By Representative Peter Roskam
This is the time of year when Americans have calculated to the penny how much of their money must be paid to the government. Not only do the folks at Treasury require families to give them the product of their labor, but the IRS makes them labor for hours to give them your money.
Studies show that Americans spend more than six billion hours a year complying with federal taxes. That means that, on average, each taxpaying household spends the equivalent of a week's work preparing their taxes. The total compliance cost adds up to about $228 billion a year. As heavy a burden as this may be, many Americans can actually avoid spending their own limited resources on filing taxes.
A number of years ago, leading members of the online tax preparation industry joined with the Internal Revenue Service (IRS) in a public-private partnership to form the Free File Alliance. Thanks to this partnership, millions of Americans are able to file their taxes themselves at no cost because tax software companies donate the necessary tax preparation software.
Free File software also encourages the use of online tax filing, which is cheaper and quicker for the government to administer and reduces the number of errors. In fact, Free File has saved the IRS more than $104.8 million in processing costs, according to the U.S. Government Accountability Office.
Each of the software companies that participate in Free File gets to choose who can use their product for free. Generally it's lower- and moderate-income taxpayers, young people, seniors, active-duty members of the military and those eligible for the Earned Income Tax Credit. Most taxpayers with an adjusted gross income of $57,000 or less qualify to file their taxes through Free File. In fact, of the 138 million taxpaying households in the U.S., 70 percent -- about 100 million households -- are eligible to save money with Free File.
By using Free File programs, taxpayers can be sure that they have identified and claimed all of the tax credits and deductions to which they are legally entitled. In addition, Free File makes electronic tax filing easy, which saves money, reduces errors and speeds up refunds.
The Free File Alliance is currently structured through a partnership between the IRS and software companies -- meaning that it can end when any party pulls out of the program. To ensure Americans can continue to rely on Free File Alliance and do not have to spend their limited resources on an already costly process, I've sponsored the Free File Program Act of 2011 to codify the Free File program into U.S. law. This would ensure that the IRS continues to save money on processing costs and many taxpayers can count on free filing for years to come.
Some say that a better solution would be for the IRS to prepare our taxes for us, and others go even further and say the IRS should simply send us a bill every year. I couldn't disagree more. The IRS should not be given the responsibility to make sure you receive all of the credits and deductions you are eligible for -- making the tax collector also the tax preparer creates an inherent conflict of interest while forcing citizens to relinquish control of their taxes to the government.
Though tax filing can be a burden, expanding the IRS's powers is not the type of solution Americans are looking for. With the Free File software program readily available, Americans are able to file their taxes for free without increasing the size and scope of government.
And while tax filing will never be completely painless, maintaining individual responsibility without expanding the IRS is important to the integrity of the system. The Free File Program Act will ensure there's no cost to maintaining that integrity for millions of Americans.
Rep. Peter Roskam is a member of the House Ways & Means Committee and the chief deputy whip.