US Congress bill would ban IRS from offering free tax services

A bill on its way through the US Congress would permanently prevent the US government from offering free online tax services. It codifies the current system that relies on private services.

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Locking in private services and profit

The for-profit tax preparation industry is about to realize one of its long sought goals should the US Congress pass the bill called ironically the Taxpayer First Act. Both Democrats and Republicans are moving to pass a bill that will permanently bar the Internal Revenue Service (IRS) from creating a free electronic filing system that individuals could use bypassing the tax preparation industry.

Last week, the House Ways and Means Committee, led by Democrat from Mass. Representative Richard Neal passed the act sponsored by Representative John Lewis a Democrat of Georgia and Mike Kelly Republican of Pennsylvania. There is bipartisan support for putting the tax-preparation industry first!

As a recent article explains: "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."

Mandi Matlock a tax attorney working for the National Consumer Law Center said: “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.”

Bill codifies and enshrines the present system

In effect the bill enshrines the present system and prevents the IRS from offering a competing service to the private offerings of companies such as TurboTax and others. The bill passed the House last week with bipartisan support and a companion bill has been introduced in the US Senate.

The present system operates under an agreement between the IRS and the private tax service industry in which the latter does offer some free services. The lawmakers said: “This provision codifies the existing Free File program and requires the IRS to continue to work with private stakeholders to maintain, improve, and expand the program."

Intense lobbying has drowned out critics

Experts have criticized the US tax system for years for not offering a simple, government-run option for filing taxes online. The IRS could actually fill out the tax forms of many Americans and send along the refund or demand for payment. However, intense lobbying by the private tax filing industry have negated any attempts at a reform that could put the taxpayer first. The appended video presents the bill as all sweetness and light and as putting the taxpayer first.

Previously published in the Digital Journal