House Republicans are seeking to divert funds from the development of a free digital tax filing system by the Internal Revenue Service (IRS) in order to cover the $14 billion emergency request for military aid for Israel’s efforts in Gaza. The move comes as part of an effort to offset the financial burden of the Israel war funding bill.
House Speaker Mike Johnson declared the Republican’s intention to make these budget cuts, leading the House Rules Committee to release legislation on Monday. The legislation outlines a $14 billion reduction in IRS funding, which will be drawn from the $67 billion allocated for additional IRS funding in last year’s Inflation Reduction Act.
The increased IRS funding from the Inflation Reduction Act was originally intended to support the agency’s efforts to combat tax evasion by the wealthy and improve its internal and public-facing systems and software.
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The proposed GOP cuts to IRS funding would impact several areas, including enforcement, operations support, policymaking, and internal investigations. The only sections spared from these cuts are taxpayer assistance and the modernization of internal business systems.
The IRS has promoted its free digital tax filing system as part of the Biden administration’s broader initiative to reduce administrative burdens and facilitate easier interaction between Americans and the government.
The GOP’s proposed bill to cut IRS funding from the Inflation Reduction Act is unlikely to pass in the Senate, where Democrats hold the majority, and it faces further opposition from President Joe Biden.
Favoring lobbyists
Tax preparation companies like TurboTax, Intuit, and H&R Block have opposed the IRS’s efforts to create a free digital tax filing system for years, having spent substantial sums on lobbying against it.
An agreement was reached in 2002, under which the IRS refrained from pursuing a free online filing system, while tax preparers agreed to offer free services to filers earning less than $73,000 annually. This agreement is set to expire in 2025, as per a recent amendment.
Despite this agreement, investigations have revealed that these tax preparation companies often pushed individuals who were eligible for free tax filing into paying for their services. A Government Accountability Office report also found that, while 70% of Americans were eligible for free digital tax preparation assistance, only 3% actually used it.
Information for this story was found via Paul Blumenthal on X and Huffpost, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
