- It's been approximately one year since the passage of the Inflation Reduction Act.
- A small part of the Inflation Reduction Act instructed the IRS to look into developing a free tax filing program.
Democratic members of Congress praised the Internal Revenue Service Monday morning for its work in developing a free direct-file tax pilot program for the 2024 tax season.
Signed into law by President Joe Biden in August 2022, the Inflation Reduction Act aims to crack down on people cheating the tax system as well as reduce healthcare and energy costs for Americans.
The Inflation Reduction Act also, in part, increased the funding of the IRS and directed it to look into establishing a program allowing a subset of taxpayers to directly file their taxes to the IRS for free instead of through paid programs like H&R Block or TurboTax. According to a Bloomberg Second Measure report, TurboTax is by far the most popular tax filing service with a 73 percent market share in May 2021. That same year, H&R Block was the second-most popular service, with a 21 percent market share.
Speaking at a virtual press conference Monday morning alongside the Coalition For Free and Fair Filing to celebrate the upcoming one-year anniversary of the passage of the Inflation Reduction Act, Rep. Don Beyer praised the Inflation Reduction Act for reversing "years of chronic underinvestment in the IRS" and stressed how important he thinks it is for the government to provide a direct-file option for taxpayers.
"Unless there's a direct file option, Americans will be spending time and money on a service that should be free," Beyer said. "The Free File program, which was created in partnership with tax preparation companies, clearly has not been successful in over two decades."
As Beyer noted, the Free File Alliance currently works with the US government to assist taxpayers making $73,000 or less per year with filing their taxes for free. While the Free File Alliance and its services have been around for decades, its services have been chronically underused, which critics say is due to deliberate steps taken by filing services to hide or steer taxpayers away from cost-free filing services. Intuit, which makes TurboTax, and H&R Block both pulled out of the Free File Alliance during the pandemic.
According to the US Government Accountability Office, approximately 70 percent of tax filers could have used the services from the Free File Alliance in previous years, though less than 3 percent actually did.
In a recorded message, Rep. Katie Porter backed the IRS' push for a free direct-file program, noting that "the IRS already has all the data it needs for your taxes. It could just send you the pre-populated form. You can look it over and sign it off if everything looks right."
While it's currently unclear if the direct-file pilot program will include pre-populated forms, pre-populating tax forms have been accomplished before in California which resulted in positive feedback from taxpayers.
And while Porter, Beyer, Sen. Elizabeth Warren, and others have expressed interest in the free direct-file pilot program, congressional Republicans are speaking out against it.
In May, the Republican-controlled House Ways and Means Committee published a press release disapproving of the IRS' direction to move forward and create the pilot program after its chairman accused the Biden Administration of "cooking the books" in its study that ultimately recommended such a program be implemented.
"IRS control of tax preparation is the latest step in Democrats' ongoing efforts to supercharge the agency to go after working-class families, after giving the agency $80 billion to increase audits on taxpayers making less than $75,000," said Rep. Jason Smith. "Americans will be powerless when the IRS completely controls the tax filing process from start to finish."
And while some Republican lawmakers and politicians have pushed to defund the IRS or cut its funding, as they did by reducing the Inflation Reduction Act's IRS funding by more than $20 billion, Porter responded on Monday by drawing a proverbial line in the sand.
"If politicians in Congress refuse to do the right thing and instead work to stymie this progress," Porter said, "they'll have to go through me."