New push on US-run free electronic tax-filing system for all

Apr 16, 2023, 6:51 AM | Updated: 10:27 am

Tax form...

A portion of the 1040 U.S. Individual Income Tax Return form is shown July 24, 2018, in New York. The IRS has been tasked with looking into how to create a government-operated electronic free-file tax return system for all. Congress has directed the IRS to report in on how such a system might work. (AP Photo/Mark Lennihan, File)

(AP Photo/Mark Lennihan, File)

WASHINGTON (AP) — It’s that time of year when throngs of taxpayers are buckling down to file their income tax returns before Tuesday’s filing deadline. Many often pay to use software from private companies such as Intuit and H&R Block.

Almost one-quarter of Americans wait until the last minute to file their taxes.

There could be a new, free option in future years. The IRS has been tasked with looking into how to create a government-operated electronic free-file tax return system for all. But that doesn’t sit well with the big tax-prep companies.

The idea has been batted around and hotly debated for a long time. Congress now has directed the IRS to report on how such a system might work.

The order came as part of the $80 billion infusion of money for the tax agency over the next 10 years under the Democrats’ flagship climate and health care measure, known as President Joe Biden signed last summer. It gave the IRS nine months and $15 million to report in on how it might implement such a program and how much it would cost.

Next month, the IRS will release the first in a series of reports looking into how it might be done.

The possibility of an electronic free-file system operated by Washington is being celebrated by some taxpayer advocates who for years have said that would reflect good governance and well serve taxpayers. Critics voice skepticism about the IRS taking on the dual roles of both tax collector and tax preparer, arguing that the new service could create a power imbalance between taxpayers and the government.

Robert Marvin, an IRS spokesperson, said in an email that a key goal of the study is to “look for ways to make filing taxes as easy as possible.”

“It’s important that Americans have choices that work best for them when preparing their taxes, whether it’s by using a tax professional, tax software, or free options,” he said.

But big tax preparation companies have millions of dollars to lose if the program comes to fruition. Last year, more than 60 million taxpayers were serviced between Intuit, the parent company of TurboTax, and H&R Block.

Tens of millions of dollars have been spent trying to influence policymakers on the issue, and lobbying data shows that the big tax companies in particular have spent heavily.

An analysis shows that Intuit, H&R Block, and other private companies and advocacy groups for large tax preparation businesses, as well as proponents in favor of electronic free file, have reported spending $39.3 million since 2006 to lobby on “free-file” and other matters. Federal law doesn’t require domestic lobbyists to itemize expenses by specific issue, so the sums are not limited to free-file.

Intuit has spent $25.6 million since 2006 on lobbying, H&R Block about $9.6 million, and the conservative Americans for Tax Reform roughly $3 million.

Derrick Plummer, a spokesman for Intuit, said taxpayers can already file their taxes for free through the mail and there are other online free-file programs available to some people.

A “direct-to-IRS e-file system is a solution in search of a problem, and that solution will unnecessarily cost taxpayers billions of dollars,” he said. “We will continue unapologetically advocating for American taxpayers and against a direct-to-IRS e-file system because it’s a bad idea.”

Starting in 2006, an agreement between the IRS and some commercial tax preparation companies, known as the Free File Alliance, prevented the IRS from creating its own free tax return filing system. In exchange, tax preparation companies agreed to provide free services to taxpayers making $73,000 or less.

The provision that barred the IRS from exploring a free-file system expired in 2019, but the Free File Alliance agreement to provide free services for low-income taxpayers remains in effect.

Ariel Jurow-Kleiman, a tax law professor at Loyola Law School, and the New America think tank have been selected by the IRS to conduct the congressionally mandated study for the agency. Jurow-Kleiman said their mandate is “evaluating the feasibility, approach, schedule, cost, organizational design, and IRS capacity to deliver a possible direct e-file system.”

But she has faced pushback from Republicans who say she does not fit the law’s requirement that an independent third party assess what it would take to deliver a direct file program.

Rep. Jason Smith, chairman of the House Ways and Means Committee, sent a letter to the IRS in March questioning Jurow-Kleiman’s ability to be an independent reviewer, saying her work indicates “a clear preference for an expansive government-run system.”

Smith, R-Mo., said the selection of Jurow-Kleiman and New America shows that “the Administration has already predetermined that a government-directed e-file system should exist regardless of what might be found in a truly nonpartisan, independent, third-party review.”

Jurow-Kleiman said the GOP pushback to her selection was based on an unpublished draft of an article about tax compliance costs and that none of her writings have “addressed the questions that we are assessing in the feasibility study.”

Molly Martin, director of strategy at New America, referred requests for comment to the IRS, saying the organization “is still working on its report.”

David Williams, at the right-leaning, nonprofit Taxpayers Protection Alliance, says the “government preparing taxes is problematic.”

“The taxpayer is looking for the biggest refund possible, but for the IRS that’s not their job to look for the biggest refund for filers,” he said. “We’re concerned about that conflict of interest, but also really the ability of the IRS to do this.”

To Gabriel Zucker, who helped create the tool to help families access the Advance Child Tax Credit during the pandemic, successfully setting up a free-file program is possible. “It is a really great way for the government to better serve people,” said Zucker, associate policy director for tax benefits at Code for America.


Associated Press Chief Elections Analyst Chad Day contributed to this report

KSL 5 TV Live


FILE - Members of Denver's East High School soccer team, right, sit in the house chamber at the Col...

Associated Press

Colorado laws that add 3-day wait period to buy guns and open paths to sue gun industry take effect

When two Colorado gun control laws take effect Sunday, purchasing a firearm will require a three-day waiting period — meant to curtail suicide attempts and shootings — and gun violence victims will have an easier path toward filing lawsuits against the firearm industry.

1 day ago

FILE — MIAMI, FL - OCTOBER 21:  A Subway restaurant is seen as the company announced a settlemen...

Associated Press

Subway franchise owners must pay workers nearly $1M – and also sell or close their stores

A federal court ordered the owners of 14 Subway locations north of San Francisco to pay employees nearly $1 million in damages and back pay — and also to sell or shut their businesses, with any sale proceeds going to the Department of Labor.

2 days ago

The Utah Department of Transportation is holding meetings for community members to learn more about...

Katija Stjepovic

UDOT wants public comment on lane extension to Midvalley Highway in Tooele County

The Utah Department of Transportation is holding meetings for community members to learn more about a possible extension to the existing Midvalley Highway.

3 days ago

Timothy Kinyua unloads sacks of onions from Ethiopia at an open market in Nairobi, Kenya Tuesday, S...

Associated Press

Food prices are rising as countries limit exports. Climate change, El Nino and Russia’s war to blame

Food prices worldwide, experts say, will be determined by the interplay of three factors: how El Nino plays out and how long it lasts, whether bad weather damages crops and prompts more export restrictions, and the future of Russia's war in Ukraine.

3 days ago

What to do when a business shuts down abruptly but owes you money...

Matt Gephardt & Sloan Schrage

What to do when a business shuts down abruptly but owes you money

Jeanie Ortiz bought into a subscription plan for her treatments at Innovation Aesthetics. She says the clinic withdrew $139 directly from her bank account every month like clockwork. That was until the place abruptly shut down.

3 days ago

Bountiful stores...

Brittany Tait

Organized retail crime costs Utah businesses $1 billion

Target is closing nine stores in major cities across four states, claiming theft has made the environment unsafe for staff and customers.  

4 days ago

Sponsored Articles

Design mockup half in white and half in color of luxury house interior with open plan living room a...

Lighting Design

Lighting Design 101: Learn the Basics

These lighting design basics will help you when designing your home, so you can meet both practical and aesthetic needs.

an antler with large horns int he wilderness...

Three Bear Lodge

Yellowstone in the Fall: A Wildlife Spectacle Worth Witnessing

While most people travel to this park in the summer, late fall in Yellowstone provides a wealth of highlights to make a memorable experience.

a diverse group of students raising their hands in a classroom...

Little Orchard Preschool

6 Benefits of Preschool for Kids

Some of the benefits of preschool for kids include developing independence, curiosity, and learning more about the world.

rodeo contestant on a saddle bronc...


Get Ready for the Days of ‘47 Rodeo!

The Days of '47 Rodeo is a series of events everyone in the family can enjoy, with world-class rodeo contestants vying for the gold medal.

Electric LED Lightbulb Change In Light At Home...

Lighting Design

How to Know When to Upgrade Your Lighting

This guide explores indicators that suggest it’s time for a lighting upgrade with tips to make an informed decision when you’re ready to buy. 

Brunette guy in headphones playing games on his desktop computer...

PC Laptops

Looking For a New Computer? Use This Desktop Buying Guide

Choosing a new desktop computer can come with a lot of questions, so we created this desktop buying guide.

New push on US-run free electronic tax-filing system for all