IRS Direct File Program: Unnecessary And Overreaching

The IRS recently unveiled a controversial “direct file” program, raising concerns about the agency’s growing disregard for legal and constitutional boundaries. Critics argue that the IRS’s latest move exemplifies its increasing tendency to operate without proper oversight. This new program, launched without explicit congressional approval, follows a series of actions that have put the agency under scrutiny.

Back in 2022, Congress passed the Inflation Reduction Act, which allocated $15 million for the IRS to explore the feasibility of a direct tax filing program. However, rather than conducting a traditional study, the IRS chose to implement a pilot program, which was used by 140,000 taxpayers this past tax season. While this might be seen as an effort to provide tangible evidence of the program’s viability, the IRS’s recent decision to make the program permanent has sparked significant controversy.

Americans for Tax Reform has highlighted how IRS Commissioner Danny Werfel misled both Congress and the public about the agency’s intentions. Despite repeatedly assuring that no decision had been made about the direct file program, the IRS continued to build the necessary infrastructure to support it. This has led to accusations that the agency is overstepping its bounds by creating a permanent filing portal without legislative approval or appropriate funding.

The IRS has redirected $114 million from various areas intended to improve taxpayer services to fund this new initiative. This reallocation of resources, critics argue, undermines the IRS’s primary mission and could lead to taxpayers receiving less support in other areas.

There is also concern about the potential conflict of interest inherent in the IRS running a tax filing program. Taxpayers typically rely on third-party preparers to ensure they claim all eligible refunds and credits. With the IRS controlling the filing process, there is fear that the agency might interpret tax laws narrowly, potentially reducing the refunds and credits taxpayers receive. This could particularly disadvantage lower-income taxpayers, who are more likely to use the IRS’s “free” service over a paid preparer and less likely to have the resources to challenge the IRS in tax disputes.

The IRS’s history of targeting low-income taxpayers for audits, due to their simpler returns and limited ability to contest, adds to these concerns. By extending its reach into tax preparation, the IRS could further entrench this problematic pattern.

The rollout of the direct file program, following the significant budget increase granted by the Inflation Reduction Act, has only intensified skepticism about the IRS’s motives and capabilities. Critics argue that the agency’s actions reflect an overreach that could have serious implications for taxpayer rights and the integrity of the tax system.