In a step that might be termed as a victory for the tax preparation industry, Congress is all set to bar Internal Revenue Service (IRS) from ever building a free electronic filing system, as reported by TechCrunch. In an important move last week, the House Ways and Means Committee, led by Massachusetts Democrat Richar Neal passed the Taxpayer First Act, which aims to bring about far-reaching changes to the IRS.
One of the provisions of the bill that is of utmost importance is the fact the bill bars IRS to develop its own online system of tax filing, which companies like Intuit and H&R Block have lobbied for years to achieve.
Speaking to ProPublica, Mandi Matlock, a tax attorney who works for the National Consumer Law Center said, “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.”
Experts have long been of the view that the agency has failed to make filing taxes an easy and cheap exercise. One of the main features of the bill is that it would make it illegal for the IRS to create its own online system for tax filing. Well, some may find it a bit surprising, but it’s true–members of Congress are trying their best to prevent a branch of the federal government from providing a much-needed service that would make the lives of all the stakeholders much easier.
If we compare it with other developed countries we will find that other countries have their own programs that make filing tax returns easy, efficient and free for citizens. But the fact remains that such an initiative in the U.S. would eat into the profit of the tax prep industry which was estimated to be around $11 billion in 2018.
According to a private industry group, The Free File Alliance, nearly 70 percent of American taxpayers are eligible to file for free but just 3 percent of eligible U.S. taxpayers actually use the free program each year. Under an existing memorandum of understanding (MoU), the IRS pledges not to create its own online filing system and, in exchange, the companies offer their free filing services to those below the $66,000 income threshold.
The deal is renewed regularly and the new bill plans to make it permanent. It is important to note here that the reason why the Congress is pushing the bill so vehemently may be because of the money that H&R Block and Intuit have spent to lobby Senators and Representatives. According to ProPublica estimates, the tax prep industry has spent $6.6 million to advocate for the IRS filing deal, which brings to light the money involved behind the bill.