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House passes bill that will ban the IRS from providing free online tax filing

Lobbying from TurboTax and H&R Block has been credited for the legislation

Scott Olson/Getty Images

The House of Representatives has posted its stamp of approval on a bipartisan bill that would prohibit the Internal Revenue Service from directly offering taxpayers a free method of filing tax returns, reportedly at the behest of companies that profit off providing such services.

What are the details?

H.R. 1957, also known as the Taxpayer First Act, is a bill to "redesign" the IRS and was sponsored by Reps. John Lewis (D-Ga.) and Mike Kelly (R-Pa.). It sailed through the Ways and Means Committee last week and was passed on the floor Tuesday.

Ways and Means Committee Chairman Richard Neal (D-Mass.) hailed the legislation as a measure that would "protect low- and moderate-income taxpayers, create sensible enforcement reforms, and ensure the IRS provides taxpayers and small businesses the assistance they deserve."

Kelly promised the plan would help the IRS "be a resource, not an adversary" to Americans.

But ProPublica says the bill bans the IRS from "creating a free electronic tax filing system" and is a result of $6.6 million spent last year in lobbying efforts by H&R Block and Intuit (the owner of TurboTax), whose businesses rely on upcharges from taxpayers who utilize their services.

The outlet also noted that Neal "received $16,000 in contributions from Intuit and H&R Block in the last two election cycles."

Proponents of the legislation say it's a good thing, because it would keep the government from competing in a market it created. Others argue the provision would favor corporations for profiteering reasons and that providing a free tax filing service is the least the IRS can do to give citizens a break.

Numerous outlets have raised alarm over the legislation, with Slate noting that "the IRS currently has an agreement with an industry group called Free File Alliance, under which the IRS has agreed not to create its own free online system as long as the companies offer free filing for Americans below a certain income threshold."

While services from H&R Block and TurboTax do offer free federal filing, the firms have been accused of deception and upselling by requiring users to pay for filing state returns — which has nothing to do with the federal government. The companies also offer additional services like audit protection for a charge.

But not everyone in the House is happy with the legislation, particularly from the far left. Rep. Alexandria Ocasio-Cortez (D-N.Y.) pointed out that the IRS should do even more, arguing from the House floor, "It is a huge scandal that Congress has not yet instructed the IRS to automatically prepare taxes for the vast majority of Americans. The IRS has all the information required to do that for all but a few taxpayers, and the main reason it hasn't to date is lobbying by companies like TurboTax and H&R Block."

Anything else?

The bill also has bipartisan support in the Senate, according to Slate. Democratic Sen. Ron Wyden (Ore.), ranking member of the Senate Finance Committee, proclaimed after the House vote, "During the debate on the tax administration bill, my staff pushed back on a prohibition on the agency competing with private tax preparation services."

But the senator defended the full final package, saying it "reduced the role of private debt collection on the most vulnerable Americans and made permanent a highly successful program for low-income taxpayers."

One last thing…
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