Congressional Democrats are accusing major tax-prep firms, including Intuit and H&R Block, of undermining the federal government’s upcoming electronic tax filing system and are demanding lobbying, personnel and revenue data to determine what’s going on.

The lawmakers accuse the companies of lobbying against the new program, hiring former government employees to arouse public interest against free filing for all, and deliberately sabotaging a government program that previously offered free tax preparation services, according to letters obtained by the Associated Press. Press.

On Thursday, Sen. Elizabeth Warren (D-Mass.) and Representative Katie Porter (D-

california irvine

), sent letters to the executives of Intuit, H&R Block, the American Coalition for Taxpayer Rights and the Free File Alliance, a group of tax preparation companies that offer free online services through the IRS website.

Warren and Porter are looking for details about the amount of money companies have made since joining the Free File Alliance and information about the number of former government employees who have joined their companies in the past two years.

Tax preparation firms are engaged in a long and aggressive lobbying campaign to prevent the IRS from providing taxpayers with a direct filing option, the letter from lawmakers to Intuit CEO Sasan K. Goodarzi said.

California tried to save the nation from tax filing woes, but then Intuit intervened

Derrick Plummer, an Intuit spokesperson, said his company will respond to lawmakers’ letter, adding that taxpayers already have the option to file taxes for free. An IRS Direct File system is redundant and will not be free, not free to build, not free to operate, and not free to taxpayers,” he said.

Plummer said a government-built free file system “is a solution in search of a problem, and that solution will unnecessarily cost taxpayers billions of dollars.”

An H&R Block spokesperson also said there are free options for taxpayers and that the IRS should direct additional funding toward improving its existing taxpayer services.

An agreement with the Free File Alliance prevented the IRS from creating its own free tax filing system in exchange for the companies providing free services to taxpayers earning $73,000 or less annually, but the key provision of the agreement ended in 2019 Tax experts and government reports say the program largely failed to reach its intended audience, with only 3% of eligible taxpayers taking advantage of it.

The IRS announced in May that it would launch a pilot program for the 2024 filing season, allowing taxpayers to file directly with the agency for free. If the effort is successful, it could be rolled out nationwide in the future, potentially saving taxpayers the extra cost of hiring through a tax preparation company.

IRS will start processing tax documents digitally as it strives to go paperless

As the program moves forward under the leadership of new IRS commissioner Daniel Werfel, groups on both sides of the issue have mobilized to convince the public and Congress of the program’s usefulness.

An April analysis by the AP found that since 2006, Intuit, H&R Block and other private companies and advocacy groups for major tax preparation firms, as well as proponents of electronic free files, have spent $39.3 million lobbying for free files and other causes. Federal law does not require domestic lobbyists to itemize spending by issue, so the amounts are not limited to free filing.

Tim Hugo, executive director of the Free File Alliance, said in an email to the AP Friday that his organization does not lobby, does not hire lobbyists, has not hired lobbyists in the past and has never had a PAC.

And David D. Ransom, counsel for the American Coalition for Taxpayer Rights, said by email that the IRS’s new free file program won’t be free and easy to implement and that U.S. tax law is too complex to handle with the planned free file program. to be able to work. to be successful.

Direct File proponents often suggest that we should have tax administration systems similar to those in Denmark or Estonia, he said. We deliver social benefits through our tax code; most European countries do not.

New IRS Leader Promises Faster, Easier Tax Filing Process

In July, a group of Congressional Democrats including Warren and Porter released a report outlining how three major tax preparation firms H&R Block, TaxAct and TaxSlayer sent extremely sensitive information about tens of millions of taxpayers to Facebook parent company Meta and Google through the course of at least two years. TaxAct and H&R Block said protecting customer privacy is a top priority, and TaxSlayer said the report contained false or misleading statements. Meta said it was clear in its policy that advertisers should not send sensitive information about people through our business tools.

In a letter to the heads of the IRS, the Department of Justice, the Federal Trade Commission and the IRS watchdog, lawmakers said their findings reveal a shocking violation of taxpayer privacy by tax preparation firms and major tech companies. as an argument for the creation of a government-run free file system.

“Tax preparation firms simply cannot be trusted with sensitive personal and financial information of taxpayers,” said Thursday’s letter to Jeff Jones, CEO of H&R Block.

The IRS was tasked with investigating how to create a direct file system as part of the funding it received from the Inflation Reduction Act, the Democrats’ flagship climate and climate policy.

healthcare

measure, that chairman

joe

Biden signed last summer. It gave the IRS nine months and $15 million to report on how such a program would be implemented.

Here’s something you don’t often hear from the IRS: Don’t pay your taxes (yet).

The report’s initial cost analysis shows that an option from the IRS could cost less than $10 per return, and of course be free for taxpayers by comparison. Simple electronic filing options currently available to taxpayers are about $40.

The study estimates that depending on the usage and size of the program, the annual cost of direct files can range from $64 million for 5 million users to $249 million for 25 million users.