Liberal groups advocate for IRS-backed creation of government-operated tax filing system

Left-wing groups and Democrats in Congress are supporting a plan by the Internal Revenue Service (IRS) to create a government-run tax filing program. The proposal, known as “direct file,” has raised concerns among critics who argue that it would give the agency too much power. The plan is part of the Inflation Reduction Act, a large spending bill signed into law last year, which allocated $15 million for the IRS to explore the feasibility of a free direct tax-return system.

IRS Commissioner Daniel Werfel has stated that no decision has been made about direct file and that the agency will consult with Congress and wait for the report on the feasibility study before moving forward. However, it was revealed in May that the IRS had been quietly building a prototype of the direct file system before submitting the report. The IRS announced its final report one day after this revelation, and the system will be available through a pilot program for a small group of taxpayers starting in January 2024.

Critics, particularly Republicans in Congress, have criticized the IRS for developing a prototype before the report and study were released. They argue that it suggests the agency had already made up its mind and was moving forward without explicit authorization from Congress. The IRS has stated that the prototype was only built to gather taxpayer opinions and that no real tax information was used.

One concern is that the IRS intends for direct file to not only be a federal program but also include state tax filings in some way. IRS Commissioner Werfel sent a letter to the Federation of Tax Administrators stating that the IRS’s report found that many taxpayers would be interested in a free direct e-filing tool that includes state tax filing. The IRS is finalizing plans for “state tax integration” and is excited to partner with states to ensure a seamless experience for taxpayers.

Code for America, a nonprofit organization with left-wing ties, has expressed support for direct file and is exploring the development of state tax software that would work alongside the IRS’s tool. Some lawmakers, including Republican Rep. Claudia Tenney, have spoken out against direct file, arguing that it would be costly, burdensome, and grant the IRS excessive power.

Critics have also raised concerns about the IRS’s partnerships with left-leaning organizations in studying and promoting direct file. The IRS contracted the New America Foundation, a left-wing think tank funded by liberal billionaires, to study the system. House Republicans have pointed out that New America employees have previously written favorably about Sen. Elizabeth Warren’s Tax Simplification Act, which proposes a government-run filing system at the IRS.

Overall, the debate over the IRS’s direct file plan continues, with supporters arguing for a streamlined and free tax filing system, and critics expressing concerns about the agency’s power and potential consequences for taxpayers.

Original Story at www.foxnews.com – 2023-08-04 11:00:00