Congress is again considering a truly free IRS tax filing system

By Laura Weiss, roll call CQ (via TNS).

US Senator Elizabeth Warren is leading her fellow Democrats in renewing efforts for the IRS to create its own free tax filing services and move away from its current private partnership, whose services are only used by a small portion of taxpayers .

Warren, D-Massachusetts, introduced a bill that would require the IRS to create its own free online program for preparing and filing tax returns and expand taxpayers’ access to their own tax data held by the agency. California Democrats Brad Sherman and Katie Porter led the introduction of a House version of the measure.

The legislation would direct the IRS to create software that would allow any taxpayer to prepare and file their personal income tax return beginning with the 2023 tax year. simple – those who don’t take any of the above -line deductions, itemize their deductions, or earn income as a sole proprietor of a business, for example – to choose to have the Treasury prepare their tax return from of the 2023 tax year.

The IRS should create a program that allows taxpayers to securely download return information provided by third parties and data held by the IRS relating to their individual tax bills.

The bill would require a program by March 1, 2023, allowing taxpayers who do not have to file tax returns to claim refundable tax credits. The provision aims to extend a child tax credit enrollment tool to non-filers who can access other tax benefits like the working income tax credit, which is open to low-income workers .

The measure would also prevent the Secretary of the Treasury from entering into new agreements that would restrict the federal government’s right to provide services or software for tax preparation and reporting.

A fact sheet from the bill’s sponsors highlights problems with the IRS Free File program, which currently aims to provide free tax preparation to 70% of taxpayers by partnering with private tax preparation companies. Lawmakers have argued that the program is underutilized, often tricks taxpayers into paying for services, and does not adequately protect taxpayer data. Over the past two years, leading online tax platforms H&R Block and Intuit’s TurboTax have withdrawn from the program.

According to IRS data, only 2.8% of all personal tax returns filed in fiscal year 2021 were submitted through the Free File program.

The bill has garnered co-sponsors since its last introduction in 2019 and now has 22 Democratic senators.

Warren sought to link the issue to the push by Democrats for a budget reconciliation bill. Senate Majority Leader Charles E. SchumerD-NY and Sen. Joe Manchin III, DW.Va., are in talks in hopes of agreeing a package that includes items to cut prescription drug costs, encourage clean energy production and raise taxes on the wealthy and corporations.

The Senate’s latest version of the legislation provided about $80 billion over a decade for the IRS, largely intended to bolster its ability to recover uncollected taxes and boost federal revenue in the process. It also included $15 million for the IRS to study the feasibility of creating a free and direct online tax filing system.

When Treasury Secretary Janet L. Yellen appeared before the finance committee in June, Warren pressed her to commit to having the IRS go further and build its own free filing system if Congress grants permission. injection of 80 billion dollars.

Yellen pointed to more pressing priorities such as dealing with a massive backlog of tax returns, but agreed the IRS would look into the issue when it has “adequate resources.”

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