Did You Enjoy Spending Time, Money to Give the IRS Info It Already Had?

Each year businesses tell the IRS what they paid people for their work. They file copies of W-2 forms for their employees and 1099 forms for contractors and freelancers. Then we taxpayers have to provide the same W-2 and 1099 information to IRS by midApril. (The deadline is usually April 15, of course. It shifted to April 18 this year. )

Wouldn’t it be better if people in the United States could log into an IRS website and check on the information the tax agency collected?

In some cases, people would be able to complete their tax filings largely based on what the IRS already has gathered. An IRS-run website also could help people who prefer to use accountants — and the accountants too. Think of all of the time lost across the United States as people gather and submit W-2 and 1099 information. And think of all of the minor errors made as people submit information that (again) the IRS already has.

In this Vox article, “The IRS has a big opportunity to fix the way Americans file taxes,”Dylan Matthews explains why the tax agency does not (yet) have its own easy-to-use website for this purpose.

He also details why the Free File Fillable Forms option now is such a mess. You might have heard something about the Free File option. It’s an online website that Matthews describes as arising from “a kind of peace treaty between the IRS and the private tax preparation industry.”

The federal government at one point agreed not to make its own easy-to-use website and for-profit tax-preparation companies agreed to provide online aid to consumers. But the federal government has shown greater interest in creating better online IRS resources and some private companies have ended their participation in Free File.

The Free File option now appears to be much tougher to use. The Free File “software exists for the 2021 filing season, but it’s not clear it will continue to exist after that,” Matthews wrote.

Screenshot from IRS website.

If you want an exercise in frustration, scroll through the long list of “known limitations” with the Free File program. I’d bet these issues prevent many people from using Free File this year. I know I gave up on it due to a flawed form.

Popular Support

As the editorial board of the New York Times noted in 2019, there’s actually been widespread support for years for a free IRS-run tax-filing webpage.

“The federal government collects enough information about most American households to mail out a completed tax form that people would simply need to verify, sign and return,” the NYT editorial board wrote. “President Ronald Reagan proposed a version of just such a system. In 1998, Congress passed a law instructing the I.R.S. to develop such a system by 2008. President Barack Obama endorsed the concept during the 2008 presidential campaign. It still hasn’t happened.”

Why not?

Well, cynical folks with a disdain for the federal government might say it’s because the IRS doesn’t have the ability to develop a free online tax-filing system.

But some of the nation’s leading tax experts disagree with that view. They have said they believe the IRS could indeed develop a free filing system — — and they don’t like that idea.

Opposing View

In fact, H&R Block and Intuit, the owner of TurboTax, include warnings for their investors about this risk in their regular filings with the Securities and Exchange Commission (SEC).

Here’s what H&R Block said in a recent one::

“…..U.S. federal and state governments have considered various proposals through which the respective governmental taxing authorities would use taxpayer information provided by employers, financial institutions, and other payers to ‘pre-populate,’ prepare and calculate tax returns and distribute them to taxpayers….. The adoption or expansion of any measures that significantly simplify tax return preparation, or otherwise reduce the need for third-party tax return preparation services or financial products, including governmental encroachment at the U.S. federal and state levels, as well as in foreign jurisdictions, could reduce demand for our services and products..”

And here’s what Intuit, owner of TurboTax, said in a recent SEC filing:

“….we face the risk of federal and state taxing authorities proposing revenue raising strategies that involve developing and providing government tax software or other government return preparation systems at public expense. These or similar programs may be introduced or expanded in the future, which may change the voluntary compliance tax system in ways that could cause us to lose customers and revenue.”

Tax Day Tweets

If you’d like the IRS to at least explore the idea of an easy-to-file, pre-populated tax-filing website, you should let members of Congress know.

As today is Tax Day in the United States, it’s a great time to do this.

Start with congressional leadership. You could tweet a link to the Vox article by Dylan Matthews to @SpeakerPelosi @SenSchumer and @LeaderMcConnell.

But don’t forget to make your opinion known to the lawmakers most involved with the operations of the IRS.

These are members of the House and Senate Appropriations subcommittees that have jurisdiction over the IRS.

What does “Appropriations” mean in the real world?

Think of it as shorthand for the folks who write the basic operating budgets for federal agencies. No matter which party is in control of the White House, a president’s “budget” is only a request. The White House gathers information from federal agencies and then presents Congress with detailed requests. These requests break down how much is needed to run the basic operations of government in the approach budget year.

Fiscal 2023 starts on Oct. 1, 2022, so there’s work underway now to decide how much to spend on the operations of the IRS and other federal agencies.

Members of the House and Senate Financial Appropriations subcommittees have the most direct influence on how much money the IRS gets and what marching orders are attached to these funds.

Other members of Congress can be helpful, but often lack perspective. Any member of Congress could introduce a bill calling for an IRS-run tax-filing website. But appropriators look at the federal budget both in its entirety and in depth. They can better assess what resources it takes to complete a project like the creation of a new free IRS-run tax-filing website.

Appropriators also stick with issues even after they drop from the headlines. In their role of overseeing spending, appropriators end up doing a lot of the planning and oversight of the federal government. It’s actually their job — one your tax dollars pay for.

ProPublica has reported on Intuit’s lobbying on this issue. Tax-preparation firms certainly have the right to try to shape IRS policies to their benefit.

But so do you.

In fact, I’d say it’s your responsibility to let members of Congress know how you feel. I’m sure they’d be interested to know how many voting Americans would like to be able to file their taxes directly through a pre-filled IRS website.

Consider sending a Tax Day tweet on the topic. Below are the Twitter handles that you can cut and paste into tweets. These are the handles the members of Financial Services subcommittees and the leadership of the Appropriations committees.

House Financial Services Appropriations and leadership

@RepMikeQuigley @RepCartwright @SanfordBishop @MarkPocan @RepLawrence @NormaJTorres @RepKirkpatrick @rep_stevewomack @MarkAmodeiNV2 @RepChrisStewart @RepDaveJoyce @rosadelauro @repkaygranger

Chairman Rep Mike Quigley

Matt Cartwright

Sanford Bishop Jr.

Mark Pocan

Brenda Lawrence

Norma J. Torres

Ann Kirkpatrick

Steve Womack, Ranking Member

Mark Amodei

Chris Stewart

Dave Joyce

Leadership: House Appropriations Chair Rosa DeLauro and Rep. Kay Granger of Texas, the ranking Republican on House Appropriations

Senate Financial Services Appropriations and leadership

@ChrisVanHollen @SenatorDurbin @Sen_JoeManchin @SenHydeSmith @JerryMoran @JohnBoozman @SenJohnKennedy @SenatorLeahy @SenShelby

Senate Appropriations Chairman Patrick Leahy of Vermont

Sen. Richard Shelby of Alabama, the ranking Republican on Senate Appropriations

Financial Services and General Government Appropriations Subcommittee

Chairman Sen. Chris Van Hollen

Sen. Chris Coons

Sen. Dick Durbin

Sen. Joe Manchin

Sen. Cindy Hyde-Smith

Sen. Jerry Moran

Sen. John Boozman

Sen. John Kennedy

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