The IRS Announces an Online Tax Payment Agreement System
The IRS recently announced that it will be launching a system to allow "tax professionals" to apply online for tax payment agreements or tax installment agreements for their clients.
While this is a step in the right direction, it does present yet another opportunity to consider whether the IRS should be allowed to simply provide a FREE suite of online tools for taxpayers to complete and submit tax forms to and interact online directly with the IRS.
To its credit, the IRS has attempted to provide FREE tax return preparation tools for taxpayers in the past. Unfortunately the tax software giants were able to convince Congress to reign in the IRS's efforts.
According to the tax software folks, the IRS should not be in the business of providing taxpayers with a FREE method for complying with our tax laws or interacting with the IRS because this would significantly harm their businesses. I agree that the IRS providing a FREE service would harm these businesses, but I do not agree that their business provide a value that warrants protection from government competition.
The current tax software vendors and tax resolution firms are now providing services that are squarely within the government's interest and function. In these cases the businesses should have to show that they provide some value over and above what the government could do if the government were to provide the same or similar service. If the business cannot make this showing, it is the business model upon which the business is based that is faulty and the business does not warrant protection from government competition.
With regard to being able to complete and submit IRS forms online, the tax software and tax resolution firms cannot make this showing. To the contrary, there are a number of reasons why taxpayers would be better off if the IRS were to provide FREE tools to complete and submit IRS forms online.
It is hard to argue that passing taxpayer information to a private third party middlemen is a more secure and efficient means for getting online forms delivered to the IRS. Given the real threat of identity theft and online security it just does not make sense to have taxpayers submit their information to a private third party middleman only to have that middleman pass the information on to the IRS. This extra step increases the chances that taxpayer information will be intercepted by others.
Also, imposing third party middlemen helps to insure that IRS forms will not be presented to the IRS in a way that is most efficient for the IRS. For example, there are a number of "tax resolution" firms that use scare tactics to charge taxpayers thousands of dollars for the firm to complete and submit one IRS form to the IRS. IRS statistics show that the majority of the IRS forms submitted by these "tax resolution" firms are rejected because they are incomplete or otherwise incorrectly submitted. If the IRS were to create and maintain a FREE online process for taxpayers to submit these offers, the IRS could impose computer restrictions that would prevent taxpayers and "tax resolution" firms from submitting incomplete or otherwise faulty forms.
Of course, this would also save taxpayers the millions if not billions of dollars that they pay to the "tax software" vendors and "tax resolution" firms. It could also save taxpayers and the government quite a bit of money by reducing the costs associated with administering our tax collection system.
For example, the IRS currently only accepts offers in compromise or Form 656s that are submitted using the IRS printed forms. The current wait time for the IRS to process these printed forms and to prepare a written response to an offer in compromise is somewhere between six to twelve months. In many cases offers that are submitted are lost by the IRS as the files are transferred to different IRS offices throughout the nation. In these cases taxpayers have no ability to track where or what is happening to their offer; therefore, taxpayers end up making multiple calls to the IRS service centers, to the Taxpayer Advocates Office, and to the IRS Appeals Office in an effort to locate and get their offer processed.
By having a FREE online tool available taxpayers could print a verification form to ensure that their offer was accepted and they might even be able to track the progress of their offer online. This would save the IRS operator phone time, it would speed up the IRS internal case file transmission process, and it would provide a means for the IRS and taxpayers to easily track the progress and location of submitted offers in compromise. And the offer in compromise form is just one of hundreds of IRS forms that taxpayers frequently submit.
If this isnt bad enough, the reality is that the government subsidizes tax software and tax resolution businesses in that it allows taxpayers who itemize their deductions to deduct amounts that they pay for the tax software or "tax resolution" services.
Why should the government use taxpayer money to support these businesses, instead of just providing a better service itself? These tax software vendors and tax resolution firms are an inefficiency in and a drag on our economy. The greater good requires that the government provide the service - especially since it will save taxpayer and government money.
While this is a step in the right direction, it does present yet another opportunity to consider whether the IRS should be allowed to simply provide a FREE suite of online tools for taxpayers to complete and submit tax forms to and interact online directly with the IRS.
To its credit, the IRS has attempted to provide FREE tax return preparation tools for taxpayers in the past. Unfortunately the tax software giants were able to convince Congress to reign in the IRS's efforts.
According to the tax software folks, the IRS should not be in the business of providing taxpayers with a FREE method for complying with our tax laws or interacting with the IRS because this would significantly harm their businesses. I agree that the IRS providing a FREE service would harm these businesses, but I do not agree that their business provide a value that warrants protection from government competition.
The current tax software vendors and tax resolution firms are now providing services that are squarely within the government's interest and function. In these cases the businesses should have to show that they provide some value over and above what the government could do if the government were to provide the same or similar service. If the business cannot make this showing, it is the business model upon which the business is based that is faulty and the business does not warrant protection from government competition.
With regard to being able to complete and submit IRS forms online, the tax software and tax resolution firms cannot make this showing. To the contrary, there are a number of reasons why taxpayers would be better off if the IRS were to provide FREE tools to complete and submit IRS forms online.
It is hard to argue that passing taxpayer information to a private third party middlemen is a more secure and efficient means for getting online forms delivered to the IRS. Given the real threat of identity theft and online security it just does not make sense to have taxpayers submit their information to a private third party middleman only to have that middleman pass the information on to the IRS. This extra step increases the chances that taxpayer information will be intercepted by others.
Also, imposing third party middlemen helps to insure that IRS forms will not be presented to the IRS in a way that is most efficient for the IRS. For example, there are a number of "tax resolution" firms that use scare tactics to charge taxpayers thousands of dollars for the firm to complete and submit one IRS form to the IRS. IRS statistics show that the majority of the IRS forms submitted by these "tax resolution" firms are rejected because they are incomplete or otherwise incorrectly submitted. If the IRS were to create and maintain a FREE online process for taxpayers to submit these offers, the IRS could impose computer restrictions that would prevent taxpayers and "tax resolution" firms from submitting incomplete or otherwise faulty forms.
Of course, this would also save taxpayers the millions if not billions of dollars that they pay to the "tax software" vendors and "tax resolution" firms. It could also save taxpayers and the government quite a bit of money by reducing the costs associated with administering our tax collection system.
For example, the IRS currently only accepts offers in compromise or Form 656s that are submitted using the IRS printed forms. The current wait time for the IRS to process these printed forms and to prepare a written response to an offer in compromise is somewhere between six to twelve months. In many cases offers that are submitted are lost by the IRS as the files are transferred to different IRS offices throughout the nation. In these cases taxpayers have no ability to track where or what is happening to their offer; therefore, taxpayers end up making multiple calls to the IRS service centers, to the Taxpayer Advocates Office, and to the IRS Appeals Office in an effort to locate and get their offer processed.
By having a FREE online tool available taxpayers could print a verification form to ensure that their offer was accepted and they might even be able to track the progress of their offer online. This would save the IRS operator phone time, it would speed up the IRS internal case file transmission process, and it would provide a means for the IRS and taxpayers to easily track the progress and location of submitted offers in compromise. And the offer in compromise form is just one of hundreds of IRS forms that taxpayers frequently submit.
If this isnt bad enough, the reality is that the government subsidizes tax software and tax resolution businesses in that it allows taxpayers who itemize their deductions to deduct amounts that they pay for the tax software or "tax resolution" services.
Why should the government use taxpayer money to support these businesses, instead of just providing a better service itself? These tax software vendors and tax resolution firms are an inefficiency in and a drag on our economy. The greater good requires that the government provide the service - especially since it will save taxpayer and government money.
 
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