The Internal Revenue Service (IRS) is close to changing the method by which Americans pay their taxes in the wake of an “Inflation Reduction Act” that was passed in the name of Joe Biden and grants the IRS $80 billion in funds. The law includes $15 million for reporting regarding tax e-filing, which is a “free, government-run tax e-filing system.”
The agency is given one year to submit its electronic filing report. The agency needs to determine how much the filing system will cost taxpayers and how they would consider making use of it. It's not clear how they'll decide if taxpayers are in favor or disapprove of their system, unless they propose ballot measures that allow states to select it. It's not clear what the new electronic filing system will fit into the current agreement between the IRS and private taxpayers. There are numerous questions to be addressed.
Tax experts suggest that this change could come in two types: one that is more limited in scope, as well as one which is more expansive.
Tax analyst from The Tax Foundation Alex Muresianu said:
“Withholding, the IRS already has this information. It's a bit irritating to have to go through and fill it in on your own. However, here in the U.S. we have, for example, joint filing. Therefore, your employer knows the income you earn but they aren't necessarily aware of the income of your spouse. Employer withholding doesn't reflect the various tax credits and tax programs.”
As stated, there are many questions to be answered.
Robert Weinberg, who is affiliated to The Urban-Brookings Tax Policy Center said:
“If you as a taxpayer are aware of things the IRS isn't aware of that work beneficial to you and you are able to use them, then you may not want to share it with them … However, there are arguments to suggest that it is worth the effort, because the entire system will be simplified and people would be more content. This is probably something we're willing to accept.”
On the other end of the spectrum Frank Clemente, a left-leaning advocacy group director of Americans for Tax Fairness, said:
“It's essential to make tax filing as simple as possible … We have to break away from this skepticism. Simple tax systems can reduce costs, improve compliance, and make taxpayers feel more comfortable regarding tax authorities like the IRS.”
The left has argued that the IRS policy can “reduce cost” and make everyone pay their fair share which could lead to individuals finding themselves “better about the IRS.”
As I wrote this week, Texas cattle ranchers warned American citizens following the “Inflation Reduction Act” being signed by President Joe Biden which would increase $80 billion in IRS funding. They could have been right about something.
If the IRS is successful with its plan and the proposal is approved, the American taxpayers will have an alternative method of filing taxes.