US Sen. Hirono joined colleagues to introduce Tax Filing Simplification Act

US Senators Mazie K. Hirono and Brian Schatz of Hawaiʻi joined 21 colleagues to introduce the Tax Filing Simplification Act of 2022, which could save millions of Americans time and money.

The bill would eliminate red tape for all taxpayers, with simplified filing tools to ensure more eligible people – including millions of low-income Americans – would receive important tax refunds, like the Child Tax Credit and Earned Income Tax Credit.

According to recent polling, 77% of Americans support this legislation, according to a press release from Sen. Hirono.

“We should be making it easy for individuals and families to file their taxes, but our complicated system results in too many people spending far too much time and money every year,” Sen. Hirono said. “The Tax Filing Simplification Act will help change that.”

This legislation follows years of issues with the Free File program, which was outsourced by the Internal Revenue Service to the tax prep industry and serves just 3% of taxpayers when 70% are eligible.

Longtime Free File Alliance member Intuit has been sued for scamming taxpayers into paying for filing services that should have been free, and faced reports of ongoing abuse of revolving door tactics to defend the broken tax filing system.

The Government Accountability Office recently recommended that the IRS develop additional options for free online filing, and Treasury Secretary Janet Yellen agreed that investing in truly free and simple tax filing tools like those proposed in this legislation is “definitely a priority,” according to the press release.

The Tax Filing Simplification Act makes several changes to simplify and decrease the costs of the tax filing process for millions of American taxpayers by:  

• Prohibiting the IRS from entering into agreements that restrict its ability to provide free online tax preparation or filing services.

• Directing the IRS to develop a free, online tax preparation and filing service that would allow all taxpayers to prepare and file their taxes directly with the federal government instead of being forced to share private information with third parties.

• Enhancing taxpayer data access by allowing all taxpayers to download third-party-provided tax information that the IRS already has into a software program of their choice, saving time and decreasing the risk of math errors on W-2 income or CTC payments that lead to significant processing delays.

• Directing the IRS to expand the CTC non-filer tool to cover other tax benefits, especially the EITC, by March 1, 2023.

• Allowing eligible taxpayers with simple tax situations to choose a return-free option, which provides a pre-prepared tax return with income tax liability or refund amount already calculated.

• Mandating these data and filing tools be made available through a secure online function and requires any participating individual to verify his or her identity before accessing tax data.

• Reducing tax fraud by getting third-party income information to the IRS earlier in the tax season, allowing the agency to cross-check this information before issuing refunds.

The full text of the legislation can be found here. A one-page summary can be found here.

The House companion bill was introduced by Representatives Katie Porter and Brad Sherman, both of California.

The Tax Filing Simplification Act of 2022 is cosponsored by Senators Elizabeth Warren (D-MA), Tammy Baldwin (D-WI), Richard Blumenthal (D-CN), Cory Booker (D-NJ), Bob Casey (D-PA), Tammy Duckworth (D-IL), Dianne Feinstein (D-CA), Kirsten Gillibrand (D-NY), Maggie Hassan (D-NH), Tim Kaine (D-VA), Angus King (I-ME), Amy Klobuchar (D-MN), Patrick Leahy (D-VT), Ed Markey (D-MA), Jeff Merkley (D-OR), Alex Padilla (D-CA), Bernie Sanders (I-VT), Jeanne Shaheen (D-NH), Tina Smith (D-MN), Debbie Stabenow (D-MI) and Sheldon Whitehouse (D-RI).