This Company Fought to Keep Your Taxes Complicated -- and Won

The fight is not over yet, though.

Mar 16, 2014 at 2:00PM

Source: Flickr.

Every year, Americans spend an estimated 225 million hours and $2 billion preparing their taxes. It doesn't need to be this way. Wouldn't it be great if your taxes were done for you free of charge, and all you had to do was make sure nothing was wrong with them? That's the idea behind "pre-populated filings," where the IRS would prepare your tax filing for you. In the recently released "Tax Reform Act of 2015," however, the bill includes a section that prohibits the IRS from starting such a program. Read on to find out more, including the company that has spent millions lobbying against "pre-populated filings."

Pre-populated filings
The government already collects most of the data it needs from employers and brokerages for those with simple tax filings. The idea behind "pre-populated filings," also known as "return-free filings," is that the IRS would use the data it already collects to send you your tax forms with all the information already filled out. If it were correct, you wouldn't have to do anything. If not, you would send back corrections. While not everyone would qualify, those with simple taxes wouldn't have to go through all the hassle that comes every tax season. This isn't an unrealistic idea, either; Spain, Chile, and some Nordic countries have been doing this for nearly a decade.

Simpler taxes
Two weeks ago, Rep. Dave Camp (R-Mich.) released the first draft of the "Tax Reform Act of 2015." The bill, which took three years to compile, proposes to simplify the tax code by 18,000 pages, or roughly 25%. To make this happen, the bill simplifies income taxes brackets from seven brackets to three, repeals the Alternative Minimum Tax, repeals numerous small deductions, and significantly raises the standard deduction. You can read about what the Tax Reform Act of 2015 could mean for individuals here.

Ban on pre-populated filings
While the Tax Reform Act of 2015 proposes to make the tax code itself simpler, the bill includes one specific provision to make sure the government cannott make preparing your taxes simpler. Section 6103 of the "Tax Reform Act of 2015" specifically prohibits pre-populated returns. The summary reads (italics mine):

Provision:Under the provision, the IRS would be prohibited from instituting any program under which it prepares or otherwise provides taxpayers with proposed or final returns or statements intended to be used by the taxpayer to satisfy his reporting obligation under the Code. Thus, the IRS would not have authority to implement a broad-based program under which it pre-populates a return with third-party information supplied to the agency (e.g., Form W-2 wage statements, Form 1099s for interest, dividends or capital gains) and provides such return to a taxpayer for filing.

Leading the charge against simpler taxes
The above section of the bill is a handout to the tax prep industry, which would take the biggest hit from such a program. Last year, an investigation by ProPublica found that one of the groups leading the charge against "pre-populated filings" is Intuit (NASDAQ:INTU), maker of the popular tax-preparation software TurboTax. ProPublica's investigation found that Intuit had spent $11.5 million over the past five years lobbying congress on the tax prep issue.

It shouldn't surprise anyone that a company will fight to preserve a problem that only that company can solve. Intuit even singles out in its annual report the risk that the government will offer free returns to taxpayers:

Our consumer tax business also faces significant competition from the public sector, where we face the risk of federal and state taxing authorities developing software or other systems to facilitate tax return preparation and electronic filing at no charge to taxpayers. These or similar programs may be introduced or expanded in the future, which may cause us to lose customers and revenue. Although the Free File Alliance has kept the federal government from being a direct competitor to Intuit's tax offerings, it has fostered additional online competition and may cause us to lose significant revenue opportunities. The current agreement with the Free File Alliance is scheduled to expire in October 2014. We anticipate that governmental encroachment at both the federal and state levels may present a continued competitive threat to our business for the foreseeable future.

Bottom line
The overall changes to the tax system would be a net positive if adopted, but either way, you'll still have to spend hours preparing your taxes. In 2002, the tax software industry and the IRS started a public-private partnership to offer some taxpayers free online tax-filing. The agreement expires later this year and has not yet been replaced.

In both the public and private sectors, governance functions best when stakeholders educate themselves, take an active interest in what's going on, and hold their representatives accountable. So take a moment to let your representative know what you think of the Tax Reform Act's restriction on "pre-populated filings" or write directly to the House Ways and Means Committee at

No matter what happens in Washington with the tax code, it shouldn't change your investing strategy. When it comes to your investments, you should continue to educate yourself, find great companies, and invest for the long term.

How one Seattle couple secured a $60K Social Security bonus -- and you can too
A Seattle couple recently discovered some little-known Social Security secrets that can boost many retirees’ income by as much as $60,000. They were shocked by how easy it was to actually take advantage of these loopholes. And although it may seem too good to be true, it's 100% real. In fact, one MarketWatch reporter argues that if more Americans used them, the government would have to shell out an extra $10 billion… every year! So once you learn how to take advantage of these loopholes, you could retire confidently with the peace of mind we’re all after, even if you’re woefully unprepared. Simply click here to receive your free copy of our new report that details how you can take advantage of these strategies.

Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Intuit. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers