The IRS has no business entering the tax preparation business

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The Inflation Reduction Act famously included $80 billion for the Internal Revenue Service to hire 87,000 new auditors. What received less attention was an additional $15 million for the agency to conduct a feasibility study on how the IRS can develop its own tax preparation software.

This study is a complete waste of taxpayer resources and would be better spent by modernizing the agency’s woefully outdated information technology systems.In September 2020, the IRS Taxpayer Advocate cited the “desperate need for multi-year funding to modernize IRS computer systems and infrastructure. Tax administration is at risk, and the country and the IRS need a solution now more than ever.

On Feb. 7, the Government Accountability Office report on IRS IT systems reiterated that the IRS is using legacy hardware and software ranging in age from 24 to 64 years old, including the Individual Master File, which is the “authoritative data source for individual tax account data.” The IRS has been attempting to replace the 60-year-old IMF for more than 10 years, but that work has been suspended so that the agency can reallocate the staff working on the effort to other projects.

Some members of Congress view this as an excuse for supporting the creation of the IRS’s own system, which will be mandatory, not voluntary. On Jan. 26, the IRS announced that taxpayers who earn $73,000 or less in 2022 may be eligible for the Free File program.

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Our tax code should be simplified to the point where the average person can file online through the IRS website.

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