House plan bars IRS from offering free filing services, provides millions in filing assistance funds
WASHINGTON, D.C. - The deadline to file your 2019 income taxes is now just four days away. But if you’re one of the millions of Americans who file for free, some changes to those programs could be coming from Congress next year.
This week, the U.S. House unanimously approved the bipartisan Taxpayer First Act, the first sweeping reform of the IRS in over 20 years. Congressman Mike Kelly is the top House Republican behind the plan.
“We’re trying to make sure that the IRS is actually a service to the American taxpayers as opposed to something you’re afraid of,” Kelly said.
But a service potentially saving money for millions of Americans was not included, causing an uproar among some Democrats despite the House passing the bill by a unanimous voice vote. Inside is a provision barring the IRS from ever creating a free tax preparation software to compete with the big-name, for-profit companies like Intuit and H&R Block.
Right now, the IRS and those companies have a deal, known as the “Free File Alliance,” which essentially states that the government will not create their own program as long as the companies offer free filing options.
“This makes it harder for the IRS to move in this direction,” according to Mark Mazur, the director of the Urban-Brookings Tax Policy Center in Washington, D.C. “In some sense, it says ‘don’t even think about doing this’.”
While this appears to be a big break for the corporate tax-prep companies, Mazur believes this change is unlikely to affect low-income filers because many of the assistance programs will still remain available.
“The Free File Alliance will still continue to have free versions of software available, and the volunteer low-income tax clinics will still be in operation,” Mazur said, referencing the Volunteer Income Tax Assistance program among others.
The good news, supporters argue, is the House version contains millions of dollars for those programs, a way to get both Republicans and Democrats on board. Kelly is the lead co-sponsor of the bill, which is led by House Ways & Means Committee Chairman John Lewis (D-Ga.).
“We are looking at policy now that really serves the best needs of every hardworking American taxpayer,” Kelly said.
The bill now heads to the Senate where it already has bipartisan support, but whether or not the House version codifies the IRS agreement remains unclear among some senators and economists.