Surveys sent by the Internal Revenue Service to taxpayers about the agency's proposed e-file system may have been improperly designed to mislead Americans about their ability to file state taxes via direct e-file — and the agency may have downplayed the cost of implementation by billions of dollars, according to a new watchdog report.
The audit by the Treasury Inspector General for Tax Administration was initiated to assess the IRS's compliance with a provision of the Inflation Reduction Act of 2022 requiring the agency to design and report to Congress on a system for free electronic filing of tax returns.
The IRS announced in late June that it would pilot a free tax-filing tool next year.
As of July 10, 2023, the IRS has obligated $11.1 million (74%) of the $15 million allocated by the act, according to the report.
According to IRS management, the IRS plans to spend $966,000 in salaries and benefits and $26,000 for equipment from the $3.9 million unobligated funds, the report states.
However, IRS management did not have any planned spending for $2.9 million of the $3.9 million unobligated funds.
The IRS obtained taxpayer opinions on a Direct File system.
"However, taxpayer interest in a Direct File tool may be overstated due to the design of the surveys conducted," the report states.
