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Could new legislation lead to direct income tax filings?

Under federal law, filing a federal income tax return is mandatory. There are severe consequences for not filing your return on time (or at all). To that end, tens of millions of Americans and businesses file returns every year. Many of whom actually spend money in order to comply with the law.

Since the average taxpayer spends more than one working day (13 hours) and $200 filing a tax return, new legislation is being considered that would alleviate this burden; especially for those taxpayers who have relatively simple returns. 

The bill, entitled The Tax Filing Simplification Act of 2016 would allow taxpayers to file their returns directly with the Internal Revenue Service using a measure of pre-filled forms. The concept is based on the notion that many administrative agencies already have access to the information needed to complete a simple return. So in essence, some middle income and low income taxpayers spend money to  provide information to the federal government that it already has.

This ostensibly would cut into quite a bit of business from professional tax preparers, including Intuit (maker of TurboTax), H&R block, and Jackson Hewitt, since they may not be interested in losing sizable chunk of a traditional income. After all, they have been able to convince a large cross-section of Americans that they can’t file their returns without assistance. More importantly, they lead taxpayers to believe that they won’t be able to get a refund without the assistance of a tax preparer.

It remains to be seen whether this bill will eventually be passed . 

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