#IRS FREE FILE FREE#
Vanessa Williamson, a senior fellow at the Urban-Brookings Tax Policy Center, said “if the IRS moves forward with a free product, it could save lower-income families the money they used to give to H&R Block or TurboTax.” “There’s no reason in the world that a modern economy shouldn’t have a system that makes it easy for such a large group of taxpayers to file their returns,” she said. “Americans spend too much time and money to file their taxes, and the IRS should adopt these proposals to help millions of Americans file taxes and claim refunds.”Īt her Finance Committee appearance, Yellen called for a new system. “I’ve been pushing for a free tax filing system for years, and now the IRS is on the verge of having significant funding to modernize its IT systems, which means it’s time to develop simplified filing tools laid out in my Tax Filing Simplification Act,” Warren told The Associated Press. Elizabeth Warren, D-Mass., in July resubmitted a bill called the Tax Filing Simplification Act that would require the IRS to create its own free online tax filing service and move away from its partnership with private online tax preparation companies. There are also legislative attempts to move this effort along. Those plans would have to be developed within nine months and would include cost estimates for creating and administering a system. Included is a provision that allots $15 million to the IRS to make plans for a free direct e-file tax return system. With the funding in the bill, the IRS has an opportunity to create a new system. The watchdog recommended the IRS find new free filing options before the Alliance expires in October 2023. The Government Accountability Office in April reported that while 70% of taxpayers were eligible for services through the Free File Alliance, only 3% of taxpayers actually use the service. The program has been marred with controversy, with commercial firms misrepresenting their services and low taxpayer participation rates.
That 16-year provision within the agreement was formally nixed in 2019, but tax experts and government reports say the program’s existence is largely responsible for the IRS not pursuing its own electronic free file system. In short, the IRS agreed not create its own filing system if companies would instead provide free services to taxpayers making $73,000 or less.
Perhaps this biggest hurdle is an agreement between the IRS and some commercial tax preparation companies, known as the Free File Alliance, which prevents the federal agency from creating its own free tax return filing system. There’s also pushback from commercial tax preparation companies, which question whether Americans want the IRS to prepare their taxes. Even in a best-case scenario, it will likely take years to get a new, free system up and running. The legislation passed Congress on Friday. “It’s definitely something we should do, and when the IRS is adequately resourced, it’s something that will happen,” said Treasury Secretary Janet Yellen at a June Senate Finance Committee hearing.Īnd now that the IRS is set to receive nearly $80 billion through the so-called “Inflation Reduction Act,” the agency has the means to develop new systems to help Americans pay their taxes.
For many Americans, it’s frustrating that beyond having to pay sometimes hefty tax bills, they also have to shell out additional money for tax preparation programs or preparers because of an increasingly complex U.S. It’s something lawmakers and advocates have been seeking for years. taxpayers one step closer to a government-operated electronic free-file tax return system.
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