Trump admin eyeing closure of IRS Direct File program: Report

Oh snap, it's tax season. People are freaking out right now

Literally drug tax season. What's that saying about death and taxes? I swear to God, as soon as March and April rolls around

I feel like I have this constant looming threat in my life. The IRS expects 146 million individual tax filings this season

You'd think with so many people affected, the process might be a bit more streamlined

Reflexity is out of control. It's the single biggest problem the taxpayers have

See, I understand the tax code better than anybody that's ever run for president. And it's extremely complex

The government knows how much I owe. So why the hell do I have to do this

There are 14 billion reasons why the tax prep industry has a vested interest in making sure

the majority of Americans need a tax pro this time of year. There is an incentive to keep the tax code complicated, to keep this industry in operation

And the industries spent millions lobbying against a new government program where you could foul your taxes for free directly through the IRS

There are a variety of things that the IRS needs to do to enhance taxpayer service and tax administration

This does not seem like the best investment. More on that, plus there's got to be an easier way

United States tax system is a maze. We look to the banks of the Baltic Sea for a simpler tax solution

I'm pretty sure Avril was singing about the U.S. tax code. Our U.S. tax code is quite complex and unique in that, you know, we of course use it to collect taxes and fund the federal government a variety of services

But we also use it to administer a variety of social subsidies

Okay, so the U.S. employs a ton of provisions intended to help American taxpayers, like the child tax credit, mortgage interest deduction, and earned income tax credit

And so that does create complexity. It also creates opportunities for taxpayers to use their tax return to their financial betterment

Did you use that $916 million loss to avoid paying personal federal income taxes

Of course I do. Of course I do. The Internal Revenue Code contains nearly 10,000 sections and a six-volume set of corresponding regulations

That's according to the National Taxpayer Advocate's annual report to Congress. They say the average taxpayer spends 13 hours and 240 bucks to file one annual tax return

13 hours, $240. Meanwhile, IRS customer service reps spent 3.7 million hours answering phones during the 2022 tax season

This year, the U.S. government is rolling out a pilot program that offers some Americans the opportunity to file directly with the IRS for free

The pilot program is limited to just 12 states. They created the direct file system with funding from the Inflation Reduction Act

and it only covers simple individual federal tax returns. The 12 states in the program either have no state income tax or have some sort of electronic filing system of their own

So there's still only a small number of taxpayers that are actually able to use the in-house government services at this point

But government-run websites have a complicated past. In 2013, when healthcare.gov launched, millions of Americans typed in that URL to put some

insurance in their shopping cart. But instead, they got bugs, crashes, and other messages preventing them from checking out

The White House said they never expected that much traffic the first day With the baby steps the IRS is taking it appears the government learned at least one lesson from that But the IRS pilot program faces far more opposition than folks who think government should stay out of web development

When it runs out on a much wider scale, it could potentially pose as a threat to Intuit's businesses every year

Turbo Tax parent company Intuit says the program is a solution in search of a problem

H&R Block Tax Institute Director Andy Phillips says there are literally dozens of outlets already providing free services

Just here at H&R Block, we have a free product that offers support for more than 40 forms

That's more than what's offered in the Direct File program. That's more than what's offered by some of our biggest competitors, including TurboTax

And so while, yes, that program is free, at H&R Block, we also have a free DIY product, and we're pretty confident that we're doing free better

Tens of millions of Americans turn to tax prep services like H&R Block and TurboTax every single year

The two companies bring in billions in revenue each tax season, and they account for roughly 42 percent of electronically prepared individual tax returns

Overall, the U.S. tax prep services industry is about a $14 billion market

We guarantee 100 percent accurate taxes. She's good. I switched to H&R Block doing my own taxes online

I was able to file free and it was so easy to do on my own. In 2003, the IRS launched the Free File Program, a public-private partnership between the IRS

and tax prep companies to give lower-income taxpayers access to tax prep software

Since the launch, the tax prep industry has spent $93 million on federal lobbying efforts

according to ysis from Open Secrets. Intuit set a company lobbying record in 2023, spending $3.8 million that year

while H&R Block put up another $3 million lobbying. Much of that is targeted on fighting the IRS development of a competitor to the tax prep

industry that would allow people to file for free. The direct file pilot program, which cuts out the private sector, is just one reason for the rift between tax prep giants and

the government. It all started with a 2019 ProPublica investigation that accused TurboTax

of using lobbying and dark pattern customer tricks to fend off the government's attempts

to make tax filing free and easy. ProPublica reports Intuit made their version

of the government's free file program harder to find while promoting their own free edition

And free and free and free and free and free not a better damn free. Which came with traps that could push customers into paying

That's right. TurboTax free edition is free, free, free, free, free. In many cases, taxpayers may not know

what they're getting into from the start. They may invest time and energy into preparing their

tax filing only at the very end to say, OK, actually, this is going to cost money

Tonight, more than 4 million people who used TurboTax to file their income taxes

are getting a refund. All 50 states sued, forcing a $141 million settlement

And the Federal Trade Commission ruled Intuit was guilty of deceptive advertising

The popular tax filing software TurboTax has been banned from advertising its services as free

This year, the FTC also filed a similar complaint against TurboTax competitor H&R Block

I was able to file free. The FTC says H&R Block also deceptively advertises free products

and unfairly deletes customer data when users try to downgrade to cheaper options

H Block is denying the claims and suing the FTC in return H Block lawsuit claims the FTC use of internal judges to decide these cases violates the Constitution

The Supreme Court is already considering a similar argument against the Securities and Exchange Commission

But back to taxes. When I spoke with H&R Block, I asked them how many of their customers file for free

They told me that's not a number they can publicly share. Meanwhile, TurboTax claims they have over 11 million customers

who file 100% free each year. But this is advertising TurboTax's free edition

not the government's existing free file. Secretary Yellen, what percentage of taxpayers actually use free file right now

I believe that last year, about 4%. And you know that is not an accident

These companies deliberately sabotaged the free file program and steered people to products that they could charge for

After nearly two decades, Intuit stopped offering the government's free file program in 2021, saying the program was too limiting, focusing instead on their free edition

We're seeing the tax prep industry investing into making their services more enhanced, having integrations with other types of services

I know Intuit recently launched an integration with Credit Karma. And so we're seeing them make their services more appealing to taxpayers, trying to make them easier and have more available

In addition to also spending to fight against that government program. Intuit says the government's newest attempt at free tax prep is a thinly veiled scheme where billions of dollars of taxpayer money will be unnecessarily used to pay for something already completely free of charge today

Let's get real. There's a reason the TurboTaxes of the world even exist

The commercial tax prep industry has really developed because people struggle to file their taxes, because there really isn't an easier way

Hey, it's time to pay your taxes. Oh, OK. How much do I owe you? What's the total amount

Oh, we're not going to tell you that. So many different types of income are taxed differently

Some types of saving are taxed never. Some types of saving are taxed once

Some types of savings are taxed twice. You know, dividends, interest, short-term capital gains, long-term capital gains

I'm thinking big here. How do we simplify the tax code? It would be something that would look more like Estonia

Welcome to Estonia, the land of the best tax code in the world, according to the Tax Foundation

97% of people filed the taxes electronically, and 92% found that process really easy

Erlik Komets is the head of the Tax and Customs Policy Department of the Estonian Ministry of

Finance. The system calculates everything for you. So you don't need to do really anything

yourself except enter a few numbers that government maybe does not have

Estonia has a flat 20% tax on individual income. Every Estonian taxpayer has an account with the Ministry of Finance

Come tax season, you log in and your tax information is already filled out

You already see what is the salary that you have earned during the year and how much your

employer has withheld and the system automatically already applies allowances if you are entitled

to them. Even more complicated tax situations are pretty easy to amend. Estonia says most

taxpayers are done filing in three minutes Nobody in Estonia would even dream about wanting to pay money to file your taxes The fact Estonia has a population the size of the state of Maine doesn mean the system would not work on a larger scale

I don't think there are as many scaling issues with a tax system in the way that there might be with other policies

I think you need efficient systems. And of course, for a big country, the initial IT cost of introducing such a system would be horrendous

But again, then big countries would have also more funds to use towards that purpose

But Estonia's flat tax could be considered regressive. It was introduced 30 years ago after the country declared independence from the Soviet Union

At the time, there wasn't as much wealth disparity. Komet says she would not be surprised if the country moves toward more progressive taxation years from now

But you can still maintain the easy filing system. But like the U.S., changes to the tax code can be a heavy lift in Estonia

2023 was the first year when we had to increase taxes, mostly because of the additional defense expenditure that we had to fund

And even people recognize that this is for the good cause and we really need to boost our defense

It was still incredibly hard to make happen. The Tax Policy Center says the last time the U.S. made comprehensive changes to the tax code was in 1986

Signed by President Ronald Reagan, the Tax Reform Act dropped the top income tax rate from 50 percent to 28 percent

and raised the lowest rate from 11 to 15 percent. In 2017, Republicans promised a simple tax return that could fit on a postcard

But the idea got about as much traction as it did when Steve Forbes published

Flat Tax Revolution using a postcard to abolish the IRS back in 2005

And don't forget pizza executive Herman Cain's run for the Republican presidential nomination in 2012

Do you think the Libya comments reinforce the idea that you don't have a thorough understanding of foreign policy

9-9-9. Keynes proposal would replace the current tax system with a 9% personal income tax

9% federal sales tax, and 9% corporate tax. There's a reason these proposals go nowhere in the U.S

As the late Louisiana Senator Russell Long famously said, Just to say that we promise to not touch your provisions, the provisions that you benefit from

But the other special benefits that other people benefit from, we'll get rid of those

As another tax season winds down, the IRS says nearly one in three people wait until the final few weeks to file their returns

So with that in mind, here are some inspirational words from the man behind 999, which could also relate to doing your taxes

I believe these words came from the Pokemon movie. Life can be a challenge

life can seem impossible. It's never easy when there's so much on the line

But you and I can make a difference