It’s 2019: The Internal Revenue Service has your salary data before you ever file your tax return.
If you don’t require an accountant’s services to file, why shouldn’t the IRS allow you to file your return for free, confirming what the agency already knows?
Some of the biggest tax-preparation companies are on the verge of making that illegal, with bipartisan help from Congress.
Earlier this month, the House Ways and Means Committee, led by Rep. Richard Neal, D-Mass., passed the Taxpayer First Act, a wide-ranging bill making several administrative changes to the IRS that is sponsored by Reps. John Lewis, D-Ga., and Mike Kelly, R-Pa., ProPublica.org reported April 9.
In one of its provisions – ironic for something called the Taxpayer First Act — the bill makes it illegal for the IRS to create its own online system of tax filing. Companies like Intuit, the maker of TurboTax, and H&R Block have lobbied for years to block the IRS from creating such a system. If the tax agency created its own program, which would be similar to programs other developed countries have, it would threaten the industry’s profits.
“This could be a disaster. It could be the final nail in the coffin of the idea of the IRS ever being able to create its own program,” said Mandi Matlock, a tax attorney who does work for the National Consumer Law Center.
The Free File Alliance, a private industry group, says 70% of American taxpayers are eligible to file for free. Those taxpayers, who must make less than $66,000, have access to free tax software provided by the companies. But just 3% of eligible U.S. taxpayers actually use the free program each year, MarketWatch.com reported. Critics of the program say that companies use it as a cross-marketing tool to sell their paid products and that they have deliberately underpromoted the free option.
At the risk of stating the obvious, the IRS is funded by our taxes.
Beyond that, the tax system remains too complicated. We think it could be considerably simpler: If a person is in the 12 percent tax bracket and the IRS took 13 percent, that person should get a refund; if the IRS took 11 percent, that person should get out the checkbook.
It doesn’t seem out of reach to reduce the tax return to 15 line items, such that any adult could make the calculations necessary to determine “I owe,” “I get a refund” or “I paid the correct amount.”
The IRS should work for all the people, not just the people who sell tax-preparation services and software.
The provision barring the IRS from creating its own system should be removed, and the IRS should instead be encouraged to make it possible for the 70% of Americans eligible to file for free able to do so.
Then, Congress should pass legislation simplifying things for the remaining 30% of us.