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Problems at IRS: Will you get your tax refund on time?

The IRS chief is warning of a poor tax season, with delayed refunds and long waits for customer service help likely after budget cuts. But could the income tax system and the IRS be overhauled to work for everyone? 

By Alexander LaCasse, Staff Writer

Benjamin Franklin famously once said that the only two certainties in life are death and taxes.

He never mentioned anything about customer service.

IRS Commissioner John Koskinen warned employees to get ready for a difficult tax season due to budget cuts, in an internal e-mail obtained by Fox News. The result could be thousands of Americans receiving late refunds. Plus, out of those who need to call the IRS for assistance, only about half of them will be able to reach an associate after an excessively long wait period, according to the e-mail.

Though the IRS is far from America's' favorite bureaucracy, possible solutions that will make the tax-collection process easier for taxpayers to send their money to Washington (and ease the administrative crush on the IRS during tax time), 聽have been lobbied to death in recent years. Why? Such efforts would hurt two things the US tax system has come to protect: tax expenditures and software companies that sell tax payment software, like Intuit, the designers of Turbo Tax.

Why no automatic returns?聽

Advocates for tax reform want to simplify the tax filing process, especially for individuals who do not qualify for a high number of deductions.

Denmark, Sweden, and Spain聽already offer government-prepared tax returns, where the government calculates a figure that individuals must pay. This is not outside of the current capability of the IRS because this figure can be determined with聽information banks and employers聽already send to the government, according to a story from Propublica.

This is know as 鈥渞eturn-free filing鈥 and advocates say it could save taxpayers a combined $2 billion and over 225 million hours in preparation costs. If an individual disagrees with the government鈥檚 projected income tax figure he or she has the option to file their taxes manually or make adjustments to items like filing status or income so there is little risk involved as far as paying the IRS more money than necessary.

So why has Intuit and conservative tax-advocate Grover Norquist, founder of Americans for Tax Reform, been so bent on defeating any measure to make this change to the income tax system?

Mr. Norquist has claimed in an April 2014 letter to members of Congress that return free filing would "socialize all tax preparation in America" in an effort to gain higher tax revenues.

Also, 25 million Americans used Turbotax to file taxes in 2014, and its products accounted for 35 percent of Intuit鈥檚 $4.2 billion in revenue last year, According to Propublica. The cost of Turbotax for individuals and small businesses can run from free to $150.聽Propublica also found that Intuit spent聽$11.5 million on federal lobbying聽in the last five year to defeat bills that could have led to government-prepared tax returns. The one state where return-free filing has been attempted is Intuit鈥檚 home state of California.

In 2005, the state introduced its ReadyReturn program to test out return-free filing. According to Propublica, Intuit spent $3 million inside the state to defeat the bill, but to no avail. Former State Representative Tom Campbell wrote in an聽op-ed in the Los Angeles Times聽at the time he, "never saw as clear a case of lobbying power putting private interests first over public benefit."

Only 90,000 Californians used the ReadyReturn program last year and it鈥檚 budget is not public.聽98 percent聽of ReadyReturn users who filled out a survey said they would use the program again and that聽state鈥檚 tax bureau praised it聽because it was cheaper than paper returns to process, according to Propublica.

Tax expenditures: government spending that's not

The second element of tax reform advocates would like to see gone are tax expenditures, which are equivalent of an individual or business receiving payment from the government for some type of action. They are granted by members of Congress in the form of certain exemptions 鈥 like not taxing an employer's mortgage interest, for example. It's sort of addition by subtraction. By聽not making taxpayers pay for certain things, the government is effectively spending money without having it appear on a federal budget 鈥 or having it approved in an annual budget vote, something not required of such expenditures.聽

With an annual federal deficit north of $1 trillion, this is a powerful tool: it is not good politics to appear as though members of Congress are spending more money than necessary, but, as the practice's opponents argue, it's an easy way to allow for聽tax exemptions for corporate entities and special interests that, thanks to the Citizens United decision, have unlimited license to fund campaign contributions 鈥 and expect something in return.

The Simpsons-Bowles bi-partisan committee on debt reduction called this "backdoor-spending hidden in the tax-code."聽Or, as Derek Thomson of the Atlantic wrote:

Simpson-Bowles estimated that all of the tax expenditures in 2011 added up to over $1 trillion in forgone revenue, according to report on Fareed Zakaria's CNN program, GPS. The government's total revenue in 2011 was just over $3.5 trillion.

Zakaria argues that by eliminating tax exemptions for corporate entities and special interests, they can eliminate what a lot of campaign money buys.