The Internal Revenue Service (IRS) recently announced their intention to proceed with a pilot program in 2024 that would allow the agency to prepare tax returns for some individuals, in addition to their current work as tax collectors and tax auditors.
This comes on top of the IRS using $15 million from the Inflation Reduction Act to hire an independent third party to study the idea of a direct e-file system. This is not only a redundant program, as many tax preparer programs already offer free or low-cost alternatives, but also creates concerns about transparency and effectiveness American taxpayers need.
While this idea may seem well-intentioned, it raises some immediate concerns that I would like to raise.
First, in February, the IRS was already told via a report from an independent advisor, MITRE, that only 37% of tax filers with simple returns would use an IRS direct file system, which drops to 29% if the system does not include a state tax-prep feature. Instead of taking this report into account, the IRS decided to contract with New America, a group whose top officials include alumni from the Obama administration and a former aide to Hillary Clinton, to study such a proposal. Not exactly an “independent” third party, if you ask me. The IRS and the Administration believe a government-run e-file system should be the system in place and their choice for an independent third party shows they had a pre-determined outcome they wanted to see and chose a group that would give them that affirmation.
The IRS released its study on May 16, but a day prior, the Washington Post published an article which highlighted the fact that the IRS “quietly built its own prototype system to allow Americans to file tax returns digitally and free of charge.” Interesting that while working through its feasibility study, the IRS would be working on creating a prototype system, something that was not authorized through the $15 million in funding.
Additionally, an IRS-run direct e-file system represents a massive conflict of interest. The IRS is the agency in charge of generating tax revenue for United States. Whose interests will they have at heart if they are preparing, collecting, and auditing taxes? Under such a system, the IRS would essentially serve as the judge, jury, and executioner when it comes to your taxes. This is a major concern and should not be simply brushed aside.
Not to mention that the IRS has had issues in the past when it comes to protecting taxpayer privacy, why should we trust them with even more information?
Finally, this type of program could be seriously harmful to Black or lower-income taxpayers it claims to benefit. IRS Commissioner Danny Werfel recently wrote to Congress and admitted that Black taxpayers are unfairly subject to audits at a rate of 3-5 times more likely than other demographic groups.
Government is already too involved in our lives, let’s not let the IRS do our taxes for us, too. I hope that Senator Bob Casey and the rest of our federal elected officials stand up for their constituents and oppose this system before it’s too late.