Proposal to Let IRS Prepare Tax Returns Raises Concern as D.C. Looks Under the Cushions

The heightened focus in Washington over deficit reduction has stirred up talk about a languishing proposal that would allow the IRS to go ahead and prepare those tax returns for you.

The idea was pushed earlier this year by a Democratic congressman, who pitched it as a way for some filers to save time and money by letting the IRS do the heavy lifting when it comes to tax-return preparation.

But Republicans and advocacy groups warn it's a ploy to let the IRS charge filers more money in taxes. Critics of the policy are fairly confident the so-called deficit Super Committee will not ultimately include this proposal in any deficit-reduction plan -- that is, if the committee produces a plan. But they're not convinced the idea is dead, either.

"I'm sure it's been discussed" on the congressional Super Committee, said Ryan Ellis, tax policy director with the anti-tax-hike Americans for Tax Reform.

Last March, Rep. Jim Cooper, D-Tenn., introduced a bill that would institute such a program allowing the IRS to "do your paperwork." As Cooper pitched it, individuals who do not itemize would be eligible. Cooper's office estimated that about 40 million Americans could enroll, saving them $2 billion in preparation fees and millions of hours in preparation time.

Cooper spokesman Stephen George told the program would be optional. And taxpayers could reserve the right to reject the IRS-prepared tax return and get it done themselves.

The idea has been touted in the past by Obama administration officials, including President Obama himself. Cooper's proposal, though, hasn't gone far. It attracted zero co-sponsors and hasn't gotten out of committee.

George also said Cooper has not lobbied for his proposal with members of the Super Committee.

On the Republican side, Rep. Sam Johnson, R-Texas, went so far as to introduce a bill over the summer that would explicitly prohibit the Treasury Department from implementing the so-called "return-free" tax system. It has 27 co-sponsors.

"Allowing the IRS to file your tax return is like asking the fox to guard the hen house," Johnson said at the time.

Ellis said a key concern is the IRS would probably not flag all the deductions for which a potential taxpayer is eligible.

"Their mission is to maximize revenue collection for the government," he said. "They're not going to make any positive assumptions on behalf of the taxpayer."

Ellis said that while the issue may have come up in the Super Committee, Republicans would probably nix it.

Ed Black, president of the Computer and Communications Industry Association, said he can't assume it's off the table -- though it "should be."

"It is one of those things, it's like whack-a-mole," Black said, claiming the proposal keeps popping up from time to time.

Black said the program would probably raise revenue for the government, but only by "cheating" taxpayers.

Despite the concern, Black said he'd be "surprised" if the Super Committee included the program in its final plan.

The committee is facing a Nov. 23 deadline to find at least $1.2 trillion in savings over the next decade. Members and party leaders are locked in battle over how to split that savings up between revenue increases and spending cuts.