Improving the Taxpayer Experience and Protecting Taxpayers' Rights
Background & Key Issues
Who We Are
The American Coalition for Taxpayer Rights ("ACTR") is a 14-member, voluntary coalition of the nation's leading tax preparation, tax software and financial services settlement companies. Each year, ACTR member companies serve approximately 110 million of the more than 150 million Americans who file federal income tax returns - the most direct and crucial financial interaction that the vast majority of Americans have with their federal government. ACTR member companies, through their expertise and experience, make the tax-filing process increasingly efficient and accurate, and as productive as possible.
ACTR was established in 2011 as a non-profit trade association to engage with federal and state policymakers and regulators on public policy issues to promote the interests of the American taxpayer in obtaining needed services and products. ACTR is comprised of: (1) the 1O leading tax preparation and tax software companies,1 and (2) the four leading bank and financial services settlement companies.2 While ACTR members assist in the preparation and filing of more than two-thirds of individual federal income tax returns, they also provide the vast majority of financial products and services associated with tax time (e.g., refund transfers, refund advances, debit cards). These products and services are voluntarily chosen by millions of Americans each tax-filing season. While ACTR members are often aligned on public policy issues, they never stop competing against one another to provide better services.
Key Issues for Taxpayers
ACTR Supports America's Tax Administration System Based on Voluntary Compliance.
Voluntary compliance empowers Americans to determine and file their own income tax returns and to declare what they believe they owe the federal or state governments. In the United States, the citizen initiates the process of taxation, not the government. Only if the IRS or state revenue department tax collectors disagree with an individual's return does that taxpayer have further proceedings with the government. Since taxpayers must calculate their taxes and voluntarily file their returns, this is widely regarded as a critical check on government. The IRS, as tax administrator and collector, may examine the tax return for compliance and determine whether it believes additional tax is owed or what, if any, refund is due. ACTR members assist taxpayers in this core requirement and duty of citizenship. Each year, approximately 115 million Americans receive a tax refund. ACTR members work to reduce the complexity of filing and can save taxpayers time and money, and often are asked to stand up for them if a tax agency raises questions or concerns with the resulting return. We note that, periodically, legislation is introduced at the federal and state levels that would fundamentally change the government role; such legislation would permit or encourage the government to send taxpayers a bill, or create a government-operated website where the IRS and state departments of revenue (DORs) would provide the taxpayer with government software to create their return. Such a step is portrayed as a service to the taxpayer, but it would create a fundamentally different system than the American system of voluntary compliance. Legislation that leads to the disengagement of taxpayers from their own tax and financial affairs, or substitution of a government-created return is misguided and not in the taxpayers' best interests.
Protecting Taxpayer Privacy Is a Paramount Concern.
ACTR companies recognize that income tax returns contain taxpayers' personal and most sensitive financial information, and our members are absolutely committed to protecting and respecting taxpayers' privacy. The protections for taxpayers that are required by federal statute and regulation are public policies that ACTR member companies must comply with on every tax return each year, even as industry continues to innovate on taxpayer privacy protections. Given the increasing concerns regarding cybersecurity and identity theft tax refund fraud, ACTR members have helped lead the fight to protect taxpayers and the tax administration system from such crimes. ACTR members also are committed to following their obligations under IRS regulations (e.g., IRS regulation Section 7216) -- which prohibit the use or disclosure of tax return information for any purpose (with limited exceptions) absent the taxpayer's voluntary consent - and ACTR members believe that all such regulations should be modernized to ensure they are consistent with taxpayer needs and technology capabilities.
Innovation That Benefits the Taxpayer.
Every year, ACTR member companies collectively invest tens of millions of dollars in developing and implementing the most up-to-date technologies and innovations - from software, lo artificial intelligence (Al), to innovative identity and privacy protections - to meet taxpayers' needs where, when and how they wish to be served. ACTR members believe that free-market competition and innovation within IRS and bank agency rules will drive the future and are in the best interests of the taxpayer.
Permitting Flexibility in Addressing Taxpayer Needs.
ACTR members believe that taxpayers know their own circumstances and needs best, and we try to provide a variety of services and products that fit those circumstances and needs. For example, millions of taxpayers do not have an established banking relationship, and thus a bank product such as a refund transfer (where a temporary bank account is established for the electronic receipt of a taxpayer's tax refund) may be an option that best suits their circumstances and needs. Additionally, a refund advance - where a specified amount of a taxpayer's expected refund is "advanced" to the taxpayer (often at no cost)- may best suit their circumstances and needs.
ACTR Supports Taxpayer Service Standards, and Removing Bad Tax Preparers from the System.
ACTR is a proponent of establishing both taxpayer service standards and a timely and effective way to deal with identified suspicious return preparers. For many consumers, their tax refund or payment is the most significant financial transaction of the year. Unfortunately, with no minimum taxpayer service standards to become a tax preparer, and no timely and effective way to revoke the PTIN of bad preparers, too many Americans are exposed to incompetent and/or unethical return preparers who lead taxpayers to file inaccurate returns and/or have their identities and/or refunds stolen.
ACTR Supports Public-Private Partnerships that Benefit Taxpayers.
ACTR is a proponent of public-private partnerships between government and industry, including the IRS Security Summit and the IRS Free File Program. The Security Summit was first convened by the IRS in 2015 to combat and prevent the crime of identity theft tax refund fraud. ACTR proactively engaged with the IRS to devise and implement strategies to prevent such fraud. ACTR also was instrumental in helping to establish the Information Sharing and Analysis Center on Identity Theft Tax Refund Fraud (ISAC-ITTRF), which brought together stakeholders from across the tax administration ecosystem to combat this criminal activity. To date, this federal-state-industry partnership has seen tremendous results and reduced levels of identity theft tax refund fraud by 80 percent.
The IRS Free File Program is a public-private partnership between the IRS and private-industry tax preparers through which qualifying middle- and low-income American taxpayers can file their federal and state income taxes at no charge. Since its inception in 2003, approximately 65 million federal income tax returns have been filed through the program, saving taxpayers nearly $2 billion (a conservative estimate) in tax preparation and filing fees. In addition, millions of state income tax returns have been prepared and filed for free through parallel state Free File programs. This past year, taxpayer use of Free File increased by more than 50 percent, and millions more used Free File to receive Economic Impact Payments (EIPs).
ACTR Supports Transparency.
ACTR members believe that taxpayers must be provided the information they need to make the financial decisions that are best for themselves and their families. Accordingly, ACTR members support efforts to enhance transparency in fees charged. Por example, ACTR members proactively devised consensus best practices on refund transfers and then entered into a joint statement with several state attorneys general regarding the offer and provision of tax-time refund transfers, with the central thrust being enhanced transparency.
ACTR Does Not Support the Imposition of a "Government-Populated Return" System.
ACTR does not support legislative or administrative efforts to direct the IRS to break from its well-understood and accepted role of reviewing the taxpayer's voluntarily created return. There have been legislative efforts that would require the IRS or state departments of revenue to send the taxpayer a "bill" based on the government's calculations of the taxpayer's tax liability. Such efforts, if implemented, would even more radically alter the American system of voluntary compliance, representing a fundamental shift in power away from taxpayers to the government. A government-populated return system also would exacerbate the inherent conflict of interest for IRS and state DORs, and create an incentive to subtly skew the tax calculation process to the benefit of government revenue collection to the disadvantage of taxpayers. In such a system, the IRS and state DORs not only would be the tax auditor, tax investigator and tax enforcer, but also the tax preparer. Many taxpayers are likely to simply accept the government's calculation of their taxes, and thus fail to obtain credits and benefits they are entitled to receive under law. Such a radical change in tax administration could lead to a back door tax increase because the government's calculation of taxes may increase the actual tax owed. Furthermore, in a government-populated return system, the taxpayer would remain liable for errors, even if the government agency was responsible for the error in calculating the taxpayer's taxes.
The American Coalition for Taxpayer Rights (ACTR) was formed in 2011 by the nation’s leading retail tax preparation and tax software companies and financial institutions, which collectively prepare and file more than 120 million of the 160 million federal tax returns annually. ACTR advocates for taxpayer rights and strengthens America’s voluntary tax compliance system.