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.
