Debate: With Direct File, Is the IRS Inviting Conflict of Interest?

The Internal Revenue Service has introduced its Direct File tax preparation service to eligible taxpayers. 

The pilot program, currently open to taxpayers in 12 states, is available for filers with certain types of income, including W-2 income, interest income reported on Form 1099-INT, Social Security income and unemployment compensation. Only taxpayers who take the standard deduction  — including those with deductions for student loan interest or educator expenses — can use the platform. Taxpayers are ineligible if they claim credits aside from the earned income tax credit, child tax credit or credit for other dependents. 

The program, free of charge, walks taxpayers through the tax preparation process. Some critics, however, have claimed that the program will create a conflict of interest.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about whether the IRS pilot program creates a conflict of interest.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Byrnes

Bloink

Their Reasons:

Byrnes: The IRS is the entity that reviews, evaluates and audits federal income tax returns. Through this new pilot program, IRS agents may also be involved in providing advice to taxpayers when it comes to preparing their actual returns. This new system, by definition, is going to create a risk that taxpayers will receive conflicted advice — or advice that’s entirely insufficient. We also have to remember that millions of Americans already have access to free tax preparation services that aren’t run by the IRS.