IRS urged to avoid electronic tax preparation

The advisory board to the Internal Revenue Service's Electronic Tax Administration issued a strongly worded letter last week urging the ETA to "discontinue all other efforts to further expand their mission and role into tax preparation on the Internet and elsewhere."

The letter, signed by seven current or former members of the Electronic Tax Administration Advisory Committee (ETAAC) was sent to Rep. James Kolbe, R-Ariz., chairman of the House Subcommittee on Treasury, Postal Service and General Government.

The letter reiterated the position made clear in a May letter to Robert Barr, assistant commissioner of ETA, that the IRS proposal to offer options to the public for preparing and filing individual income tax returns, saying the plans "was not good public policy."

The IRS has been mandated with moving 80 percent of tax returns to be filed online and to find a way to offer these services at no cost to the taxpayer. The agency has been seeking ways to fulfill its mandate, but many in the private sector and the advisory committee feel the government agency is over-stepping its bounds and plans to compete with the private sector.

At a hearing Tuesday in front of the subcommittee, Ed Black, chairman and CEO of the Computer and Communications Industry Association, said that the IRS' actions indicate that it is suffering from "mission creep" and that it intends to compete against the private sector by offering these e-commerce services. The private sector is providing these services and there is no need for the government to step in, he said.

The ETAAC letter said members "strongly oppose any action" by the IRS to offer tax preparation services internally or obtained from an outside contract. "We were surprised and shocked that the IRS is continuing with this effort after all of the discussions and recommendations on the part of the ETAAC and the industry.

Also at the hearing Tuesday, former ETAAC Chairman Charles Lacijan said the IRS request for information caused confusion in the marketplace and he urged Congress to articulate a public policy making clear its intentions for IRS involvement in the preparation and filing of electronic tax returns.

Lacijan said Congress should urge the IRS to seek private sector solutions and be ordered to back off of its policy to offer no-cost electronic Internet filing and in two years evaluate whether the range of private sector choices are meeting the public need.

But IRS Commissioner Charles Rossotti stressed that "it was not, and is not intended that the IRS would offer preparation or filing services itself in any form."

Rossotti also told the panel that the IRS intends to promote competition while fulfilling its mandate. "Our approach is to ask industry for suggestions as to how to accomplish this objective. At this time, we have no plans beyond soliciting input from the industry on this matter."