Given the issues that currently exist within the IRS, proposals to put it in charge of tax-return filing are unnecessary at best and malicious at worst.
The IRS's track record on auditing poorer Americans should make us resist putting it in charge of tax-return filing.
T ax Day is coming soon. Before this dreaded day even arrives, the Internal Revenue Service is already anticipating a monthslong backlog of millions of tax returns. With an added $675 million from the omnibus spending bill passed in March, the IRS is dedicating much of that funding to enforcement and investigatory activities, rather than radically focusing on this backlog. This is terrible news for hardworking Americans in the lower income-tax brackets who rely on a tax refund.
Once a return is filed, the bad news continues for lower-income filers. Publicly available data show that the IRS disproportionately targets poorer communities for increased audit scrutiny. Shamefully, this scrutiny is also heavily directed at minority communities. The IRS neither denies nor repudiates these trends. In fact, IRS commissioner Charles Rettig has described auditing poor Americans who claim the Earned Income Tax Credit as “the most efficient use of available IRS examination resources.” Now, the IRS has more resources to keep struggling Americans in the crosshairs.
Rettig and the IRS further rationalize these practices by claiming it is easier to audit disadvantaged communities. It costs less, requires fewer staffers, and takes up less time because these particular demographics do not have the resources to fight back with any seriousness. Simply put, the IRS is a bully with the entire apparatus of the federal government (and billions of taxpayer dollars) at its back.
What could make this problem even worse is a legislative issue gaining traction in the halls of Congress. A proposal from Senator Elizabeth Warren (D., Mass.) would put the IRS in charge of filing tax returns. This is disastrous because the IRS is struggling to handle the caseload it is already receiving from returns submitted the last two years. The IRS has shown no indication that it can handle these added responsibilities with any competency.
Second, Warren’s proposal would give the IRS more opportunities to take advantage of vulnerable Americans. The agency has already demonstrated a desire and willingness to target low-income Americans for excess scrutiny. With the IRS in charge of returns, it can extort more from low-income Americans, knowing that the burden of proof will be on taxpayers to prove they’ve been wronged and that they won’t pursue a robust legal defense.
Such a system has already been tried in California. California’s “ReadyReturn” or “CalFile” program has state employees fill out tax returns for citizens, send them the filing, and leave it up to the taxpayer to simply sign it and mail it back. However, in one year almost 80 percent of recipients threw away the pre-prepared return and opted to submit their own. This means that the program on a national level could be a monumental waste.
Such a system is also deceptively billed as a “free” tax filing. The government’s development of tax-return software is done at a higher cost than companies such as Intuit. Government employees are also paid more than private tax preparers. Ironically, Americans won’t notice the difference in a one-time fee of roughly $200, but the charge will be taken out via tax liability, which would be almost unilaterally determined by the IRS under such a proposal.
It is also difficult to imagine how much information-gathering the IRS would have to do to reasonably prepare tax returns for millions of Americans. Unfortunately, the IRS has proven a poor steward of sensitive information. A Department of the Treasury investigation showed both that IRS equipment is susceptible to cyberattacks and that confidential information is not disposed of properly. This new power for the IRS puts the information of millions at risk. If the IRS is to do anything with extra money, it needs to be securing the data it already has, not searching for more.
The IRS does not have the best interests of taxpayers at heart. It does not know what is best for each American. Allowing it to set the baseline for tax liability for each American is a costly endeavor and one that will no doubt extort more money than necessary from hardworking people.
Given the issues that currently exist within the IRS, proposals to put it in charge of national tax-return filing are unnecessary at best and malicious at worst.