Congressional Democrats are accusing big tax-preparation firms including Intuit and H&R Block of sabotaging the federal government’s forthcoming electronic free-file tax filing system and are demanding lobbying, hiring and income data to determine what’s going on.
Lawmakers accused the companies of lobbying against the new program, hiring former government workers to influence public interest, opposing free tax filing for all, and sabotaging previous government programs that offered free tax filing, according to letters obtained by The Associated Press.
Sen. Elizabeth Warren (D-Mass.) and Rep. Katie Porter (D-Calif.) wrote to Intuit, H&R Block, the American Taxpayer Rights Coalition and the Free File Coalition on Thursday. Alliance executives. Tax preparation companies that offer free online services through the IRS website.
Warren and Porter are seeking information about the exact amount the firm has earned since becoming a member of the Free Documents Coalition and the number of former government workers who have joined their firm in the past two years.
“Tax preparation firms have engaged in a long and aggressive lobbying campaign to prevent the IRS from offering taxpayers a direct filing option,” lawmakers told Intuit Chief Executive Sasan K. Goodarzi in a statement. wrote in the letter.
Intuit spokesman Derrick Plummer said his company would respond to the lawmaker’s letter, adding that taxpayers already have the ability to file their taxes for free. “The IRS Direct File System is redundant, and it’s not going to be free — it’s not free to build, it’s not free to operate, it’s not free to the taxpayer,” he said. Plummer said the government’s free filing system “is looking for a solution to a problem that will unnecessarily cost taxpayers billions of dollars.”
The H&R Block spokesperson also said taxpayers could choose to file for free and that “the IRS should focus additional funding on improving existing services for taxpayers.”
A deal with the Free Tax Coalition that prevented the IRS from creating its own free tax return system in exchange for companies offering free services to taxpayers making $73,000 or less a year, but key provisions of the agreement were terminated in 2019 . Tax experts and the government report that the program has largely failed to reach its target audience, with only 3% of eligible taxpayers using it.
The IRS announced in May that it would start a pilot program for the 2024 filing season, allowing taxpayers to file directly with the agency for free. If the effort is successful, it could be implemented nationwide in the future, potentially saving taxpayers the additional cost of going through tax-prep companies.
$39 million spent on lobbying
As the pilot program moves forward under new IRS Commissioner Daniel Werfel, groups on both sides of the issue have mobilized to influence the public and Congress over the program’s usefulness.
An Associated Press analysis in April found that Intuit, H&R Block and other private companies and advocacy groups for large tax-prep businesses and proponents of electronic free filing reported spending $39.3 million since 2006 lobbying for free filing and other affairs. Federal law does not require domestic lobbyists to itemize fees by issue, so the amount is not limited to free documents.
Tim Hugo, executive director of the Free Files Coalition, said in an email to The Associated Press Friday that the group “does not lobby, does not hire lobbyists, has never hired a lobbyist in the past, and has never had a PAC.” “.
David D. Ransom, an adviser to the American Taxpayers Rights Coalition, said by email that the new IRS free-filing program will not be free and easy to implement, and that the U.S. tax code is too complex for the planned The free reporting program cannot be implemented. successful.
“Proponents of direct filing often suggest that we should have a tax administration system like Denmark or Estonia,” he said. “We provide social benefits through the tax code; most European countries don’t.”
In July, a group of congressional Democrats, including Warren and Porter, released a report outlining how three major tax-prep firms — H&R Block, TaxAct and TaxSlayer — sent information about tens of millions of dollars to Facebook parent Meta. Taxpayers’ “extremely sensitive” information and Google for at least two years. TaxAct and H&R Block said protecting customer privacy was a top priority, and TaxSlayer said the report contained false or misleading statements. Meta said its policies clearly state that advertisers “should not send sensitive information about people through our commercial tools”.
In a letter to the heads of the IRS, DOJ, FTC and IRS regulators, the lawmakers said their findings “reveal alarming concerns about taxpayer privacy by tax preparation firms and Big Tech.” Shocking Violation”—and cites the report as an argument for creating a free government-run filing system.
“Tax preparation firms simply cannot be trusted with taxpayers’ sensitive personal and financial information,” said the letter to H&R Block CEO Jeff Jones on Thursday.
The IRS was tasked with looking at how to create a “direct filing” system as part of the funding it received from the Inflation Reduction Act, the Democratic Party’s flagship climate and health care measure that President Joe Biden last summer signed the bill. It gave the IRS nine months and $15 million to report on how to implement the plan.
report Initial Cost Analysis Showing options run by the IRS “Providing each return may cost less than $10, certainly at no cost to taxpayers — compared to about $40 for the simple electronic filing option currently available to taxpayers .”
The study estimates that, depending on the usage and scope of the program, the annual cost of direct archiving could range from $64 million for 5 million users to $249 million for 25 million users.
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