October 19th 2023.
As tax season approaches, the IRS is reportedly planning to launch its first pilot of an electronic free file tax return system in January 2024. According to IRS Commissioner Daniel Werfel, the agency is taking extra steps to ensure the rollout of the program is done correctly. The commissioner said it is “imperative” to have an “easy-to-understand pilot” in order to determine its usefulness.
The program was established after the IRS was granted nine months and $15 million from the Inflation Reduction Act to publish a feasibility report. Participation in the direct-file pilot will be voluntary and completely optional. The IRS will be working with select taxpayers across thirteen states to test out the new system. The agency also announced they will be partnering with Code for America, Arizona, California, Massachusetts and New York to integrate state taxes into the program.
The IRS’ move to release the free tax prep program has sparked some concerns in the industry. Private tax preparation companies, like Turbo Tax Live and H&R Block, will be in direct competition with the government-run system. This could be especially damaging to Black accountants in the industry.
Back in June, BLACK ENTERPRISE reported on the potential issues this could cause for Black Americans. It was noted that the IRS stated in a letter that “Black taxpayers are audited at three to five times the rate of non-Black taxpayers”. Critics argued that if the IRS takes on the role of assessor, collector, preparer, and enforcer, this could put vulnerable communities at risk of not receiving their full tax refund.
Overall, the IRS is taking the necessary steps to ensure the pilot program is successful and that taxpayers are not disadvantaged in the process. The agency has collaborated with organizations like Code for America and nonprofits to identify taxpayers who are eligible to test out the system. It is important to ensure the safety of taxpayers and the success of the program before its full roll-out.
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