The US does not adopt two simple practices that are standard in many countries: the first is to provide free tax filing software to all people and the second is that the government could calculate the first draft of your taxes for you and let you know and you sign off if you agree. Right now in the US, you have to use commercial tax preparation software that offers it free only to people who have income below a certain threshold but do not advertise that service so few take advantage of it.
According to the IRS commissioner, one of the reasons given for the focus on auditing poor people is that the EITC provision that benefits them is complicated and a lot of people get it wrong. Having the IRS adopt the above two practices would immediately eliminate that problem and free up auditors to go after the big cheaters.
Yesterday, I mailed my taxes and forms to the IRS. Yes, I still use snail mail for this purpose. I do my taxes on a spreadsheet that I created and update each year, then transfer the numbers to the fillable pdf forms that the government provides, and send it in with the supporting documentation. Why don’t I take advantage of the software that is available to file electronically? Because I object to the collusion between the government and tax preparation companies to prevent the IRS from providing those services directly to people. I refuse to use these companies’ services since I do not see why I should give my personal information to a private company, free or otherwise, and go through them to deal with the government. Furthermore, some of these ‘free’ services use the information they get from you to target you with advertising.
Meanwhile, lawmakers are seeking to go even further in the wrong direction and put into law a longstanding practice that bars the IRS from providing free online tax filing services directly to the public. The tax preparation companies have lobbied both parties heavily for this legislation and it is being sponsored by Democratic congresspeople.
Last week, the House Ways and Means Committee, led by Rep. Richard Neal, D-Mass., passed the Taxpayer First Act, a wide-ranging bill making several administrative changes to the IRS that is sponsored by Reps. John Lewis, D-Ga., and Mike Kelly, R-Pa.
In one of its provisions, the bill makes it illegal for the IRS to create its own online system of tax filing. Companies like Intuit, the maker of TurboTax, and H&R Block have lobbied for years to block the IRS from creating such a system. If the tax agency created its own program, which would be similar to programs other developed countries have, it would threaten the industry’s profits.
“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,” said Mandi Matlock, a tax attorney who does work for the National Consumer Law Center.
Experts have long argued that the IRS has failed to make filing taxes as easy and cheap as it could be. In addition to a free system of online tax preparation and filing, the agency could provide people with pre-filled tax forms containing the salary data the agency already has, as ProPublica first reported on in 2013.
As a result of ProPublica drawing attention to this provision that had been tucked into a bill, this bill is drawing greater scrutiny from progressive Democrats but the Democratic-controlled House of Representatives passed it anyway. It now goes to the senate where it will likely pass.
This time of year is also when the right wing will selectively use statistics to argue that the rich are taxed far too much, by looking at only federal taxes and ignoring all the other taxes that people pay.