How to pay your federal income taxes
The U.S. House has passed a bill designed to make paying taxes a little less painful. In at least one important way, the bill fails to live up to that promise.
But wait. There’s the problem.
In 2002, the IRS began the Free File Program so that more taxpayers would file returns electronically. Electronic filing, the government believed, would lead to fewer headaches and quicker refunds.
But the IRS decided against writing its own tax preparation software. Instead, it turned to private tax companies — think Intuit, with TurboTax, or H&R Block of Kansas City — to establish a free preparation and filing option for federal returns.
It’s called the Free File Alliance. “Private industry, with established expertise and experience in electronic tax preparation, has a proven track record in providing the best technology and services available,” the IRS says.
Ever heard of the Free File Alliance? Didn’t think so. Critics say tax preparers have failed to promote it, preferring to sell their own for-profit services instead. Those same critics worry that the Taxpayer First Act would lock those companies in place.
“This could be a disaster. It could be the final nail in the coffin of the idea of the IRS ever being able to create its own program,” tax attorney Mandi Matlock told ProPublica, which has written extensively about the free tax return issue.
Some lawmakers say the measure doesn’t actually prohibit government tax software, and the language in the legislation is hazy. No matter. The Senate must make sure the final bill gives the IRS explicit permission to develop its own software and free filing system.
On this annual Tax Day, it’s worth repeating that filing taxes should be simple, fast and free. There is no reason taxpayers should feel pressured to use private software or to hire a tax service to prepare and file federal tax returns.
Some taxpayers will always want help with their taxes, and H&R Block and others can fill that role. For everyone else, though, free IRS software — and free tax filing — should be an option.
Some experts would go even further. They say the IRS should prepare tax returns, then send taxpayers the bill. That would end needless individual struggles with tax forms this time every year.
H&R Block would fiercely resist such a system, of course. And, to be honest, that seems like a fight for another day.
For now, the first step is to provide a full, free and visible IRS-designed system for preparing and electronically filing taxes. The Senate should make that happen before the measure is voted into law.
Then we can get to work on state tax forms, which are an even bigger disaster.