Republicans are looking to cut funding for the free digital tax filing system currently being developed by the Internal Revenue Service to instead offset the $14 billion emergency request for military aid for Israel’s war in Gaza.
After House Speaker Mike Johnson (R-La.) declared that Republicans insisted on cutting the budget to pay for the Israel war funding bill, the House Rules Committee released legislation on Monday that includes $14 billion in cuts to the IRS. That $14 billion will come out of the $67 billion that remains in additional IRS funding included in last year’s Inflation Reduction Act.
The boost to IRS funding in the Inflation Reduction Act sought to aid the agency’s efforts to police tax evasion by the wealthy and update and upgrade the IRS’s internal and public-facing systems and software.
In addition to targeting the free digital filing program, the GOP offsets would cut funding at the IRS for enforcement, operations support, policymaking and internal investigations. The only sections of the IRS funding spared from proposed cuts are assistance for taxpayers and modernization of internal business systems.
Tax preparation companies including TurboTax, Intuit and H&R Block have long opposed the creation of a free digital tax filing system by the IRS, spending tens of millions of dollars on lobbying efforts. The government and the companies came to an agreement in 2002 for the government to not pursue a free online filing system and, in turn, the tax preparers would offer their services free to filers who make less than $73,000 per year. That agreement is set to expire in 2025, based on an amendment issued last March.
Even though the tax preparation companies had entered into an agreement with the IRS to provide free tax filing services, a 2019 investigation by ProPublica found that the companies routinely pushed those who should be paying nothing into paying for their services. A Government Accountability Office report found that 70% of Americans were eligible for free digital tax preparation help under the agreement but that only 3% actually used it.
The IRS promotes its free digital tax filing system as part of the Biden administration’s broader efforts to reduce administrative burdens by making it easier for Americans to access and interact with the government.
The GOP bill to cut the IRS funding provided in the Inflation Reduction Act is likely dead on arrival in the Senate, where Democrats hold the majority, and on President Joe Biden’s desk.
As Senate Majority Leader Chuck Schumer (D-N.Y.) told CNN, “Obviously, a pay-for like that makes it much harder to pass.”