Tax Day is here, and last-minute filers might spend a few dollars on tax-prep software. Wouldn’t it be nice if instead of making people pay for software the IRS just provided it free of charge?
Of course it would, but last week the Democratic leadership in the House of Representatives pushed through the Taxpayer First Act, which would prevent the IRS from directly providing free digital filing.
There’s much to like in the act. It includes protections from private debt collectors and millions of dollars to help low-income taxpayers. But then there’s the ban tucked deep in the bill. It seems to exist only to protect profits for Intuit, H&R Block and other tax-prep companies. Or so the critics say.
Backers of the bill — Washington’s Rep. Suzan DelBene was a co-sponsor — say it’s all just a misunderstanding over the text. If smart analysts so easily misunderstand the bill, then it isn’t ready to become law. The IRS isn’t likely to implement a free filing system that would have to survive a lawsuit over muddy language before rollout.
In fairness, it’s not as if the IRS offers this service now. In other countries, it’s common, but U.S. tax collectors reached an understanding with tax-prep companies years ago not to offer its own free filing alternative.
Some Americans can file for free through the private tax-prep companies. Anyone who earned less than $66,000 last year might be eligible. Few people avail themselves of the option, though, because they don’t know about it. The IRS doesn’t promote it well, and the companies try to upsell other products once they have people through the door.
The IRS already has the W-2s, 1099s and other tax paperwork. It doesn’t have to wait to incorporate new rules and guidance. Who better to help taxpayers? If the government wants the people’s money, the least it could do is streamline the process for handing it over.
Simple, free, online filing isn’t for everyone. As one’s wealth and income increase, so does the complexity of filing a return under America’s Byzantine tax code.
The Taxpayer First Act now heads to the Senate, where it has bipartisan support. Before senators pass it, they should fix it so that Americans someday won’t have to pay a private company to complete a simple tax return.