House Scraps Provision in IRS Reform Bill That Would Have Explicitly Prevented IRS From Developing Free Filing Program

By:
Chris Gaetano
Published Date:
Jun 10, 2019
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House lawmakers, in response to public outcry, have opted to remove a provision of the IRS reform bill that would have explicitly prevented the IRS from developing its own free filing program that could potentially compete with private services, according to ProPublica. While the bill containing this provision passed the House in April, it has since stalled in the Senate, which did not want to approve the legislation as long as it contained the controversial measure. 

The measure would have codified into law the public-private partnership between the IRS and various tax prep software vendors, which requires the vendors to provide free commercial-type online individual income tax preparation and electronic filing services to  taxpayers with the the lowest 70 percent of adjusted gross income. ProPublica had previously reported that this provision—combined with a previous memorandum of understanding between the IRS and the software vendors whereby the former pledged not to develop its own independent service if the latter offered these free filing services—would preclude any effort to simplify tax filing directly through the government. It also reported that that the free services offered by these private firms are underpromoted, as evidenced by the fact that only 3 percent of eligible filers use them. In addition, Pro Publica said, these companies often use the free-service programs to cross-promote paid services, and the programs leave taxpayers vulnerable to data breaches and identity theft. 

The policy itself will still remain in place, as it will take until 2021 for the current deal to expire, although it will no longer be enshrined in law. The IRS has already launched a review of the private free-file programs, particularly concerning the accusations that customers were deliberately steered away from free options. 

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