the 1040EZ. One-third of EZ filers pay tax preparers. Meanwhile, for tens of millions of taxpayers who file simple returns, the Internal Revenue Service already has all the data it needs (such as household size, wages, and interest income) to calculate the tax or refund due."

Edwards claimed that Form 1 could save families $2 billion in tax preparer fees, but noted that the tax preparation industry has fought similar efforts. "In California, one company spent over $500,000 in a failed effort to derail the successful ReadyReturn program," he stated.

"At the federal level, the IRS agreed with the tax software industry to limit free online filing to low-income taxpayers. Its barebones "Free File" program for low-income taxpayers has a history of hidden fees and bait-and-switch advertisements," Edwards concluded.

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