Home » IRS Tests Its Own Free Tax Filing System, Tax Giants Freak Out

IRS Tests Its Own Free Tax Filing System, Tax Giants Freak Out

This could be a very big deal, since the commercial tax-prep market is estimated to be worth $14.4 billion this year and their lobbyists pour massive amounts of money into the Republican party. Via the Washington Post:

The Internal Revenue Service has quietly built its own prototype system to allow Americans to file tax returns digitally and free of charge, according to three current and former agency officials, essentially creating government software that could disrupt the tax-prep industry.

The system will be available through a pilot program for a small group of taxpayers by January, when the 2024 filing season begins, said the people briefed on the matter, who spoke on the condition of anonymity to discuss internal agency conversations. It was developed by the IRS and the U.S. Digital Service, the White House’s technology consulting agency.

Last year’s Inflation Reduction Act, one of President Biden’s chief legislative victories, included $15 million for the IRS to look into creating a direct filing program.

Here’s the uproar:

The tax agency tapped the left-leaning New America think tank to study a direct filing system and produce a report, which is expected this week.

IRS Commissioner Daniel Werfel had previously told lawmakers that the IRS would consult Congress after the think tank made its recommendation and had not yet determined whether to pursue its own software program. But if the IRS already has a prototype before the New America report has been released, “this suggests a pre-determined outcome and flies in the face of previous commitments Commissioner Werfel made to publicly consult Congress on a potential free-file solution, and for the IRS to not act without explicit legal authority,” said Sen. Mike Crapo (Idaho), the top Republican on the Senate Finance Committee.

In some countries, your return is filed automatically because the government already has access to your earnings. They then send the taxpayer a bill, which seems more sensible than the current U.S. system. If that’s what they have planned, it would be a game changer.

Stay tuned!