With Tax Day looming, Wisconsin Sen. Tammy Baldwin thinks she has the answer to make things easier: Why not let the IRS file your return?
If your instincts tell you that’s a bad idea, you have good instincts.
The IRS has a terrible track record carrying out its existing duties in an accurate or efficient manner. According to a 2015 Treasury Inspector General for Tax Administration (TIGTA) report, a two-year pilot program that was meant to reduce waste, fraud and abuse missed tens of thousands of fraudulent tax returns at a cost of $313 million to U.S. taxpayers.
More recently, the Government Accountability Office found that the IRS was failing to collect billions of dollars in tax underpayments. The report spelled out in great detail agency inefficiencies that are preventing it from carrying out its most basic function: collecting taxes owed to the government.
And just last year, the personal information of 100,000 taxpayers was stolen following a major security breach on an IRS data retrieval tool used to apply for federal student aid. The identity thieves used the information to file fraudulent tax returns. In the end, the IRS issued 8,000 fraudulent refunds worth $30 million before it figured out what was going on.
This last example of inefficiency and mismanagement is particularly relevant because Sen. Baldwin’s legislation would charge the IRS with taking on even more online tax preparation responsibilities. In most workplaces, an employer would provide you with more responsibility only after you proved you were doing your current job well.
Perhaps the biggest problem with Sen. Baldwin’s proposal is that it’s a solution in search of a problem. The bill’s supporters claim empowering the IRS to file tax returns is necessary because tax preparation services can be costly, particularly for low-income Americans.
But there are already more than a dozen existing partnerships between the IRS and private-sector tax preparation services providing services free of charge to millions of Americans who earn less than $66,000 or less last year. To access these services, eligible taxpayers can click a link on the IRS website that reads: “Free File Program.”
And there are more than 100+ clinics that work with the IRS, operating all over the country, to help low-income taxpayers file their returns every year. According to the IRS’s own estimate, the taxpayer clinics and the existing partnerships that Free File provides, cover approximately 70 percent of all taxpayers who could qualify to file their taxes free of charge.
Of course, not everyone who is eligible is seeking help. This is what happened in California where only a small fraction of eligible residents took advantage of a new-defunct state-run service similar to the one Baldwin proposes for federal tax returns.
Finally, there is another reason to be leery about having the IRS file your taxes: taxpayers are removed even further from the tax filing process. By centralizing the power of filing and collecting taxes, it becomes harder for the taxpayer to understand their federal tax burden, ensure the accuracy of their returns and challenge any discrepancies or mistakes.
It’s the opposite of greater transparency in the tax filing process.
Some ideas are best left on the drawing board. This is one of them.
Eric Bott is Wisconsin state director for Americans for Prosperity.