Consumer Debt

An IRS plan to test drive a new electronic free-file tax return system next year has got supporters and critics of the idea mobilizing to sway the public and Congress over whether the government should set up a permanent program to help people file their taxes without needing to pay somebody else to figure out what they owe, the Associated Press reported. On one side, civil society groups launched a coalition to promote the move toward a government-run free-file program. On the other, tax preparation firms have been pouring millions into trying to stop the idea cold. The advocacy groups are exponentially out-monied. Federal law doesn’t require domestic lobbyists to itemize expenses by specific issue, so the sums are not limited to free-file. The IRS in May released a report that said most taxpayers are interested in filing their taxes directly to the IRS for free, and concurrently announced plans to launch the pilot program for the 2024 filing season. The goal is to test a direct file system that will help the IRS decide whether to move forward with a more permanent program. That idea has faced the immediate threat of budget cuts from congressional Republicans. Republicans on the House Appropriations Committee in June proposed a budget rider that would prohibit funds to be used for the IRS to create a government-run tax preparation software, unless approved by a group of House and Senate committees. The move “safeguards the IRS from an obvious conflict of interest where the tax collector becomes the tax preparer,” the bill’s summary states. A Government Accountability Report in April 2022 found that 70% of taxpayers were eligible to use an existing free-file program but just 3% actually used the service.

The Biden administration announced that it would cancel $39 billion of student debt owed by more than 804,000 borrowers whose debts have been outstanding for more than 20 years, Politico reported. The Education Department said that it was implementing its plan, announced in April 2022, to compensate borrowers for what it called “historical inaccuracies” and other failures in how the agency and its contracted loan servicers have managed the income-driven repayment programs. The program is separate from President Joe Biden’s sweeping student debt relief program that the Supreme Court struck down last month. But the announcement comes as the Biden administration looks to highlight its alternative pathways for delivering student debt relief in the face of that legal defeat.