Mixed Reaction to IRS Direct E-File System

May 31, 2023 | Blog

A tax attorney in San Jose has learned that the Internal Revenue Service announced the debut of a government-managed tax-filing system on Tuesday. This free service allows taxpayers to avoid using third-party services. Instead, they can deal directly with the IRS at no additional cost. The details of this new system were covered in a final report that was ordered by the Inflation Reduction Act. The report was released on Tuesday, and the program is still being tested.

IRS Will Not Run New System Alone

According to IRS Commissioner Danny Werfel, the launch of the new program is in compliance with proper practices for new product launches in both the private sector and the government. The US Treasury has directed the implementation of this new system from the point of research through its full development, which was done in an incremental manner to ensure proper testing along the way. He added that the IRS will not single-handedly run the new system.

Taxpayers Assured They Still Have Options

Werfel told reporters on Tuesday that US taxpayers’ choices for filing will in no way be limited by the presence of the new system. If they choose not to use it, they can continue with whatever method currently works for them or consult an IRS tax attorney to resolve any filing problems they may be facing. The pilot program is expected to be rolled out during the 2024 filing season, according to Department of the Treasury official Laurel Blatchford.

Tax Filing Costly and Time-Consuming

Blatchford stated that it is time-consuming and expensive for Americans to file taxes, and she estimated that most individuals spend about $140 and eight hours of time having their tax returns prepared each year. Those who find themselves in need of a back-taxes attorney, or who face challenging issues with their tax returns, may spend considerably more. She went on to state that many countries throughout the world offer tax filing options at no cost to their citizens, and that an accessible option for American taxpayers should be available as well. The IRS’s report stated that the new system received support from the majority of the country’s taxpayers.

However, in a conflicting report conducted by the nonpartisan MITRE Corporation, the findings indicated that direct file was unpopular overall among United States citizens when compared to a program where the IRS files automatic returns for taxpayers. It also paled in comparison to the use of private software.

The MITRE study found that a mere 15 percent of filers would use an IRS direct e-file system even if it offered a functionality similar to that of free commercial software.

Big Tax Software Companies Targeted

On Tuesday, Senate Finance Committee Chairman Ron Wyden, D-OR, referred to big tax software companies as “sophisticated pickpockets,” charging them with relentless lobbying against reforms that would make it easier to file taxes and tricking customers into the acceptance of unjustified charges.

He went on to state that he believed all US citizens should have easy, free tax filing options, and that these should be available online. Wyden expressed happiness with this new effort and stated he’s looking forward to it becoming a reality.

Conflict over the Involvement of Partisan Organization 

In February, the IRS announced that it would allow the New America Foundation, a progressive billionaire-funded nonprofit think tank, to evaluate the hypothetical system. House Ways and Means Committee Republicans spoke out against the IRS for its hiring of a partisan group, stating that the Inflation Reduction Act itself calls for independent, third-party, nonpartisan review of the feasibility of the system, its costs, and the opinions of taxpayers on the matter.

Jason Smith, the Republican chairman for the House Ways and Means Committee, accused Biden of failing to be transparent concerning MITRE’s independent findings and criticized him for hand picking a left-wing think tank that, in his opinion, would stack the deck toward a predetermined conclusion. It remains to be seen whether the US ultimately embraces or rejects the new option.

It’s not yet known if the system will handle specific problems, such as assisting filers who owe back taxes or who need unfiled tax return help, or if the program will be more suited to those with simple returns. Tax lawyers in San Jose are still the best individuals to help filers with complicated problems, and they will continue to monitor this story as it develops.