When April 15th, Tax Day, is done many breathe a sigh of relief. But, for those who file with the
IRS's new "e-file" system could be the beginning of their tax trouble. The IRS's new Direct File Program is supposed to allow taxpayers to file their federal taxes directly with the IRS and save money on TurboTax or other online third-party tax filing systems. Florida was even chosen as one of the states for the IRS to pilot this program. But don't believe the hype.
Research shows that 75% of Americans use free tax software such as TurboTax to file taxes while just about 22% hire a CPA to file for them. This means the IRS thinks it can pick up a lot of data if it tackles this majority market. The problem is that the IRS e-file system does not help taxpayers file their state taxes. It is also not clear how the IRS will protect this additional consumer data or even how they may get a jump-start on using AI programs and other measures to analyze taxpayer mistakes and assign additional fines and penalties.
Importantly, many third-party tax filing systems also come with some built-in protections in the event that a taxpayer gets a penalty or fine for an error in their filing. The IRS, of course, offers no such protection for the taxpayers who file directly with them. Consumers must be warned of these risks. Could you imagine being audited by the IRS after using THEIR IRS-guided, digital service to file your taxes?
The IRS could provide a way for people to ask questions and walk through the new system they have. But, when has the IRS ever been the poster child for customer service or efficiency?
There's a chatbot that people can use to ask questions online, but forget about ever being able to reach a human on the phone. Those days are over. The IRS Direct File Program is a solution in search of a problem. Or, maybe it is a ravenous government in search of a new income stream.
Remember, we are warning about the same IRS who wanted to monitor payments of over $600 on third-party pay apps like CashApp, PayPal, and Venmo. The IRS has just grown by an infusion of $80 billion to add 87,000 new IRS agents. And we already know that none of them are answering a consumer hotline. This new program is more of the same. Your federal government is desperate to get more information from you, but just five months ago, the IRS leaked private tax information on the former President of the United States. Why would an average taxpayer be any safer?
Thankfully, the e-file pilot program has not seen great participation, with only 50,000 users this tax season. But, this is a time for caution and not victory. Do not use the IRS e-file system. It could be the beginning of your tax problems, not the finish line you think.
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Jimmy Patronis serves as Florida's Chief Financial Officer.
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