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Sunday July 21, 2024

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IRS Explores Direct E-File

The IRS has been slowly moving forward with a direct e-file system. Several members of Congress have promoted the concept. The Inflation Reduction Act included funding to allow for the IRS to conduct a study on building an e-file system.

To explore the interest in a federal e-file system, the IRS has conducted two taxpayer surveys. There is significant taxpayer support for a direct e-file system, particularly among younger taxpayers. The survey responses emphasized that privacy is a major concern and taxpayers prefer to combine filing a federal return with their state tax return.

The IRS estimates that a direct e-file system would cost between $64 million to $249 million each year. The majority of the costs would be for customer support. The IRS also faces major challenges due to the complexity of the U.S. tax code. A direct e-file system must be updated regularly for tax law changes and to ensure that taxpayer information is secure.

The IRS points to many other nations that offer a direct file system including the United Kingdom, Australia, Japan, Spain and France. One step in taxpayer convenience is a prepopulated filing system. Australia, Belgium, Denmark, Spain, Sweden, France, Finland and Norway all offer these systems.

Many nations, including Australia, New Zealand and the United Kingdom, offer extensive online services. The IRS recently has moved forward with enhanced systems. U.S. taxpayers now have a " Your Online Account " page. The IRS also launched new chat bots that provide taxpayer support.

Editor's Note: Several members of Congress who support direct e-file have observed that commercial tax software companies are not protecting taxpayer information. One of the primary reasons for creating a federal system is that many of the commercial companies have been using Google analytics. Some of the tax software websites included a Google Pixel that collected income, refund amounts, filing status and scholarship information from taxpayers who used those websites. The taxpayers did not consent to the use by Google of that information for marketing purposes. While Google claims that it has safeguards to protect personal identity, artificial intelligence capabilities now allow identification of individuals through their data. The advocates for an IRS direct file system emphasize a federal system that would protect the information of taxpayers.

Published September 1, 2023
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