The tax and spending bill that passed the Senate this weekend included a provision of $15 million for a study that allows the IRS to prepare taxes. The provision comes after Sen. Elizabeth Warren, D-Mass., and other Democrats have pushed legislation to add tax filing to the agency’s purview. The Inflation Reduction Act, which passed the House on Friday after a Senate cleanup — the vote was 50-50 with Vice President Kamala Harris breaking a tie — appropriates nearly $80 billion for the tax agency. This would allow the IRS to hire its desired 87,000 agents over the next decade to increase tax enforcement. A small portion of the funding includes $15 million dedicated to funding a task force to study the costs and feasibility of creating a free direct electronic records program, which has been a controversial idea. IRS AUDITS WILL TAKE $20 BILLION FROM THOSE WHO EARN UNDER $400,000,000 Under Inflation Relief Act Warren did not plan to wait for a task force study and had already filed a bill to develop a free, online tax preparation and filing service that would allow all taxpayers to prepare and file their taxes directly with the federal government instead of through private tax experts. Sen. Elizabeth Warren, D-Mass., speaks during a press conference on expanding eviction protections in the next coronavirus bill at the U.S. Capitol on July 22, 2020. (Drew Angerer/Getty Images / Getty Images) The Warren proposal would move more quickly to allow filers with simple tax statements to choose a “no refund option” that provides a prepackaged tax return with an income tax liability or refund amount already calculated. Proponents also say it will reduce tax fraud by getting third-party income information to the IRS earlier in the tax season. Warren’s bill has 22 Senate Democratic co-sponsors. Representatives Brad Sherman and Katie Porter, both California Democrats, are the lead sponsors of the House version. “The average American spends 13 hours and $240 every year filing their taxes — that’s too much time and too much money,” Warren said in July, before Sen. Joe Manchin, DW.Va., announced the deal of the reconciliation package. DEFLATION ACT: WHAT TAX INCREASE ARE IN THE BILL? “Congress should pass my Tax Filing Simplification Act, and the IRS itself can and should adopt my plan to simplify the tax filing process for millions of Americans and reduce their costs,” said Warren. However, the concept of a “no refund,” or allowing the IRS to control tax filing for mostly low-income people, has critics on both sides of the political spectrum. First, it presents a clear conflict of interest, said Grover Norquist, president of the conservative Americans for Tax Reform. “The IRS is the prosecutor and the judge in this system. All the incentives are wrong,” Norquist told FOX Business. Grover Norquist, founder and president of Americans for Tax Reform (Nicholas Kamm/AFP via Getty Images/Getty Images) On the left, a 2020 report from the Progressive Policy Institute argued that this system could prevent some low-income earners from receiving the Earned Income Tax Credit. “The IRS does not have the necessary information in its databases to accurately determine a low-income taxpayer’s EITC eligibility and/or correctly calculate the amount of the credit owed to the taxpayer — far from it, in fact,” the report states. report by the Progressive Policy Institute. . “The EITC is based on a stew of residence, family relationship, and income restrictions with complex tie-in rules.” In addition, the IRS has demonstrated many problems in handling the responsibilities it already has, Norquist argues. “This is an agency that needs radical reform, and this is not the time to give it more responsibility,” Norquist said. “They would say they just need more money. No more money until it’s reformed.” Norquist added that this system did not work when attempted in Britain. The Treasury Inspector General for the Internal Revenue Service, the IRS’s internal inspector general, reported in 2016 that IRS staff lost 1,000 laptops with sensitive taxpayer information. In 2015, hackers gained access to the data of approximately 330,000 taxpayers. Billionaire United Refining Company CEO and Chairman John Katsimadis criticizes adding 87,000 IRS agents amid financial woes. In June, the Taxpayer Advocate Service, an oversight agency within the IRS, found that the agency had more than 21.3 million unprocessed taxpayer returns. DEMOCRATS’ CURING INFLATION ACT WILL MEAN LOWER WAGES FOR MILLIONS OF AMERICANS The legislation aims to expand a program first implemented for stimulus checks to deal with COVID-19 in 2020. The checks were made to anyone who filed a tax return. For those who are not required to file a tax return, the IRS issued a regulation to establish “simplified filing” for those who earned too little to file. A household could provide basic information, such as names, and the IRS would do the rest. In 2021, the IRS used it to get information about the child tax credit. The legislation will make it available to all taxpayers. “American taxpayers spend too much time and money preparing their tax returns. It doesn’t have to be that way,” said a statement from Sherman, one of the House’s lead co-sponsors, who is also a CPA and co . President of the Inter-Party Parliamentary Conference of the Parliament. “The Tax Return Simplification Act represents a common-sense solution to a problem that has burdened taxpayers for a long time – simplifying the process of filing tax returns with less cost and hassle.” IRS headquarters in Washington, DC (Al Drago/Bloomberg via Getty Images/Getty Images) The IRS also has a Free File system that contracts private tax preparers to provide free services. But a Government Accountability Office report in April found that only about 3 percent of Americans who file tax returns use the system, while 70 percent of filers qualify. Warren blamed the time and cost of tax preparation on big companies for “sabotaging the Free File program to make big profits.” Supporters of the legislation say that if enacted, it would make it easier for people to qualify for the Earned Income Tax Credit and Child Tax Credit and also make tax preparation less expensive. CLICK HERE TO READ MORE ABOUT FOX BUSINESS However, a PriceWaterhouseCoopers study from December 2021 found that compliance costs for individual payers under current rules have fallen by 40% since 2005. “Because a significant portion of the population has income from self-employment and a larger number use above-the-line deductions, the pool of taxpayers eligible to use a no-refund system may be limited without meaningful expansion of information. The PriceWaterhouseCoopers study says. “Such an extension would involve significant new costs, not only in terms of administrative burden for taxpayers, tax administrators and third parties, but also burdens in relation to taxpayers’ privacy.”
