March 20, 2007

IRS in E-file Embarrassment

I have already argued at great length that the IRS should reform e-filing so that there is one government-provided portal that is simple and free for all taxpayers to use. What he have instead is a crazy situation in which several private companies collectively known as the "Free File Alliance" have contracted with IRS to provide online tax filing and it is currently not free for people with incomes over $50,000. Even we don't love doing our taxes so much that we want to pay to do them.

One member of Congress who feels the same way took the opportunity at a subcommittee hearing today to shine a light on the sort absurd things that happen when you give private companies what are fundamentally government tasks. At this morning's hearing of the Ways and Means Subcommittee on Oversight, Representative Earl Pomeroy (D-ND) told IRS Commissioner Mark Everson about a website,, that is clearly designed to fool people into thinking it is part of the IRS (whose actual website is

The website has links leading to offers for Refund Anticipation Loans (RALs) which are notorious scams that involve taxpayers receiving a loan that they will pay off, usually with ridiculously high interest, after they receive their tax return. One page on the site even shows that these loans can have an interest rate exceeding 93 percent. Congressman Pomeroy then explained that the site seems to belong to company called TaxACT (several, but not all, of the pages seem to indicate this) which happens to be one of the companies in the Free File Alliance!

The IRS actually stopped the Free File Alliance from offering and advertising RALs in the e-filing process. Now that it appears one of the companies is nonetheless involved in an egregious RAL, perhaps the IRS will feel some pressure to go further. Or, if more embarrassments like this materialize, maybe more people will swing around to the view that this is really not something that private companies should be providing in the first place.


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