Staff Reports
Montana Attorney General, Austin Knudsen, along with a group of Republican Attorneys General, is taking a stand against the Biden administration’s latest plan to give the IRS more power. Knudsen has written a letter to Treasury Secretary Janet Yellen, expressing his opposition to the IRS’ expansion into direct tax preparation and filing. This move comes as the IRS plans to launch the Direct File program in 2024, allowing taxpayers to file their taxes directly with the IRS online, rather than using third-party providers.
EXCLUSIVE: Red State AGs Push Back Against Biden Admin Plan To Expand IRS Authorityhttps://t.co/2h85y8ZoGU
— Daily Caller (@DailyCaller) January 30, 2024
Knudsen and his Republican colleagues argue that Congress has never given the Treasury Department the authority to create such a program, and for good reason. The American taxpayers do not want to invite the proverbial fox into the hen house. They also believe that the Direct File program will have negative consequences for low-income filers and devastate small businesses.
The Inflation Reduction Act passed by congressional Democrats and signed by President Biden allocated $15 million of its $80 billion IRS funding boost toward studying the feasibility of the Direct File program. However, a survey by independent advisor MITRE suggests that only 37% of taxpayers with simple returns would use the Direct File service, and that number drops to 29% without a state tax preparation function.
In addition to concerns about low usage, a report by the Treasury Inspector General for Tax Administration (TIGTA) found that the IRS deceived taxpayers about the options available with the Direct File tool and created surveys designed to overestimate support for the new system. The TIGTA report also concluded that the IRS failed to provide data justifying the cost and user estimates for the Direct File system.
Knudsen’s letter also references research from Syracuse University, which shows that the IRS audits taxpayers making less than $25,000 at a rate five times higher than all taxpayers. He argues that the IRS should address its historic discrimination against low-income taxpayers before launching a system that is purportedly designed to assist them. Knudsen points to admissions by IRS Commissioner Daniel Werfel that black taxpayers have historically been audited at higher rates, as well as the Department of Justice settling with conservative groups over politically motivated scrutiny from the IRS.
Knudsen states that millions of taxpayers already file their taxes for free with existing programs or online software, and many Americans work with small businesses to file their taxes at an affordable cost. The Direct File program threatens the livelihood of these small businesses and is likely to fail the very people it is intended to help. Knudsen and his Republican colleagues urge the IRS to rethink its plans and focus on addressing the root causes of discrimination before implementing a program that could harm taxpayers and small businesses alike.
