The government is about to permanently bar the IRS from creating a free electronic filing system

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Thanks to pressure from tax preparation industry, Congress is getting ready to ban the Internal Revenue Service from ever building a free electronic tax filing system.

As ProPublica reports, the effort is a bipartisan one. The House Ways and Means Committee, led by Massachusetts Democrat, Richard Neal, passed the Taxpayer First Act.

The bill would make changes to the IRS and is sponsored by Georgia Democratic Congressman John Lewis and Mike Kelly, a Republican from Pennsylvania.

One of its stipulations would make it illegal for the IRS to create its own online system for tax filing. That’s right, members of Congress are prohibiting a branch of the federal government from providing a much-needed service that would make the lives of all of their constituents much easier.

And why is Congress taking the step? Because companies like Intuit, the company behind TurboTax, and H&R Block have been lobbying lawmakers for years to take the step.

In other countries, the agencies in charge of taxes have their own programs which make filing taxes more efficient — and free — for citizens. But that would eat into the profits for the tax prep industry, which was estimated to pull in $11 billion in 2018.

“This could be a disaster. It could be the final nail in the coffin of the idea of the IRS ever being able to create its own program,” Mandi Matlock, a tax attorney who does work for the National Consumer Law Center, told ProPublica.

There are a number of ways that the IRS could make tax preparation easier for taxpayers dealing with the only certainty in life other than death.

The IRS could develop a free online system. It could also submit pre-prepared tax returns for people to approve and then file based on the salary data the agency already has.

Roughly 70% of American taxpayers are already able to file for free online, but only 3% do, according to data from the taxpayer advocacy organization, The Taxpayer Advocate Service.

Americans who make less than $66,000 can access the Free File Inc. software online through the IRS.gov website and all taxpayers can download electronic versions of IRS paper forms through the service.

Back in 2002, the IRS entered into an agreement with a consortium fo tax software companies, which was known as Free File, Inc.  As part of that deal, the companies agreed to open up access to filing software for about taxpayers who make less than $66,000 and the IRS agreed not to compete with the companies by developing its own software.

That deal has been renewed for over a decade and the new bill before Congress would make it permanent. One reason why folks Congress could be pushing this through is all of the money that H&R Block and Intuit spent to lobby Senators and Representatives. ProPublica estimates that the tax prep industry has spent $6.6 million to advocate for the IRS filing deal. The Ways and Means chair, Neal, received $16,000 in contributions from the two companies in the last two election cycles, according to the ProPublica report.

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