IRS Inflation Reduction Act Opens Door to IRS-operated Tax Filing System

The Inflation Reduction Act of 2022 (IRA, Public Law No: 117-169) appropriates an additional $79.6B to the Internal Revenue Service (IRS) through the end of FY2031. This includes $45.6B for tax enforcement, $25.3B for operations support, $3.2B for taxpayer services and $4.8B for business systems modernization. Additionally, the IRA appropriates $15M to the IRS to fund a task force “to design an irsrun free ‘direct efile’ tax return system” and report to Congress on the cost and feasibility of creating a free tax filing program.1 In doing so, the IRA opens the door to planning an IRS-operated tax filing system and potentially provides some startup funds necessary to plan for developing such a system. Despite this, the IRS would require further legislative authorization such as passage of the Tax Filing Simplification Act of 2022 (S. 4508/H.R. 8368), not to mention significant additional appropriations, to build and operate a free tax filing system.

An IRS-operated free tax filing system is problematic for two reasons. First, recent experience with similar government-run software demonstrates that the federal government—particularly the IRS—has a troubled track record of delivering high-quality, secure, customer- facing technology solutions.2 Second, for a majority of Americans, access to free tax preparation and filing services already exists through the Free File Program, a long-term public-private partnership between commercial tax filing services and the IRS, which has resulted in approximately 70 million free returns valued at over $2B to taxpayers at no cost to the IRS nor taxpayers who utilized the program.


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 155 million federal tax returns annually. ACTR advocates for taxpayer rights and strengthens America’s voluntary tax compliance system.

Tax Preparers

Financial Institutions