Schumer Announces Bill Providing Free Electronic Tax Filing For All Taxpayers Directly With IRS to Save Taxpayers Billion Dollars and Reduce Errors Dramatically from Standard Paper Filing

IRS Agreements with Software Companies Allows Them to Monopolize E-filing Market; Will Prevent IRS from Reaching E-Filing Goal of 80% by this Year

Washington, DC:  On the eve of Tax Day, U.S. Senator Charles E. Schumer, Chairman of the Joint Economic Committee (JEC), released a state-by-state analysis revealing that free e-filing would save taxpayers and the federal government billions of dollars and reduces tax return errors dramatically.  Online tax filing is clearly the easiest, cheapest, and most efficient way for Americans to pay their taxes, especially when this year the Internal Revenue Service (IRS) projects that 62 percent of the 138 million U.S. taxpayers will file electronically.  However, because the IRS made exclusive deals with private software companies, taxpayers are forced to pay to file their taxes electronically. 

"The bottom line is that the IRS is imposing an additional ‘tax’ on people paying their taxes,” Schumer said. “The current system forces millions of Americans to pay a fee for the ‘privilege’ of filing their taxes, even though e-filing is cheaper for the IRS to process.

The Joint Economic Committee analysis includes a state-by-state breakdown for how much taxpayers spent in 2007 to file their taxes online and also charts the progress of e-filing from 1995-2007.   The JEC e-filing fact sheet can be found here. 

Though filing electronically saves the IRS millions of dollars –fees are imposed on taxpayers to do so; while paper returns which are more expensive for the IRS to process they do not have an additional charge. The IRS made agreements with paid tax preparers and software companies to not offer free filing because the companies were concerned it would hurt their business. In exchange for the IRS staying out of the software business the companies agreed to offer free electronic filing for people whose income is under $54,000. Everyone else has to pay to e-file by going through a third party, even though the e-filing system saves the taxpayer and the government money. Even those who qualify for free filing must go through an incredibly complicated system to e-file and may be pushed into buying other services for additional fees from third party preparers.

“I’m going to introduce a bill that will eliminate the tax on taxes that millions of Americans are now paying, and impose a $50 penalty per offense on any company that charges a tax filing fee to consumers.” Schumer stated. 

Facts about E-Filing:

Free E-filing Saves Money:  Taxpayers can save over $1.2 billion annually in e-filing fees if taxpayers earning more than $52,000 could e-file for free.  For the IRS, there are enormous cost savings from e-filing. While processing each paper return costs $2.50, an e-filed return costs only $0.30.

E-filing Reduces Errors:  The IRS finds roughly 1 error in every 100 returns filed electronically (regardless of whether the return was prepared professionally of self-prepared by the taxpayer), compared to about 1 error in every 5 paper returns.

E-filing Is Easy:  Filing income tax returns electronically also has significant advantages for taxpayers. Filing online is more convenient, return processing is faster, and refunds can be sent out more rapidly.

The JEC e-filing analysis can be found here

The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.

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