Taxing Proposal for E-Filers
Nearly two dozen states have created consumer-friendly electronic systems that make it easier to file income tax forms. But California is tumbling in the opposite direction with a bill that would force online filers to use private tax-preparation software companies. This is a classic lobbyist-driven bill that offers no benefits for consumers.
Here’s how e-filing works in Maine, Indiana and other forward-thinking states. Taxpayers access forms on state Web sites and enter income and other data. Online tax tables and a built-in calculator accelerate the process.
Consumer ease isn’t the only reason e-filing is gaining ground nationally. Electronic systems also reduce errors, cut the cost of processing paper returns and often speed up refunds.
But AB 2781, which has already passed the Assembly and today goes before the Senate Revenue and Taxation Committee, would not allow Californians the choice of filing directly online to the state. E-filing taxpayers who chose not to use TurboTax or a similar state-approved private software program would have to download and print state tax forms, use their own calculators, pull figures from hard copies of tax tables and then go back online to finish filing.
Intuit, parent of TurboTax, has spent $400,000 since 1999 lobbying lawmakers and Franchise Tax Board members. Development of a state system also is opposed by state Sen. Steve Peace (D-El Cajon), who maintains that the state could monitor the keystrokes of taxpayers who filed online and target for auditing those who made a lot of revisions. The Federation of Tax Administrators, a group that monitors state tax filing and payment systems, finds the claim unrealistic.
Tax officials in states with e-filing systems note that consumers already buy airplane tickets and pay bills online and say that taxpayers, if they’re worried, can stick with old-fashioned paper returns.
The system proposed under AB 2781 would certainly require taxpayers to expose a lot of valuable confidential financial data to private companies.
Burgeoning state tax preparation sites increase pressure on the federal government to offer something similar, and Intuit sees the threat. Software companies are promising to provide free tax filing for households with incomes of $25,000 or less, but those earning more would have to pay $5 to $13 to file state returns electronically, on top of federal filing fees and possible software costs.
Either way, AB 2781 would turn the state into a potent marketing arm for its selected tax-preparation “partners.”
No one likes to pay taxes. Sacramento shouldn’t be making it harder.
