Return-free Filing Is Taxes Done Right

Chuck Sheketoff

Economic Fairness Oregon and the Oregon Center for Public Policy have an important tax filing message for Oregonians.

Every year tax preparation and refund products drain millions of dollars from Oregon families who can least afford it. That’s why we support policies such as “return-free filing” proffered by Senator Wyden that will make it easier for low- and moderate income Oregonians to file their taxes.

We have long supported policies to make the tax system fair and easy to comply with. We have worked to expand and protect the Oregon Earned Income Tax Credit (EITC), which helps low-income working families make ends meet. We also strive to reduce the cost of filing taxes, thus enabling families to retain the full-value of the credit.

The current reality, however, is that rather than devoting the full value of the EITC to meet their families’ basic needs, many EITC recipients have to resort to products that take a bite out of their tax credit. In 2010, about half of Oregon EITC recipients paid for tax preparation, a figure that does not include those who paid for online preparation or purchased software. That same tax year, more than one quarter of EITC recipients in Oregon paid for a "refund anticipation check."

That is why proposals such as Senator Wyden’s return-free filing legislation serve the interests of Oregon families. The idea is simple: using filing status and earnings information already available, the IRS would pre-populate an individual’s tax return. The taxpayer would then review the calculations and make any necessary changes or prepare their own return, with or without the use of a paid tax preparer. The choice would be theirs to make.

A public relations firm contacted several Oregon non-profit organizations in an effort to get them to oppose return-free filing. The PR firm doesn't introduce itself this way, but it represents the corporation Intuit, one of the largest sellers of tax preparation software.

While return-free filing may not serve the pecuniary interests of Intuit, the proposal advances the financial interests of Oregon families. There is widespread agreement that the expense and complexity of filing federal and state tax returns can be a tough for low- and even middle-income families.

One response has been to establish a broad network of professionally trained volunteers to staff free tax preparation. Groups like CASH Oregon and Oregon AARP have helped tens of thousands of Oregonians with tax preparation services. However, the scale and scope of largely volunteer run programs will never match the reach of the paid tax preparation industry.

Another response is the establishment of the Free File Alliance, a public/private venture aimed at making free federal tax preparation available to people below a certain income threshold. Opponents of return-free filing point to the Free File Alliance as the solution.

The Free File Alliance, however, is not a substitute for polices aimed at easing the cost of compliance. Only those with Internet access and computer literacy can avail themselves of Free File. This “free” service, moreover, also functions as a marketing tool for costly tax and financial products, including paid state tax preparation.

Low-income families spend millions of dollars every year to access the money they’ve earned through the EITC; helping them to retain the full value of their tax refund is an important policy goal that cannot simply be left to volunteer programs.

On behalf of Oregon working low- and moderate-income families, we hope our entire delegation in Congress will advance policies such as return-free filing that reduce the cost and complexity of complying with federal tax law.

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This post was written by Chuck Sheketoff, executive director of the Oregon Center for Public Policy and Angela Martin, executive director of Economic Fairness Oregon.

By Chuck Sheketoff April 07, 2014