THE DAWN OF DIRECT FILE: The IRS is fully launching the pilot program of its own government-run tax filing system this week, after initially allowing federal employees to test out the portal. The private tax preparation industry and conservative groups have fiercely opposed the Direct File program, arguing it’s an unnecessary use of government resources. Now, supporters of the idea are releasing new research arguing that the initiative will be a boon to taxpayers. The Economic Security Project’s report also finds that Direct File will be an incredibly efficient use of government resources — taxpayers, the group said, would gain $106 in benefits for every dollar spent on the program, through both savings on filing fees and increased access to tax breaks. Overall, the report from Gabriel Zucker from Code for America and Bharat Ramamurti, the former deputy director in President Joe Biden’s National Economic Council, found that taxpayers would save some $23 billion through both added tax credits and fewer compliance costs once Direct File reached maturity. Zucker and Ramamurti acknowledge that they assume the program will be quite popular with taxpayers in reaching those findings, but they also stress that the government’s return on investment would remain strong even if a more modest number of taxpayers use Direct File. Other interesting findings: —The report assumes that Direct File will prepopulate tax forms — fill out the forms for you, in other words — in the not-so-distant future. Key Democratic lawmakers like Sen. Elizabeth Warren (D-Mass.) have been calling for the IRS to take that step, noting it happens in other countries. But groups on the right, where distrust of the IRS remains quite high, would almost certainly fight such a move. — Zucker and Ramamurti’s argument that Direct File will allow taxpayers to claim more in tax benefits is in direct tension with the reasoning of opponents of the initiative, who maintain that the IRS — as the government’s revenue collector — has a vested interest in maximizing a taxpayer’s bill. “A wealth of research suggests that Direct File could help millions of low-income households claim their tax credits by providing a free and simplified tax filing option,” Zucker and Ramamurti write. SAW THEM IN COURT: Lawyers for the billionaire hedge fund manager Ken Griffin and the IRS squared off in court Friday over a lawsuit Griffin filed against the tax agency stemming from the leak of his tax returns to online news outlet ProPublica, our Josh Gerstein reports. The Miami-based U.S. magistrate judge overseeing the case, Jonathan Goodman, clearly grew frustrated with lawyers on both sides of the case during the hour-long Zoom hearing. Charles Littlejohn, a former IRS contractor, pleaded guilty last year to the ProPublica leaks, which also included former President Donald Trump’s returns. (Littlejohn also spilled Trump’s secrets to the New York Times.) Littlejohn’s plea has upended Griffin’s case, because the former contractor insists that he acted alone — and the government argues that it can’t be held as liable for the actions of a contractor as it can for the work of a federal employee. With that in mind, the IRS has asked to stop the review of thousands of documents that Griffin has demanded in the lawsuit, which the agency has to ensure comply with the Section 6103 protections of confidential taxpayer information. But Griffin’s lawyers are looking for any clues as to whether IRS officials did supervise Littlejohn or should have been aware of his actions, and have complained that the agency has blown by a January deadline for the documents. Goodman asked the IRS’s lawyers why the service hadn’t asked for more time, and for a written submission on the agency’s work on the matter so far. The IRS needs to keep its document review going until at least March 19, Goodman added, which is when Littlejohn is scheduled to give a deposition on the case. GREEN BRINGS GREEN: GOP lawmakers have argued that the clean energy credits that Democrats enacted in the Inflation Reduction Act will drag down the economy. But a new report from American University’s Institute for Macroeconomic and Policy Analysis argues otherwise. Scrapping those incentives would reduce gross domestic product by 2 percent over the long run, the institute found. “The targeted IRA credits play an important role in directly encouraging investment by reducing the cost of capital for firms, particularly in the clean energy sectors,” the group found.
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