IRS Asked to Consider Free, Direct E-File Tax Returns
Taxpayers weary of having to go through Intuit and its ilk to file and pay their share of the bill for the federal government have grounds for some hope in the just-announced “Inflation Reduction Act of 2022(Opens in a new window).”
The measure, which combines health care, clean energy, and deficit reduction provisions–a slimmed-down sequel to the Biden administration’s “Build Back Better” plans(Opens in a new window) that looked dead days ago–will direct the Internal Revenue Service (IRS) to study offering a direct, e-file system.
Page 35 of the 725-page bill text(Opens in a new window) (PDF) gives the IRS nine months and $15 million to deliver a report to Congress on the cost and feasibility of “developing and running a free direct efile tax return system, including costs to build and administer each release, with a focus on multi-lingual and mobile-friendly features and safeguards for taxpayer data.”
The section notes that such an e-file service might have income and return-complexity limits. But the IRS offering any direct-filing option that doesn’t involve mailing paper forms would be a huge shift in tax prep in the US. Even as numerous other countries and some US states (see, for example, Canada(Opens in a new window) and California(Opens in a new window)) allow direct online filing, the IRS has left e-filing to the private sector as part of a “Free File” arrangement pushed by Intuit and other tax-prep firms.
Under that bargain, tax-prep firms have offered free filing to taxpayers under an income threshold–most recently, an Adjusted Gross Income of $73,000(Opens in a new window), which should cover more than half of all taxpayers(Opens in a new window). But only a small fraction of taxpayers have availed
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