WHY IS THE IRS GETTING INTO THE TAX PREP BUSINESS? | Council For Citizens Against Government Waste


Press Release

For Immediate ReleaseContact:  Sean Rushton/Philippa Jeffery
January 29, 2002(202) 467-5300


Washington, D.C. - The Council for Citizens Against Government Waste (CCAGW) today urged the administration to abandon the idea of allowing the Internal Revenue Service (IRS) to enter the tax preparation business.

"The IRS is a grossly mismanaged agency, having proven time and again that it cannot guarantee accuracy, privacy, security or cost savings when it comes to electronic filing," CCAGW Vice President Leslie K. Paige said.  "This move would give the federal government new opportunities to snoop into private lives and will be a guaranteed government waste disaster." 

According to a 2001 General Accounting Office (GAO) report, during the 2000 tax filing system the IRS processed 35 million tax returns electronically and used no encryption to protect the data.  The report stated that it failed to construct firewalls to protect files, giving easy access to sensitive data by hackers. 

The IRS’s Cyberfile project, designed to enable taxpayers to file from home, cost taxpayers $17 million and never worked.  The IRS has lacked the capability to provide taxpayers with basic, accurate tax information or respond to inquiries in a timely manner via its toll-free hotline.  The Treasury Department inspector general reported last year that over a four-day period, its auditors were unable to get through to an IRS employee 37 percent of the time and of the calls that did reach someone, IRS officials gave the wrong answer 47 percent of the time.  "There is no reason to believe the IRS’s online tax preparation services would be any better," Paige said. 

"Permitting the IRS to be both tax collector and tax preparer is a clear conflict of interest and invites all sorts of mischief and abuses," Paige also said.  "Private accounting and tax preparation firms confidentially advise taxpayers how to legally reduce their tax burdens.  Contrarily, it is in the IRS’s best interest to maximize tax returns."

"Further, the IRS itself doesn’t want this burden," Paige added.  "Last year, the IRS commissioner told the House Appropriations Committee that 'At this point in time, no-cost options do exist, and therefore we see no need to even consider such an option….I don’t see any value or benefit to us either directly or by contract actually offering these services… That is why I have no hesitation in saying that is not our intent.'"

The demand for expert, confidential tax advice and preparation is already being met by small business entrepreneurs in the private sector.  In fact, it is one of the most successful niches in e-commerce.  Enabling taxpayers to submit their taxes electronically to the IRS is an example of a good e-government solution.  If done correctly, it can streamline an existing government process and cut costs for both the agency and the taxpayers.  However, using taxpayer-funded government resources to add new services, which directly compete with and undercut successful private businesses is an inappropriate, unnecessary, and dangerous expansion of government power. 

Link to http://www.cagw.org to send a letter to the Bush Administration opposing this policy.

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.

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