Get in the game

The ban on the federal government competing with industry is a
well-established and generally sensible policy. But as the Internet revolutionizes service
after service, the ban is producing fresh points of contention between agencies and

Electronic tax filing is moving toward a showdown on the issue of public vs. private
work. As the IRS strives to modernize both its internal systems and its service offerings,
online filing is a natural growth area. The agency defaults, though, to accepting online
tax returns only through third-party tax service providers and not directly from
individual taxpayers.

The IRS could cite manageability in making a case for taking returns only from the
H&R Blocks and Intuits of the world. Having millions of individuals pinging online
systems increases the chance for fraud and abuse.

Yet the argument also begs reality. Airlines, retailers and many agencies are among the
vanguard whose systems handle myriad transactions with the public.

Meanwhile, the IRS’ stated reason for not accepting returns from individuals is
that it would put the agency in direct competition with companies that make their living
submitting electronic returns on behalf of taxpayers. Does the argument really hold water?
I don’t think so.

Millions of people still prepare and mail in their returns the old-fashioned way. How
would individuals filing on line harm third-party companies, given that those filers
weren’t customers in the first place?

The possibility of accepting individual returns is starting to dawn on a few
states that apparently harbor no fear of competing with the private sector. Pilot programs
are going on in Delaware, Illinois, Indiana and Kansas.

Having said that, I must add that if I were running the IRS in a politically
treacherous environment—and under Office of Management and Budget Circular
A-76—I’d be cautious, too. But even so, the agency and its overseers need to
visit the issue more thoroughly, especially if the goal is better service to citizens.

Thomas R. Temin

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