June 25th 2023.
The Internal Revenue Service (IRS) recently proposed a free online tax-filing system for Americans, which has created much controversy. Industry skeptics worry that this plan could have major repercussions for Black Americans and low-income taxpayers, as they are already audited at a higher rate than non-Black taxpayers.
Critics argue that the IRS plan puts vulnerable communities at risk of unfair and inaccurate treatment. They proclaim that the tax refund is often the largest check many taxpayers receive annually and they could potentially miss out on their full refund if the IRS controls the overall tax-filing process.
Included in the IRS’s Strategic Operating Plan is the option for taxpayers to interact with the agency in the ways they prefer, including digital, phone, and in-person assistance options. The direct-file pilot will be voluntary and completely optional, and taxpayers can still prepare the return on their own using Free File or another filing method they choose.
However, the proposed IRS free-e-file system has raised many questions. Intuit’s spokesman, Derrick Plummer, believes that the system is redundant and will not be free. He also claims that the system will take away power from taxpayers, especially those from vulnerable communities, and give it to the IRS. The Treasury Chief Implementation Officer, Laurel Blatchford, has stated that the direct e-file program could potentially save taxpayers billions of dollars annually.
Industry skeptics worry that the IRS could be in competition with tax companies, Black accountants, and others doing individual tax returns. The tax preparation industry is worth billions of dollars and Intuit and H&R Block have serviced over 60 million taxpayers.
The IRS projected the annual costs of its plan may vary from $64 million to $249 million, depending on the number of users. Some observers continue to question the potential cost, and Intuit’s Plummer believes that it could cost taxpayers billions of dollars.
Questions have also been raised about the impact for gig workers and those with several jobs in different states, as well as whether taxpayers can file their federal and state taxes together. Plummer has expressed concern that expanding the IRS’s reach into taxpayer’s lives will likely increase inequities.
Overall, the proposed IRS free-e-file system has caused much contention among industry skeptics. They worry that the system will be costly, put more taxpayers from vulnerable communities at risk of being treated unfairly, and potentially not receiving their full tax refund. It remains to be seen how the IRS will proceed with their plan and the impact it will have on taxpayers.
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