It is supposed to be free for most Americans to file their taxes online, but very few households actually use the free service provided by the Internal Revenue Service in partnership with tax preparation companies like Intuit, the maker of TurboTax.
Now that that partnership is faltering, Intuit announced last week that it would no longer participate, after H&R Block, which makes its own tax filing software, abandoned the government last year.
Democrats could ask the IRS to create its own free program in the big bill they will be working on this fall, according to Sen. Ron Wyden (D-Ore.), Chairman of the Senate committee that oversees tax policy.
“They certainly made the point that I made the point that we should have free files, so we’re definitely going to look into those issues,” Wyden told HuffPost.
The Free File Alliance is supposed to allow people to file their taxes online for free if their income is $ 72,000 or less, but it does a poor job. Out of more than 100 million eligible taxpayers, only 2.4% used it in 2019, according to the Inspector General of the Treasury in charge of tax administration. And more than 34 million households eligible for the free tax return ended up paying companies like Intuit to file their taxes instead.
The Free File Alliance, the group of private companies partnered with the IRS to provide this service, says the free file tool is easy to use and accessible. But the free option is rarely marketed. Like reported by ProPublica in 2019, the private companies of the Free File Alliance have fought vigorously against the IRS creating its own tool for fear it would harm their business.
Intuit said in a declaration at the end of last week that “due to the limitations of the Free File program and conflicting requests from people outside the program, we are not able to continue in the program” after October.
“They were never really interested in Free File, what they want to do is pretend they were interested in free services and take that kind of opportunity to solve a lot of their problems,” Wyden said of the alliance companies.
Senator Elizabeth Warren (D-Mass.) Has suggested that Dems could push the IRS to create its own free tax filing site without passing a law requiring it.
“Right now, we are pushing the IRS to launch its own free files program,” Warren said. “The question is whether we have to push them harder to do it. “
(Congress could also require the IRS to tax most people for them with a “simple return” because the agency already has the income information for most people, but this idea is not on the table.)
Warren acknowledged that the IRS was “grossly underfunded,” but would not commit to pushing for specific funding to create a free deposit program.
The Free File tool has come under special scrutiny over the past year as the primary means for the IRS to get economic impact payments, or stimulus checks, to low-income families. and without income who do not earn enough money to pay taxes regularly. . It is also the only way for the very poor to qualify for the newly expanded child tax credit.
The tool continues to be extremely inaccessible for the very poor, as it requires users to have email addresses and tax literacy levels that are often inaccessible to people who do not regularly file their tax returns. It is also only available in English.
Democrats plan to use a special budget reconciliation process later this year to pass a massive domestic policy bill, with billions for child care, universal preschool education, and new insurance benefits. disease. But lawmakers are still working on the broad outlines of the bill and haven’t been able to say for sure what smaller policies might be included.
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