Free Tax Preparation Services During the Pandemic

WM, Oversight, Free Tax Preparation Services During the Pandemic,  February 18, 2021 

This is a timely topic for now, but not for much longer. The numbers of cases reported and deaths are declining rapidly. This is a good thing for all of us, but it may mean that parts of the pandemic relief package need to be pulled back for consideration of more comprehensive and bipartisan reform, especially those involving increases to the child, earned income and child and dependent care credits.

There is big business in harvesting tax credits for low-income families who are also likely overwhelmed by any tax filing, let along the complex analysis required to prepare the required forms.  While there are some free services for poor filers, most rely on paid preparers. The tax preparation industry funds much of the opposition to comprehensive reform, which is shameful.

The vast majority of Social Security and SSDI payees don’t need to file at all, unless they have significant non-Social Security income that is not already tax exempt, for example, Roth IRAs. They deserve a simplified form, one that includes such simple questions as whether IRA early withdrawals are covered by the disability exemption for early filing.

Seniors who have complicated incomes should pay for the privilege. While it is a public relations win to assist retirees with some complicated income, it is a misuse of volunteer resources except for the very old, who need even broader financial management assistance than volunteers can provide.

One of the purposes of assistance is tax avoidance. Tax cheating has, of late, been a conservative political value. The best way around this is tax simplification, including asset and credit-invoice value added taxation. This would not be the burden on retirees that people think. One person’s income tax is their customer’s hidden VAT. Bringing such taxes out of the shadows may or may not be more costly to taxpayers I suspect not. Asset VAT is an alternate way to pay capital gains taxes, but one that cannot be avoided so easily.

Child tax credits can be distributed through wages and used as an offset to employer/sole proprietor payment of quarterly income and payroll payments or as an offset to an employer-paid subtraction VAT. Six of one, half dozen of the other.

Attachment: Tax Reform