Here’s How Elizabeth Warren Wants to Save You Money on Tax Day
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Here’s How Elizabeth Warren Wants to Save You Money on Tax Day

REUTERS/Brian Snyder

Sen. Elizabeth Warren (D-MA) is promoting a new plan she says will save Americans time and money on doing their taxes.

A bill she introduced Wednesday would require the Internal Revenue Service to set up its own free, online tax preparation and filing service that allows taxpayers to file directly with the federal government.

The bill, called the Tax Filing Simplification Act, was co-sponsored by presidential candidate Sen. Bernie Sanders (I-VT) along with six Democratic senators.

"Congress should be making it easier for Americans to file their taxes each year, not bowing to the interests of the tax prep industry," said Sen. Warren in a statement. "[This] is a commonsense bill that would help taxpayers all across this country file their taxes with less stress and fewer costs, and it would push the IRS to use the authority it already has to simplify Tax Day for all Americans."

Related: The States With the Worst Tax Rates

The fact sheet accompanying the bill noted that Americans on average spend 13 hours preparing their returns and pay $200, or about 10 percent the average federal tax refund, for preparation services. Only 3 percent of eligible taxpayers currently use the “Free File” program the IRS has in partnership with private tax software companies, even though the program claims to provide free services to 70 percent of taxpayers.

These private companies make it difficult for taxpayers to determine their eligibility for the free services and, in some cases, confuse them into signing up for extra products they don’t need, according to the fact sheet. For more than a decade, the IRS has refrained from offering direct preparation and filing services and allowed private companies to fill that role.

"Tax Day has become an opportunity for corporations to profit off of confusion over our complicated tax code. That is wrong,” Sen. Sanders said in a statement. “We must make tax filing as easy as possible, not direct profits to private companies at the expense of working families.”

The legislation aims to undo all that by prohibiting the IRS from entering into agreements with private companies that restrict the agency’s right to offer free services. It also directs the agency to establish its own service.

Related: When and How to Refile Your Old Taxes

Other benefits of the legislation, according to the fact sheet, are that taxpayers will have access to information such as W-2s and Form 1099s that were filed to the IRS by third parties, such as employers and banks. Americans with simple tax returns would be able to choose a return-free option, which provides a pre-prepared tax return from the IRS.

TurboTax, H&R Block and the IRS did not immediately return requests for comment on the legislation.