Montana Attorney General Austin Knudsen is leading a group of Republican Attorneys General pushing back against the Biden administration’s latest plan to further empower the IRS, the Daily Caller has learned.
Knudsen wrote a letter Tuesday to Treasury Secretary Janet Yellen objecting to the IRS’ expansion into direct preparation and filing of tax returns scheduled to begin in 2024. His letter is co-signed by Republican Attorneys General from Georgia, Idaho, Iowa, Louisiana, Missouri, Nebraska, South Carolina, Tennessee, Texas, Utah, Virginia and West Virginia. (RELATED: IRS Misled Taxpayers In Surveys And Made Up Cost Estimates For New Filing Initiative, Watchdog Report Finds)
READ THE LETTER:
“We write to you in opposition to the unnecessary and unconstitutional efforts to empower the Internal Revenue Service (IRS) with the expansive authority to prepare and file tax returns for all taxpayers,” Knudsen wrote.
“Congress has never granted the Department of the Treasury authority to create a Direct File program. And for good reason: the American taxpayers do not want to invite the proverbial fox into the hen house. A Direct File program will also have negative consequences for low-income filers and devastate small businesses.”
Direct File, the IRS’ new tax filing service, would give taxpayers the option of filing their taxes online with the IRS instead of using a third party provider. The Inflation Reduction Act (IRA) passed by congressional Democrats and signed by President Joe Biden in 2022 allocated $15 million of its $80 billion IRS funding boost toward studying the feasibility of the Direct File program. (RELATED: ‘Actually Not Free’: Prominent CEO Pours Cold Water On Biden Admin’s Planned Gov’t-Run Tax Filing System)
A survey by independent advisor MITRE showed that 37% of taxpayers with simple returns would use the Direct File service and only 29% would use the service without a state tax preparation function, according to The Wall Street Journal.
A report by the Treasury Inspector General for Tax Administration (TIGTA) published in October found the IRS deceived taxpayers about the Direct File tool’s immediate options and created surveys designed to overestimate support for the new system.
In addition, the IRS failed to produce data to justify its cost and user estimates for the Direct File system, TIGTA concluded. Knudsen’s letter cites the MITRE survey, TIGTA report and 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.
“We urge the IRS to identify and address the root causes of the agency’s historic discrimination against low-income taxpayers before launching a system purportedly designed to assist these very same individuals. This is especially important because an IRS-run Direct File program may leave taxpayers with the mistaken impression that the IRS is an independent and disinterested party,” Knudsen’s letter reads.
IRS Commissioner Daniel Werfel admitted in May it historically audited black taxpayers at higher rates, and in October 2017 the Department of Justice (DOJ) settled with conservative groups over politically motivated scrutiny from the IRS. Both details are referenced by Knudsen as examples of the IRS abusing its power.
“Every year, tens of millions of taxpayers file their taxes for free with help from existing programs or online software. Additionally, millions of Americans work with small businesses in our states to file their taxes at an affordable cost, including both independent tax preparation services and local accountants,” Knudsen’s letter concludes.
“They choose to do so because they want an advocate in their corner who will represent their interests against the IRS bureaucracy. The Direct File program needlessly threatens the livelihood of thousands of these small businesses tax preparers. And this new system is likely to fail the very people it’s intended to help.”