By Christopher Pitts
- In 2018 HR Block and Intuit spent $6.6M lobbying for tax legislation
- 70% of Americans are already eligible to file taxes for free
Let’s face it, preparing your taxes can be difficult if not an arduous process, and for several years now the IRS has advocated for a filing system to make it easier for Americans to file taxes. However, with the adoption of new tax legislation the filing process is destined to stay complex. The recently passed Taxpayer First Act prohibits the IRS from creating a free online filing system, and oddly enough, this bill garnered support from both Republicans and Democrats.
Why This Matters: Over 40% of black Americans make less than $30,000 per year, putting them at an income disadvantage if taxes are not filed correctly. If a free system was established people of color could be alleviated of this burden, possibly with a sizable return. Furthermore, according to the Root, it was verified that when filing taxes the IRS tends to conduct a substantially higher percentage of audits in poor, disproportionately black areas, where the African American population is high and income is low. Though some of the most diverse and wealthiest counties in America result in normal audit rates.
Last year alone, H&R Block (HRB +1.47%) and Intuit (INTU +0.59%), Turbo Taxes parent company, spent $6.6 million lobbying for tax legislation. The more complex the tax filing process becomes, the more revenue that can be generated, and these companies brought in $3.3 billion and $5.9 billion respectively in revenues during their fiscal 2018 year.
H&R Block and Intuit brought in $3.3 billion and $5.9 billion respectively in revenues during their fiscal 2018 year
To appease the masses though, these for-profit tax preparation services formed the Free File Alliance in an attempt to promote free tax filing for individuals under a certain income level. Nevertheless, this is not widely known as 70% of Americans are already eligible to file taxes for free through this program. Moreover, since the Free File program is operated by for-profit tax preparers who intentionally fail to promote the free program, only 3% of eligible taxpayers actually use the service.
Situational Awareness: This bill passing is another win for the tax preparation industry in cornering the market. In 2015 H&R Block lobbied for the Earned Income Tax Credit, which gives low income, working parents a larger tax refund. Sounds like a good idea until one realizes that 20% of eligible families miss out on this opportunity, in part, due to the complication of claiming it through the filing process.
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