Paying taxes is a stressful process for taxpayers, especially when their circumstances change from one year to the next.  They could be employed, unemployed, married, divorced, have a child (or twins), move their home and/or business, sell assets like stock, inherit money and assets from an estate, buy or sell real estate, or be an independent contractor from one year to the next.  Given these and hundreds of other variances that could impact each person’s individual tax status, control over how and what to file should always remain with the taxpayer.  Currently, up to 70 percent of taxpayers can file for free under the appropriately named “IRS Free File” through a private company that is a member of the Free File Alliance.  This system that has been in place since 2001.   

Yet each tax season, proposals crop up for the federal government, meaning the Internal Revenue Service (IRS), to be given the authority to pre-determine a taxpayer’s income and tax liability by filling out all possible forms and sending a tax bill that must be paid proving again that this bad idea just won’t go away.  Questioning the IRS is taxing enough under the existing system without having to be forced to spend the time and money to convince the agency that it made a mistake after being allowed to be judge, jury, and executioner.  And creating a “solution” to a problem that does not exist is always a waste of the taxpayers’ money.  

This proposal has been called return free filing and has been introduced in the House and Senate as the “Tax Simplification Act,” a misnomer for misguided legislation.  Proponents believe that the federal government knows and understands every nuance of a taxpayer’s life and can use the taxpayer’s income as reported by their employer and others using either W-2’s or 1099 forms to determine how much money the taxpayer owes to the federal government and then generate a bill for the taxpayer to pay.

A similar proposal for the IRS to develop a program to prepopulate tax information for taxpayers has been tried and failed before. 

In 1995, the IRS was tasked with developing software, called Cyberfile, that would enable taxpayers to file paperless returns.  The agency selected the Department of Commerce’s National Technical Information Service (NTIS) to develop the program, which was supposed to be operational by February 1996.  According to a May 9, 1996 Government Accountability Office (GAO) report, “(1) there were several operational security weaknesses at the data center that placed IRS telecommunications equipment at risk; (2) the lock to the data center was improperly installed, allowing unauthorized access to the center; (3) the center’s telecommunications equipment was not being adequately protected from unauthorized personnel; (4) the center’s emergency contingency plan failed to identify those individuals responsible for executing emergency disaster recovery procedures; and (5) the risk analysis conducted for Cyberfile was incomplete and failed to address the physical, operational, and communications security threats to the center.” 

This report was just the tipping point in a costly endeavor for the government to build a program that had already been developed by the private sector.  On August 26, 1996, GAO issued a follow-up report on Cyberfile, noting that the “IRS did not adequately analyze requirements, consider alternatives, or assess NTIS’ capabilities to develop and operate an electronic filing system, even though the need for these critical prerequisites was brought to management’s attention as early as July 1995.  Instead, IRS selected NTIS because it was expedient and because NTIS promised IRS, without an objective support that it could develop Cyberfile in less than 6 months and have it operating by February 1996.”  The IRS abandoned the Cyberfile effort after wasting $17.1 million on the project.

While government information technology systems have come a long way since Cyberfile was attempted, the IRS still has major problems managing its technology portfolio.  The recent swath of coronavirus stimulus checks should serve as a warning signal to anyone thinking the government has the capability of developing and maintaining information technology systems better than the private sector.  A January 26, 2021 article in The WasteWatcher noted a GAO report that found of the $2.6 trillion appropriated in four separate coronavirus bills, 160.4 million economic impact payments had been sent by IRS, with nearly “1.1 million payments worth $1.4 billion had been paid to dead people.”  This isn’t small change, and if the IRS can’t figure out how to avoid sending checks to the deceased, this problem will continue into the future.