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Top Seven Reasons the IRS Shouldn't Do Your Taxes for You


Posted by Ryan Ellis on Wednesday, April 16th, 2014, 3:25 PM PERMALINK


There has been the usual tax day-related glut of articles from liberal publications urging a federal takeover of the tax preparation business.  As always, the ultra-left wing blog Pro Publica took the lead, followed predictably by outlets such as Slate, Vox, and Tax Analystsas well as respectable news outlets like Bloomberg View and Yahoo!.

The basic argument is always the same: the IRS has all this information on you anyway, so wouldn't it just be easier and better if they simply prepared your taxes for you?  Wouldn't that be better than having to pay some rent-seeking middleman?  This flawed line of thinking fools many a reporter this time of year, but it's refuted pretty easily once you scratch beneath the surface. 

Below are the top seven reasons the IRS should not prepare your taxes for you:

1. There already is a "Free File" program that most taxpayers are eligible for.  This is the dirty little secret that the wonky Left doesn't want you to know.  Since 2003, the IRS has partnered with the tax preparation industry to give away tax prep software--for free--to that large bulk of Americans with straightforward tax returns.  This "Free File Alliance" can be used for over 100 million tax returns every year, should people want to use it.  In its history, it's been used over 40 million times, with a 98% customer satisfaction rate. In fact, 23 states have created their own Free File programs. As an indication of the program's success, use of the IRS Free File program is up 11% this tax season over last year according to IRS numbers. 

If the liberals pushing the IRS socialized tax prep idea were actually interested in a public policy solution, one which is already up and running and requires no new laws or regulations to implement, they would be recommending Free File every year.  The fact that they don't should tell you a lot about what their true motives are (i.e., having the IRS be a tax preparer who also has the stick of tax collection).

2. The IRS commissioner has said the agency can't do it--twice.  On two occasions just this year, IRS Commissioner John Koskinen has publicly stated that the IRS isn't interested in preparing people's taxes, because it can't: 

On April 26, 2014, he told a Congressional committee, "We're not doing anything with that. It would take a long time to be able to do that."

Just today in Politico, he is quoted as saying, "We don’t have any plan to do that. (He laughed) We’re challenged enough with the things we have to do now, so there’s no work going on here at the IRS in that direction."

That's pretty good evidence that the IRS preparing your taxes is not only not possible--it's probably not a very good idea.

3. The biggest tax prep software company supports a radically-simplified tax system.  The underlying subtext of all these stories is that the tax preparation industry, and DIY software giant Intuit in particular, has been keeping down the obviously good idea for the IRS to prepare most people's taxes for them.  The reason, of course, is that the Intuits of the world want a complicated tax system so people have to keep buying their product every year.

Except that's not true.  Back in February, Intuit endorsed House Ways and Means Chairman Dave Camp's (R-Mich.) tax reform plan, saying, "Intuit is committed, like the chairman, to see the tax code simplified, reducing the burden on American taxpayers and small businesses.  This is a national policy imperative and Intuit looks forward to working with him and other policymakers of both parties across the Congress as the tax reform process moves forward."

The Camp plan, incidentally, would result in a system where 95 percent of families would be able to claim the standard deduction (up from about 70 percent today).  Presumably, a similar percentage would be eligible for Free File.

This should put to lie the sub-textual assumption that the tax preparation industry is against IRS tax preparation because they have an interest in a complicated tax code.  If these tired annual hobby horse articles were honest, they would acknowledge this and stop casting aspersions on companies that just aren't true.

If you want a simplified tax system, the solution is not the IRS preparing your tax return--the solution is for Congress to reform the tax code.

4. Have you noticed how much the IRS has begun to resemble the tax arm of a banana republic?  Lois Lerner's contempt of Congress citation.  Taxpayer-funded IRS conventions featuring Star Trek videos.  Agency targeting of non-profit applications that have "Tea Party" in the name.  Agency regulations of political speech by conservative non-profits.  

It's not as if the IRS had a lot of goodwill to build off of before this year's filing season.  But the last year has arguably been the worst one in the history of the agency.  Public confidence in the IRS took several devastating body-blows in the past year.

On what planet does it make sense for an agency that is daily redefining "politicized abuse of power" to also take over tax preparation for most of the country?  And against the explicit wishes and counsel of the guy who runs the place?

5. From the people who brought you healthcare.gov...The old joke used to be that, "if you like the Post Office, you'll love government-run healthcare."  The spectacular failure of healthcare.gov has proven that quip a bit of an understatement.

Combine this with just the latest bureaucratic overreach/unintended consequence/abuse of individual rights: the Social Security Administration trying to collect generations-old debts from the descendants of the long-dead targets of collection.  

And these folks think it's a good idea to build off this success and have the IRS prepare taxes for tens of millions of families?  No thanks.

6. Speaking of Obamacare, the IRS will soon be a partner in your healthcare.  Many people don't realize that the IRS is the agency with the second-biggest role in implementing Obamacare.  That's not only a very scary intrusion to people's lives (begging the question as to why it would also be a good idea to make them the nation's tax preparer, too)--it also costs money.

Every year for the past several years, the Obama Administration has asked Congress for a few billion dollars for the IRS to implement Obamacare.  That's not surprising, since the GAO reports that there are 47 Obamacare items on the IRS to-do list.  Congress, quite understandably given the Republican opposition to Obamacare and the IRS' squandering of its existing resources, has instead chosen to freeze the IRS budget at less than $12 billion annually. It's likely to remain that way for the foreseeable future.

The thing is, Obamacare IS going to get implemented by the IRS.  It's the number one public policy goal of the Obama Administration.  With Obamacare resources crowding out everything else, there simply isn't any money left over to do a brand new system of IRS tax preparation, even it was a good idea (which it's not).  And have you heard of Free File?

7. The IRS has sent you a friend request.  Marketplace this week reported that the IRS has begun to do aggressive data mining of social networking sites like Facebook, Twitter, Instagram, and others.  The goal is for them to find out as much information about taxpayers as possible to help with audits.  So, that's great.

People with good memories might remember a similar story from last year, when the IRS wanted to read all your email messages.

Needless to say, the IRS is not looking for extra tax deductions for you when they're doing this. Their goal is to increase tax revenue collections for the Treasury, plain and simple.

The bottom line.  These tired, annual articles from white collar lefty pseudo-academics living in the Beltway all ignore the really big story here: namely, that it's a giant conflict of interest for the IRS to determine your tax liability, and then to be able to seize your wages and assets in order to collect that tax liability.  To ignore that is to be criminally-naive about the way the IRS goes about its business.  It betrays either a lack of knowledge of how the tax system actually works, or it's a giant con job by people whose common cause with the IRS is growing the size of government.

Demonizing the tax prep industry doesn't change any of the arguments from above.  It does, however, provide a thin shield of self-righteousness for what is otherwise a fool's errand.

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