The Internal Revenue Service (IRS) is on the verge of changing the way Americans file their taxes following the “Inflation Reduction Act” that was signed into law by Joe Biden and grants the IRS $80 billion in funding. The legislation includes $15 million to report on the “free, government-run tax e-filling system.”
The agency has about one year to submit its e-filing report. Basically, the agency must figure out how much the filing system would cost and how taxpayers would feel about using it. It’s unclear how they will figure out whether taxpayers favor or oppose using their system unless they put up ballot measures and allow states to choose. It remains unclear how the new free e-filing system would align with the agreement between the IRS and private taxpayers. Nonetheless, there are a lot of questions that must be answered.
Tax experts say this change could take two forms: one that is more conservative in scope and one that is more far-reaching.
Tax analyst at the Tax Foundation Alex Muresianu said:
“With withholding, the IRS already has that information. So it’s kind of annoying that you have to go through and enter it in yourself. But in the U.S. we have, for instance, joint filing. So if your employer knows what your income is, they don’t necessarily know what your spouse’s is. Employer withholding isn’t reflective of various credits and tax programs.”
As mentioned, there are a lot of questions that must be answered.
Robert Weinberger, who is associated with the Urban-Brookings Tax Policy Center said:
“If you as a taxpayer know things the IRS doesn’t know that are to your advantage, then you might not want to share that with them … But there are arguments that that would be worth it, since the whole system would be simplified and people will be happier. So maybe that’s a trade-off we’d be willing to make.”
On the other side of the spectrum, Frank Clemente, a left-leaning advocacy organization director for Americans for Tax Fairness said:
“It’s critical to make filing taxes as easy as possible … We’ve got to move away from this adversarial feeling. A simpler tax system will reduce cost, increase compliance and make people just feel better about the IRS.”
The left is arguing that the IRS plan will “reduce cost” and make everyone pay their fair share, which will lead to people feeling “better about the IRS.”
As I reported last week, Texas cattle ranchers warned the American people after the “Inflation Reduction Act” was signed by Biden that would add $80 billion in IRS funding, and they might have been onto something.
If the IRS succeeds with its proposal, the American people will have a new way of filing their taxes.
Senator Ted Cruz (R-TX) did not mince words on Sunday, tweeting:
Abolish the IRS.
— Senator Ted Cruz (@SenTedCruz) August 21, 2022