Some congressional Democrats say three large tax preparation firms sent “extraordinarily sensitive” information on tens of millions of taxpayers to Facebook parent company Meta over at least two years.
The IRS already has all the relevant tax info for 99% of people. With only a few tiny changes in practice (like opening portals for applying for certain tax credits e.g., IRA incentives), we could get rid of tax prep software almost entirely and replace it with a simple bill. And for most people, the stuff they don’t automatically know about increases your tax burden instead of decreasing it. If you aren’t wealthy, they have zero incentive to chase you down on this kind of minor stuff like grey-market income, so diligently using tax prep software can really only increase the amount you owe. But we’re forced to do so.
Having prefilled tax returns / billed taxes would likely lead to less cost and overhead within the IRS. It would nearly entirely fix the vast amount of unclaimed annual refunds that exist, which represents real money taken out of the pockets almost exclusively of the working class. Very wealthy people and folks who have extremely complex tax liabilities would still likely need professional preparation… but odds are they needed it anyway. And anyone could still have the option to contest/manually file if the new system were set up well.
The tax prep lobby (H&R Block, Intuit, et al) are powerful, but their power has flagged significantly in the last few years. It may finally be a time where we can push for a better way. The IRS getting ready to offer its own tax prep software is a fabulous first step.
The point is, there’s absolutely zero reason to have some weird market-based approach to taxes. It’s just adding additional layers of rent-seekers for no purpose. Basically, it’s US Conservative politics in a perfect microcosm.
