IRS tax prep plans draw fire

Industry groups and members of Congress are lodging a loud protest against tentative plans for the Internal Revenue Service to get into the tax preparation business.

The idea is one of 24 proposals from the Office of Management and Budget for cross-agency e-government programs. But it appears to be gaining steam and is likely to be included in President Bush's fiscal 2003 budget that is scheduled for release Feb. 4.

The proposal would allow the tax collection agency to provide the public with software to prepare, calculate and file their tax returns for free. And it would allow the IRS to compete with a growing e-filing industry that has been making millions of dollars selling software to taxpayers.

"If the government is concerned about the pace of electronic filing volumes, the solution is not for the government to step in and provide electronic services itself," said a letter to OMB Director Mitchell Daniels Jr. signed by four members of the House of Representatives.

In a separate letter to the White House, the Computer & Communications Industry Association (CCIA) said the federal government should not "invest public funds" in a "competitive battle for market share and customers."

"A central feature of our economic system has always been the limited role of our government as an enforcement or regulatory authority, but never as an active participant or competitor," the CCIA letter said.

President Clinton proposed the same plan in his last budget, and Congress dismissed the idea. IRS Commissioner Charles Rossotti also has opposed the idea of government getting into the tax preparation business.

"We see no need to even consider such an option," Rossotti told the House Appropriations Committee a year ago.

But Mark Forman, OMB's associate director for information technology and e-government, is supporting the idea. He met informally with industry representatives Jan. 25 in a coffee shop near OMB's offices to discuss the plan.