The IRS is in the spotlight for a potentially free, government supported tax filing system, sending refunds to late filers during the pandemic, and for exposing the personal data of 120,000 filers.
The IRS has come under fire a lot in 2022.
Reasons range from years-late tax refunds to poor customer service.
The institution has done a lot to try to rectify their issues with the American people, but there are still some major issues.
Here are just a few of the major changes or issues the IRS is facing
The IRS may create a system for free tax filing backed by the government
The Inflation Reduction Act resulted in the IRS receiving $80 billion in funding, according to CNY Central.
Now, a government based system for filing taxes at no cost is being looked at.
Democrats have been working toward getting a free file system for years.
Many politicians feel it’s unfair that Americans are forced to spend money to file their taxes.
President Joe Biden recently signed a bill that would have the IRS use $15 million dollars to study a system that provides free tax filing.
There are a lot of positive potential outcomes for the use of a government backed free filing system.
Many people would see better access to services necessary for filing a tax return.
Other positives would be more Americans being influenced to file digitally, something the IRS has been asking for for years.
By filing electronically, it makes processing the returns even easier for the IRS.
The $80 billion given to the IRS through the Inflation Reduction Act will be sent throughout the next ten years.
The goal is to rebuild staff, update its outdated systems, and close the tax gap.
The tax gap is what the IRS is owed in taxes but hasn’t received, and it’s worth hundreds of billions.
Lack of enforcement has allowed Americans who owe taxes accountable at the rate they should be.
A government backed tax system would not be fully implemented for years, but it’s a step in the right direction to start studying it.
Private tax filing companies have their own industry right now
Most private tax preparation services mislead Americans who go there to file their taxes.
They list their service as free until anything more than basic services are required.
Most Americans go to private tax preparation agencies, and the industry could oppose a government run system.
There is a written agreement between the IRS and private tax filing companies right now called the Free File Alliance.
With this, households earning under $73,000 can use free services through private companies.
This has stopped the IRS from creating its own service.
Many places are no longer in agreement though, including H&R Block and Intuit.
70% of taxpayers are eligible for these services, and only 3% use them.
This has caused many companies to pull out of the agreement.
1.6 million Americans can expect refunds from the IRS after missing filing deadlines during the pandemic
According to CBS News, there are millions of people that will soon see refunds from the IRS for filing late taxes during the pandemic.
Those who qualify have until Sept. 30 to take advantage.
When people file late during a normal tax year, they could end up being fined up to 25% of their owed taxes.
In 2019 and 2020, all penalties for late filing are being suspended.
Anyone who already paid their fine for their year is entitled to a refund.
Over 1.6 million Americans paid fines for those years.
Credits totaling $1.2 billion dollars are being sent out, and many can expect an average payment of $750.
Some Americans can expect even more.
If you filed your return and were notified of a fine, it’s simply going to be eliminated.
Refunds can be expected by the end of the month.
If you still need to file taxes for 2019 and 2020, you can do so penalty free before Sept. 30, 2022.
That means there’s only about two weeks to file.
The IRS shared that their goal with eliminating the penalties is to help struggling taxpayers who were impacted by the pandemic.
The plan will also benefit the IRS as it still struggles to make it through massive backlogs.
The issuing of stimulus payments took a major toll on the IRS as well as other pandemic related tax laws.
By getting rid of penalties, the IRS can put more focus on backlogs.
This could give the IRS a chance to catch up and have a normal tax year in 2023.
Around 120,000 taxpayers had their data revealed by the institution
According to NPR, private information was temporarily made public by the IRS for about 120,000 taxpayers.
The IRS shared the incident Friday.
The data came from confidential forms, specifically Form 990-T.
This is a form used by tax-exempt organizations.
The data was accessible by downloading it on the IRS website’s search engine for around one year.
Human coding error was blamed and the issue went unnoticed for months until an employee caught it.
Congress was notified by the IRS, a legal requirement.
Data shared includes taxpayer names and business contract information.
More sensitive information like Social Security numbers and income information were not released.
Everyone impacted will be contacted by the IRS and the forms have since been removed from the website.
The incident is under review and more information about it will be released in 30 days.