IRS steps toward a new free-file tax return system have both supporters and critics mobilizing

Jul 19, 2023, 9:02 PM

FILE - A sign outside the Internal Revenue Service building in Washington, on May 4, 2021. The IRS ...

FILE - A sign outside the Internal Revenue Service building in Washington, on May 4, 2021. The IRS plans to test-drive a new electronic free-file tax return system next year. Supporters and critics of the idea are mobilizing to sway the public and Congress over whether the government should set up a program to help people file their taxes without needing to pay somebody else to figure out what they owe. (AP Photo/Patrick Semansky, File)

(AP Photo/Patrick Semansky, File)

WASHINGTON (AP) — An IRS plan to test drive a new electronic free-file tax return system next year has got supporters and critics of the idea mobilizing to sway the public and Congress over whether the government should set up a permanent program to help people file their taxes without needing to pay somebody else to figure out what they owe.

On one side, civil society groups this week launched a coalition to promote the move toward a government-run free-file program. On the other, tax preparation firms like Intuit — the parent company of TurboTax — and H&R Block have been pouring millions into trying to stop the idea cold.

The advocacy groups are exponentially out-monied.

An April AP analysis found that overall, Intuit, H&R Block, and other private companies and advocacy groups for large tax preparation businesses, as well as proponents in favor of electronic free file, have reported spending $39.3 million since 2006 to lobby on “free-file” and other matters. Federal law doesn’t require domestic lobbyists to itemize expenses by specific issue, so the sums are not limited to free-file.

Intuit spent at least $25.6 million since 2006 on lobbying, H&R Block about $9.6 million and the conservative Americans for Tax Reform roughly $3 million.

In contrast, the NAACP has spent $140,000 lobbying on “free-file” since 2006 and Public Citizen has spent $110,000 in the same time frame.

“What we have on our side is public opinion,” said Igor Volsky, executive director of the liberal Groundwork Action advocacy group.

Volsky’s organization and leaders from Public Citizen, the Center for the Study of Social Policy, Code for America, the Economic Security Project and others launched the “Coalition for Free and Fair Filing” on Wednesday. The group’s mission is to “ensure all U.S. taxpayers can easily file tax returns and get the tax credits they deserve by safeguarding and expanding” the new IRS program.

“The overwhelming majority of people demand a free-file option,” Volsky said. “Now the question for us is how do you channel that into effective political pressure.”

The IRS in May released a report that said most taxpayers are interested in filing their taxes directly to the IRS for free, and concurrently announced plans to launch the pilot program for the 2024 filing season. The goal is to test a direct file system that will help the IRS decide whether to move forward with a more permanent program.

That idea has faced the immediate threat of budget cuts from congressional Republicans.

Republicans on the House Appropriations Committee in June proposed a budget rider that would prohibit funds to be used for the IRS to create a government-run tax preparation software, unless approved by a group of House and Senate committees.

The move “safeguards the IRS from an obvious conflict of interest where the tax collector becomes the tax preparer,” the bill’s summary states.

A Government Accountability Report in April 2022 found that 70% of taxpayers were eligible to use an existing free-file program but just 3% actually used the service. That program consists of a public-private partnership of tax software companies that offers free services to certain taxpayers outside of the IRS website.

Additionally, anyone can prepare and mail in their taxes for free, but the tax code is so complex that almost 50% of Americans use a tax prep company. IRS officials have estimated individual taxpayers pay an average of $140 preparing their tax returns each year.

Derrick Plummer, a spokesman for Intuit, stressed the free options that already were available.

“An IRS direct-to-e-file system is redundant and will not be free – not free to build, not free to operate, and not free for taxpayers,” Plummer said, adding that it “will unnecessarily cost taxpayers billions of dollars.”

H&R Block said in a statement the direct e-file pilot “continues to be a solution in search of a problem.”

Citing the free-filing options for Americans under a certain income threshold through the existing Free File Alliance, H&R Block said, “this pilot is unnecessary and faces significant barriers to providing comprehensive tax preparation services.”

H&R Block came under fire after congressional Democrats last week released a report stating that it was one of three large tax preparation firms that sent “extraordinarily sensitive” information on tens of millions of taxpayers to Facebook parent company Meta and Google over the course of at least two years.

Susan Harley, Congress Watch managing director at Public Citizen, said “we’re outgunned as far as money being spent, but we have the moral higher ground” in supporting the free-file program over third-party tax preparers.

Nations like Germany, Japan, the U.K. and other Organization for Economic Cooperation and Development countries already offer their taxpayers some form of pre-populated tax document.

Some countries also use “tax agency reconciliation,” where taxpayers who opt to participate provide the government with basic employment status information and the tax administrator sends them a return with their calculated tax liability.

Research conducted last year by a group of Treasury, Federal Reserve and other academics shows that the IRS could pre-populate 42 to 48% of all tax returns.

The IRS has already seen cuts to its funding since the passage of the President Joe Biden signed last August gave the agency $80 billion to modernize and hire more workers and move toward the free-file program.

House Republicans built a $1.4 billion reduction to the IRS into the debt ceiling and budget cuts package passed by Congress this summer. The White House said the debt deal also has a separate agreement to take $20 billion from the IRS over the next two years and divert that money to other non-defense programs.

United States News

Associated Press

California Gov. Gavin Newsom signs law to raise minimum wage for fast food workers to $20 per hour

SACRAMENTO, Calif. (AP) — California fast food workers will be paid at least $20 per hour next year under a new law signed Thursday by Democratic Gov. Gavin Newsom. When it takes effect on April 1, fast food workers in California will have among the highest minimum wages in the country, according to data compiled […]

46 minutes ago

Associated Press

Menendez will address Senate colleagues about his bribery charges as calls for his resignation grow

WASHINGTON (AP) — With calls for his resignation increasing, New Jersey Sen. Robert Menendez is expected on Thursday to address his Democratic Senate colleagues for the first time since he was indicted on federal bribery charges. More than half of Senate Democrats have said he should step down. But Menendez, who is scheduled to speak […]

1 hour ago

FILE - Education Secretary Miguel Cardona speaks during an interview with The Associated Press in h...

Associated Press

Colleges should step up their diversity efforts after affirmative action ruling, the government says

WASHINGTON (AP) — The Biden administration is asking America’s colleges to renew their efforts to make campuses more racially diverse, urging schools to boost scholarships and minority recruiting and to give “meaningful consideration” to the adversity students face because of their race or finances. The Education Department Supreme Court decision in June barring colleges from […]

1 hour ago

Associated Press

Jury to decide fate of delivery driver who shot YouTube prankster following him

LEESBURG, Va. (AP) — Defense attorneys argued Thursday that their client was acting in self defense when he shot a YouTube prankster who followed him around a mall food court earlier this year. The jury began deliberations in the trial of Alan Colie, 31, a DoorDash driver charged with aggravated malicious wounding and firearms counts […]

1 hour ago

FILE - President Joe Biden leans in to hear a question as he speaks with reporters before walking t...

Associated Press

House Republicans make their case for President Biden impeachment inquiry at first hearing

House Republicans launched their formal impeachment hearing Thursday against President Joe Biden, saying they intend to “provide accountability” as they make their case.

2 hours ago

Associated Press

Shutdown’s shadow, Biden’s speech and arguing the case: Takeaways from the House impeachment hearing

WASHINGTON (AP) — House Republicans on Thursday are holding the first hearing of their impeachment inquiry into President Joe Biden and their effort to tie the him to the business dealings to his son Hunter. It’s a high-stakes opening act for Republicans as they begin a process that can lead to the ultimate penalty for […]

2 hours ago

Sponsored Articles



Key dates for Arizona sports fans to look forward to this fall

Fall brings new beginnings in different ways for Arizona’s professional sports teams like the Cardinals and Coyotes.



Importance of AC maintenance after Arizona’s excruciating heat wave

An air conditioning unit in Phoenix is vital to living a comfortable life inside, away from triple-digit heat.


OCD & Anxiety Treatment Center

5 mental health myths you didn’t know were made up

Helping individuals understand mental health diagnoses like obsessive compulsive spectrum disorder or generalized anxiety disorder isn’t always an easy undertaking. After all, our society tends to spread misconceptions about mental health like wildfire. This is why being mindful about how we talk about mental health is so important. We can either perpetuate misinformation about already […]

IRS steps toward a new free-file tax return system have both supporters and critics mobilizing