The Internal Revenue Service is set to collect hundreds of billions of unpaid tax dollars by drastically increasing the number of audits it performs.

Should you worry? Maybe, if your yearly income is greater than $400,000. Or if you're a multi-million-dollar partnership or corporation. Not a member of one of those clubs? Then you have nothing to worry about, according to the IRS.

Could reduce deficit by 25 percent

More than half a trillion dollars - 15 percent - of taxes owed by Americans and corporations goes uncollected each year. But the IRS has new tools to collect much of that money thanks to the 2021 Inflation Reduction Act.

The bill provided money for the IRS to increase hiring - from auditors to customer service representatives.

With previously decreased funding for the IRS audits, the audit rate for those making between $1 million and $5 million dollars dropped from 5 percent to less than 1.5 percent. Restoring that funding typically has been estimated to bring in $4 in unpaid taxes for every dollar invested.

But the IRS now believes the return will be much higher. Previous estimates included increased revenue that came only from enforcement. That return still is there.

A study released earlier this year, however, shows that high-income taxpayers will be more likely to comply voluntarily - knowing their chances of being audited are increased. In addition, additional customer service representatives means taxpayers will find it easier to get the help they need so they don't neglect taxes.

The IRS also plans to improve its guidance and provide more options for filing taxes electronically.

For more, read the CBS News article.

For more, read the Vox article.

Click here to read the IRS press release.

Click here to read the IRS report.

If your 2018 income was less than $66,000, you could have filed your taxes for free. Including your state return. You could have been doing so for the past 15 years, too.

It's a government program actually called the Free File Program. It requires that free online tax preparation programs and electronic filing be provided to 70 percent of taxpayers based on their adjusted gross income.

The program is an agreement between the Internal Revenue Service (IRS) and the Free File Alliance - a consortium of tax software companies. It's an ongoing agreement that needs to be renewed regularly. But a bill in Congress - the Taxpayer First Act - would make the program permanent.

Sounds good... but prevents a better deal

There's a catch to the program. It prohibits the IRS from simply calculating your taxes for you..

For most Americans, the IRS has all of the information it needs to figure their taxes. Income for work and interest are reported, and people simply take the standard deductions. And the IRS knows what was withheld. So the IRS simply could send you your refund (or a bill). And it could provide you with the option to accept their calculations or file your own return.

The Free File Program agreement, however, prohibits the IRS from competing with the consortium "in providing free, online tax return preparation and filing services to taxpayers."

The IRS could develop a program to do your taxes automatically, but it would need to end the Free File Agreement.

Taxpayer First Act prevents that

The Taxpayer First Act has several consumer-friendly provisions. It makes it easier for low-income taxpayers to cut a deal with the IRS on taxes they can't afford to pay. It restricts property that the IRS can seize. It offers protections against identity theft.

But it also institutionalizes the Free File Agreement into law. The bill demands the program remain in effect, thereby preventing the IRS from canceling it. And because the agreement prohibits the IRS from providing a tax-preparation service, it would take another act of Congress for the IRS ever to be able to do so.

Competing bill would do the exact opposite

A bill by Sen. Elizabeth Warren, the Tax Filing Simplification Act, would require the IRS to establish its own free online tax preparation service. It would prohibit the IRS from entering into agreements that would limit its ability to provide its own services.

Update 2019-Jul-1: The Taxpayer First Act passed the Senate on June 13, 2019. It was signed by the president on July 1.

Click here for more on the Taxpayer First Act.

For more, read the News in FiVe discussion.

You also can read this ProPublica story and this Bloomberg story.

Click here to read the 2002 Free File Program agreement.

To use the Free File Program, visit www.IRS.gov/filing/free-file-do-your-federal-taxes-for-free.

Hey... did we just save you a bunch of money on your tax preparation for next year? We can do lots more with your help. Please consider contributing just a few of the dollars that you saved. Just click here and you can be back reading in just a minute.

The Internal Revenue Service (IRS) computer failure on tax day that prevented millions of Americans from paying their taxes electronically likely was the result of decreased funding over previous years.

IRS computers are aging, while more people are filing electronically. An IRS official told Congress in October that "we are concerned that the potential for a catastrophic system failure is increasing as our infrastructure continues to age."

Yet funding for the IRS has continued to decline, hampering the agency's ability to replace its hardware or hire people to support it.

For more, read the New York Times story.

For most Americans, tax season is over.

If you had questions for the Internal Revenue Service (IRS) or are due a refund, you're likely affected by an IRS budget that caused the agency to have 1,700 fewer employees than last year.

If you had a question for the IRS and you called them, there was less than a 50 percent chance your call was answered. Even if you did get through - often after waiting on hold for half an hour - the agent was only able to answer basic questions.

The IRS also was forced to close several field offices. Although many answers could be found at the IRS website, those without internet access had fewer options.

The budget cuts also affect enforcement. This not only benefited those with high incomes disproportionately, but it affected the government's overall financial position - since each dollar added to the agency's enforcement budget would have returned more than $4, according to the Treasury Department.

For more, read the Yahoo! article.

Click here for our discussion on IRS funding.

Have a tax question? Been a victim of identity theft? If so, you'll find it much harder to get help from the Internal Revenue Service if the spending bill passed by the House of Representatives becomes law.

The IRS budget has been reduced every year since 2010. The result has been a reduced staff, leading to reduced customer service. The proposed funding levels would result in about half the calls made to the IRS going unanswered, IRS officials predict.

The lower funding also would limit the IRS's ability to perform audits and enforce tax laws - resulting in tens of billions of dollars in lost revenue - almost entirely from high-income earners and corporations. The Treasury Department estimates that every $1 spent on audits returns $6 in owed taxes.

The bill would have other impacts to the IRS as well. It effectively would prevent the agency from enforcing the Patient Protection and Affordable Care Act's individual mandate.

For more, read the Guardian.com story.

Read our discussion of this issue for a clearer understanding, status updates, and suggestions on what you can do.

If your tax situation is simple, you might have wondered why it's necessary to fill out a tax form. After all, the IRS already has all your information. You also might wonder why you might pay someone to do it for you, or pay for a service such as TurboTax.

The answer has little to do with technology. Other countries such as Spain and Sweden already do this.

The answer in the United States is much more ironic. The corporations you pay to help make your taxes simple are paying your elected representatives to keep them complex. Intuit - the maker of TurboTax - has spent more than $11 million in the past five years lobbying against making tax filing simple and free for the overwhelming majority of Americans.

For more, read the ProPublica story.