By Bernie Becker - 11/20/13 12:26 PM EST
The Senate’s top tax writer rolled out a raft of new proposals Wednesday aimed at making it easier for taxpayers to file with the IRS.
Finance Committee Chairman Max Baucus (D-Mont.) said the proposals would vastly simplify what interested parties on all sides say is an overly complex tax code while taking advantage of the technological advances made since the 1986 tax reform law.
“Our tax code today is inefficient, and incomprehensible to the overwhelming majority of Americans,” Baucus said in a statement. “This complexity is eroding confidence in our economy and creating uncertainty for America’s families and businesses. Enough is enough. This discussion draft explores ways to simplify the tax process for all Americans.”
The chairman is also seeking ways to close the gap between what people owe and what they actually pay while aiming to strip the code of obsolete provisions.
Along with House Ways and Means Committee Chairman Dave Camp (R-Mich.), Baucus is trying to jump-start work on tax reform before the end of the year. Camp is still holding out hope of releasing a bill this year, but he is backing away from a promised markup.
Baucus has given stakeholders and lawmakers until Jan. 17 to respond to his drafts but has not laid out what his next steps will be after that.
The tax administration draft is likely to be far less controversial than the other two. A wide range of business groups sharply criticized the draft on international taxation that Baucus released Tuesday.
The Wednesday proposals could also have an impact with a broader range of taxpayers.
Currently, taxpayers spend about 6 billion hours a year collectively filing tax returns, even as close to 90 percent of them have to rely on paid preparers or computer programs. Taxpayers and businesses also file an additional 1.4 billion forms like W-2 and 1099 forms outside of their normal returns.
Streamlining the tax code, Baucus argues, would reduce those burdens and make it easier for taxpayers to comply with tax rules.
Baucus’s proposed simplifications include having scannable code on any return prepared by computer but still mailed in.
The draft would also mandate that many more forms be filed electronically, including any returns from paid preparers and the 990 forms filed by tax-exempt organizations.
Plus, Baucus seeks to strip the code of more than 100 “deadwood” provisions that are no longer applicable.
On identity theft, the draft proposal notes that fraud cases more than doubled between 2010 and 2011, and that those cases are complicated enough that it takes the IRS more than a year on average to deal with each one.
To reduce that, Baucus calls for including only a partial Social Security number or another identification number on a taxpayer’s W-2 form instead of the full number.
The Finance Committee chairman also wants to restrict access to Social Security’s death files and would beef up measures meant to combat fraudulent use of tax breaks such as the credit for children.
Baucus’s second draft this week adds more stringent regulations of paid tax preparers as well, after a federal court ruled that the IRS and Treasury didn’t lawfully have that authority.
And it gives the IRS new tools to battle those purposefully seeking to avoid taxes, including more information on bank accounts, mortgage interest figures and life insurance policies.
— This story was updated at 5:20 p.m.