At a virtual event commemorating the one-year anniversary of the Inflation Reduction Act’s (PL 117-169) enactment, congressional Democrats and representatives from policy organizations coalesced around IRS initiatives funded by appropriations from last year’s bill.
Senator Elizabeth Warren, Democrat of Massachusetts, in remarks prepared for an August 14 press briefing hosted by Adam Ruben of the Economic Security Project, said the IRS has made “real progress” toward closing the tax gap by shifting tax collection efforts to those making more than $400,000 a year while also improving the taxpayer experience for honest filers in the 12 months since the agency was authorized an additional $80 billion on top of annual appropriations through 2031.
“[The IRS has] collected $38 million from 175 millionaire tax cheats in just the last few months,” said Warren, “and it’s taking important steps to make sure that the wealthy chip in their fair share so that we can create opportunity for everybody. This funding has also made life easier for hardworking families trying to claim their refunds. The IRS has slashed wait times on phone calls from 28 minutes down to three minutes … and they’ve reduced their backlog of paper returns by 80%.”
Front and center at the event was buzz around IRS Direct File, an in-development project set to debut next tax filing season in the form of an optional pilot program allowing participants to complete and submit their returns to the IRS without the need for third-party tax preparation software. Warren, who has openly opposed the for-profit tax prep industry and advocated for free filing operated entirely by the IRS, closed her comments Monday by saying companies like Intuit—providers of TurboTax—”are terrified” in the wake of the IRS’ announcement that it aims to use Inflation Reduction Act funding to construct an in-house filing alternative.
“Tax prep lobbyists are working overtime; they’re spending millions of dollars to keep the federal government from providing an easy, free way to file taxes directly with the government online,” Warren closed. “We are finally at this historic moment where the IRS can deliver a truly free file program for millions of taxpayers. So let’s get it done.”
Representative Katie Porter, Democrat of California, echoed Warren’s sentiments that the industry has fought against an IRS free filing tool, specifically accusing Intuit and H&R Block for misrepresenting the cost of their services through deliberate, deceptive marketing tactics. “The thing is, I see right through their tricks because they’re right from something that I call ‘the Special Interest Playbook,'” Porter said in prerecorded comments. “These are the exact same set of excuses and shady tactics that I saw when I was a consumer protection attorney fighting the big banks during the foreclosure crisis.”
Brandon Tucker, the senior director of policy and government affairs at Color of Change, said in his remarks that “for far too long, individuals who qualify for free filing have been duped into believing they are provided being provided a special service worth $250 to get their remaining refund,” something he called a “farce.”
He added that the average taxpayer unnecessarily spends “half a day” filing their taxes when the IRS, through Direct File, can take a more active role in matching tax credits with eligible individuals, especially those from “diverse racial backgrounds.” Gabriel Zucker, associate policy director for tax benefits at Code for America, agreed that Direct File will be a “huge deal for low-income families and for economic and racial justice” because it will bridge access gaps to the earned income tax credit and the child tax credit.
Susan Harley, managing director Public Citizen’s Congress Watch division, said her organization has, so far, collected over 65,000 signatures for a petition supporting a full launch of Direct File “as soon as possible.” According to Harley, the signatures were delivered to the IRS on Monday.
With a currently divided Congress and the 2024 Presidential Election looming, whether the IRS will have full access to the remainder of its inflation bill funds to accomplish goals set out in its Strategic Operating Plan remains to be seen. Republicans have long-criticized the $80 billion figure, especially since over half is earmarked for enforcement. $1.4 billion was already rescinded this year as part of debt limit negotiations, with another $20 billion reportedly on the table for a potential clawback amid reports of a handshake agreement between President Biden and House Speaker Kevin McCarthy, Republican of California. Supposedly, that chunk would be taken out of the enforcement portion, but it is unclear how projects like Direct File would be affected absent further details or concrete action.
Representative Donald Beyer, Democrat of Virginia, responded to Checkpoint’s question during the Q&A period at yesterday’s briefing regarding the temperature around possible budgetary changes involving the IRS funding and how the agency is prepared to move forward. He “very strongly” expects the $80 billion to come down to $60 billion as Congress braces for a possible October 1 government shutdown and for the Fiscal Responsibility Act agreement to “stay in place” despite just one of 12 annual appropriation bills reaching the Senate before the August recess, which was “dead on arrival.”
However, Beyer is optimistic that “sometime in the next six years,” that $20 billion could be recovered through future negotiations. Still, the immediate focus is on what he anticipates being a “long, painful Fall.” Beyer assured taxpayers that no matter what, the IRS has been able to draw from the funds since “day one,” so he hopes the agency will spend as much as needed now “to keep getting all this good stuff done, including the pilot on free filing.”
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