WASHINGTON (AP) — A federal appeals court cleared the way Wednesday for President Donald Trump’s administration to fire thousands of probationary workers, halting a judge’s order requiring them to be reinstated in a legal win for Trump’s effort to downsize the federal workforce.

The decision comes a day after the Supreme Court also sided with the Trump administration in another lawsuit filed over mass firings.

A split panel for the 4th U.S. Circuit Court of Appeals found the terminations of federal workers should probably be appealed through a separate employment process rather than fought out in federal court. Two judges appointed by Republican presidents sided with the administration, while a third Democratic appointed judge dissented.

The decision comes in a lawsuit filed by nearly two dozen states, who said the mass firings will cause irreparable burdens and expenses to support recently unemployed workers. They said at least 24,000 probationary employees have been terminated since Trump took office.

The states could still seek further review as the lawsuit continues to play out.

The Republican administration has argued that the states have no right to try to influence the federal government’s relationship with its own workers, but also had already reinstated some 15,000 workers to full duty or paid leave as the lawsuits played out, according to court documents.

The appeals court order halts a decision from U.S. District Judge James Bredar in Baltimore, who was one of two judges appointed by Democratic presidents who found that the Trump administration violated federal laws in carrying out the terminations at 20 agencies in the states that sued.

The Supreme Court blocked another order from U.S. District Judge William Alsup in San Francisco on Tuesday, finding that nonprofit groups lacked legal standing to sue over the firing of probationary workers. The case still has additional plaintiffs, however, and Alsup was weighing Wednesday whether to again order reinstatement on behalf of the state of Washington and labor groups.

Probationary workers have been targeted for layoffs across the federal government because they’re usually new to the job and lack full civil service protection.

The states suing the Trump administration in the Baltimore case are Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont and Wisconsin, along with Washington, D.C.

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WASHINGTON (AP) — 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.

On one side, civil society groups this week launched a coalition to promote the move toward a government-run free-file program. On the other, tax preparation firms like Intuit — the parent company of TurboTax — and H&R Block have been pouring millions into trying to stop the idea cold.

The advocacy groups are exponentially out-monied.

An April AP analysis found that overall, Intuit, H&R Block, and other private companies and advocacy groups for large tax preparation businesses, as well as proponents in favor of electronic free file, have reported spending $39.3 million since 2006 to lobby on “free-file” and other matters. Federal law doesn’t require domestic lobbyists to itemize expenses by specific issue, so the sums are not limited to free-file.

Intuit spent at least $25.6 million since 2006 on lobbying, H&R Block about $9.6 million and the conservative Americans for Tax Reform roughly $3 million.

In contrast, the NAACP has spent $140,000 lobbying on “free-file” since 2006 and Public Citizen has spent $110,000 in the same time frame.

“What we have on our side is public opinion,” said Igor Volsky, executive director of the liberal Groundwork Action advocacy group.

Volsky’s organization and leaders from Public Citizen, the Center for the Study of Social Policy, Code for America, the Economic Security Project and others launched the “Coalition for Free and Fair Filing” on Wednesday. The group’s mission is to “ensure all U.S. taxpayers can easily file tax returns and get the tax credits they deserve by safeguarding and expanding” the new IRS program.

“The overwhelming majority of people demand a free-file option,” Volsky said. “Now the question for us is how do you channel that into effective political pressure.”

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. That program consists of a public-private partnership of tax software companies that offers free services to certain taxpayers outside of the IRS website.

Additionally, anyone can prepare and mail in their taxes for free, but the tax code is so complex that almost 50% of Americans use a tax prep company. IRS officials have estimated individual taxpayers pay an average of $140 preparing their tax returns each year.

Derrick Plummer, a spokesman for Intuit, stressed the free options that already were available.

“An IRS direct-to-e-file system is redundant and will not be free – not free to build, not free to operate, and not free for taxpayers,” Plummer said, adding that it “will unnecessarily cost taxpayers billions of dollars.”

H&R Block said in a statement the direct e-file pilot “continues to be a solution in search of a problem.”

Citing the free-filing options for Americans under a certain income threshold through the existing Free File Alliance, H&R Block said, “this pilot is unnecessary and faces significant barriers to providing comprehensive tax preparation services.”

H&R Block came under fire after congressional Democrats last week released a report stating that it was one of three large tax preparation firms that sent “extraordinarily sensitive” information on tens of millions of taxpayers to Facebook parent company Meta and Google over the course of at least two years.

Susan Harley, Congress Watch managing director at Public Citizen, said “we’re outgunned as far as money being spent, but we have the moral higher ground” in supporting the free-file program over third-party tax preparers.

Nations like Germany, Japan, the U.K. and other Organization for Economic Cooperation and Development countries already offer their taxpayers some form of pre-populated tax document.

Some countries also use “tax agency reconciliation,” where taxpayers who opt to participate provide the government with basic employment status information and the tax administrator sends them a return with their calculated tax liability.

Research conducted last year by a group of Treasury, Federal Reserve and other academics shows that the IRS could pre-populate 42 to 48% of all tax returns.

The IRS has already seen cuts to its funding since the passage of the Inflation Reduction Act that President Joe Biden signed last August gave the agency $80 billion to modernize and hire more workers and move toward the free-file program.

House Republicans built a $1.4 billion reduction to the IRS into the debt ceiling and budget cuts package passed by Congress this summer. The White House said the debt deal also has a separate agreement to take $20 billion from the IRS over the next two years and divert that money to other non-defense programs.

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NEW YORK (AP) — Most taxpayers are interested in filing their taxes directly to the IRS for free, a new report says, and that option will be tested next year.

The IRS has spent the past nine months studying whether U.S. taxpayers want to see a free, e-filing system run by the government — and is now preparing to launch a pilot program.

The prospect of a free, government-run, online tax filing system has been debated for a long time. Supporters argue that the option would make tax return services more equitable and accessible for taxpayers nationwide. But there’s also been pushback from some big tax-prep companies.

Now, the IRS plans to launch a pilot program for the 2024 filing season to test a “direct file” system and help the federal government decide whether to move forward with potentially implementing it in the future, IRS Commissioner Danny Werfel and the Treasury’s Chief Implementation Officer Laurel Blatchford said Tuesday.

There are still few details available about the pilot as the agency determines the basic structure, but Werfel said that members of the public will have the option to participate.

The IRS was tasked with looking into how to create a “direct file” system as part of the funding it received from the Inflation Reduction Act, Democrats’ flagship climate and health care measure that President Joe Biden signed last summer. It gave the IRS nine months and $15 million to report on how such a program would be implemented.

The IRS published a feasibility report Tuesday laying out taxpayer interest in direct file, how the system could work, its potential cost, operational challenges and more.

The report shows that the majority of surveyed taxpayers would be interested in using an IRS-provided tool to prepare and file their taxes electronically — and that the IRS is “technically capable of delivering direct file, but doing so would require additional resources and add complexity to IRS operations,” Werfel said on a call with reporters.

The IRS’s existing free e-file option, available to lower income taxpayers who qualify, will remain in place, he added. Individuals of all income levels can also still submit their returns for free via the mail — although it can take months to process paper returns and taxpayers still have to buy postage.

The new, direct e-file program being tested “could potentially save taxpayers billions of dollars annually,” said Blatchford, who noted that an individual taxpayer pays an average of $140 preparing their tax returns each year.

The report’s initial cost analysis shows that a pre-file option run by the IRS “could cost less than $10 per return to provide, and of course would be free to taxpayers — by comparison, simple electronic filing options currently available to taxpayers are around $40.”

The study estimates that annual costs of direct file may range, depending on the program’s usage and scope, from $64 million for 5 million users to $249 million for 25 million users.

“We believe today’s announcement is a significant step toward revolutionizing access to the tax system so that it is easier and more equitable. A free and simple direct file service will ensure that more families in America receive the tax benefits they are eligible for,” Amanda Renteria, CEO of civic tech nonprofit Code for America, said in a statement.

While supporters applauded the pilot program, critics have expressed skepticism about the IRS taking on the dual roles of both tax collector and tax preparer, arguing that the new service could create a power imbalance between taxpayers and the government.

Steve Ryan, general counsel of the American Coalition for Taxpayer Rights, an advocacy group for tax companies said “a direct e-file system is unnecessary, costly and will divert attention and resources from more pressing priorities at IRS.”

There’s also concern about historic racial disparities and bias seen in the IRS’s enforcement of tax laws. In a Monday letter to U.S. Senators, for example, Werfel confirmed the IRS found that Black taxpayers may be audited at higher rates.

“I will stay laser-focused on this to ensure that we identify and implement changes prior to next tax filing season,” Werfel said in the letter.

Big tax preparation companies also have millions of dollars to lose if the program comes to fruition. Last year, more than 60 million taxpayers were serviced between Intuit, the parent company of TurboTax, and H&R Block.

An Associated Press analysis shows that Intuit, H&R Block, and other private companies and advocacy groups for large tax preparation businesses, as well as proponents in favor of electronic free file, have reported spending $39.3 million since 2006 to lobby on “free-file” and other matters. Federal law doesn’t require domestic lobbyists to itemize expenses by specific issue, so the sums are not limited to free-file.

Derrick Plummer, a spokesman for Intuit, said the study “cherry-picks data to support its flawed conclusion,” namely that only 12% of taxpayers said they would use a government-run system if state returns are not included in the program.

He said the study “ignores the harm a government-run system will have on vulnerable taxpayers and the true costs to taxpayers.”

A representative from H&R Block was not immediately available to comment on Tuesday.

Werfel on Tuesday acknowledged concerns surrounding a possible direct file system, notably operational challenges, but maintained taxpayers should chose the filing option that works best for them and that “the IRS cannot run the tax system alone.”

“We rely on an extensive network of partners across tax professional groups, the software communities, the payroll community and countless dedicated organizations that work directly with taxpayers,” Werfel said. “This report changes none of that.”

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WASHINGTON (AP) — Taxpayers who called the IRS had an average wait time of four minutes this tax season compared to 27 minutes a year earlier, the agency said Monday.

Ahead of the tax filing deadline on Tuesday, the IRS is promoting its improved customer service and giving credit to a big boost in funding provided by the Inflation Reduction Act that Democrats pushed through Congress last year.

The federal tax collector on Monday reported a dramatic turnaround for the 2023 tax season from a year ago, when the agency scored its worst customer service marks on record.

IRS employees this tax season have answered 2 million more calls, and served 100,000 more taxpayers in-person, it reported. The agency also digitized 80 times more paper forms than in 2022 and cleared the backlog of unprocessed 2022 individual tax returns.

New IRS Commissioner Daniel Werfel, sworn in earlier this month, promised that to use the new $80 billion infusion of cash over the next 10 years to help the federal tax collector become faster, more tech-savvy and provide “real-world improvements” to taxpayers.

“We’re trying to improve services dramatically,” said Wally Adeyemo, Treasury’s deputy secretary at an Urban Institute event on Monday.

At the same event, former IRS Commissioner Charles Rossotti was more critical of the IRS spending plan. “There’s an under allocation for technology,” he said. “They need to spend a lot more time on a compliance strategy.”

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WASHINGTON (AP) — An IRS policy governing the audits of tax returns filed by U.S. presidents is under new scrutiny after a report published by a congressional panel found the agency failed to perform the mandatory inspection of Donald Trump’s returns until Congress pressed for information about the process.

The three-point policy states that individual returns for the president and the vice president are subject to mandatory review, “should always be kept in an orange folder,” should be kept from the eyes of IRS employees, and “should be locked in a secure drawer or cabinet when the examiner or reviewer is away from the work area.”

The report released Tuesday by the Democratic majority on the House Ways and Means Committee said the process, which dates to 1977, was “dormant, at best” during the early years of the Trump administration. Democrats in Congress are responding by introducing legislation that would codify the IRS policy into law with more stringent requirements.

Tax experts say the failure to launch the audit earlier is emblematic of a larger problem regarding the IRS’ capacity to examine high-income taxpayers’ returns — and a reminder of Trump as a norm-defying president.

John Koskinen, who served as IRS commissioner during both the Obama and Trump administrations, said the policy has been out of the public eye because presidents have traditionally released their tax-return summaries to the public.

“It only became an issue with a president who refused to release his tax returns,” Koskinen said. “If Trump had been releasing his returns, nobody would have raised this issue.”

Trump’s tax returns being handed over to Congress recently is the culmination of a yearslong legal fight between Trump and Democratic lawmakers.

Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center, said the IRS’ failure to audit Trump is a showing that “the mandatory auditing program is broken, we cannot rely on the current system to fairly audit the president, and there’s a general problem of the IRS auditing sophisticated taxpayers.”

Rosenthal added: “This is a much larger problem than Donald Trump — yes, he makes bad things worse, but the situation was bad to begin with.”

A new $80 billion infusion of funds through the so-called Inflation Reduction Act is supposed to remedy the beleaguered agency’s low staffing levels, outdated technology and host of other issues. Republicans who are poised to take control of the House in less than two weeks, however, have said they want to cut that funding.

Tuesday’s committee report revealed that the IRS only began to audit Trump’s 2016 tax filings on April 3, 2019, more than two years into Trump’s presidency and just months after Democrats took control of the House. That date coincides with Rep. Richard Neal, D-Mass., the panel chairman, asking the IRS for information related to Trump’s tax returns.

The report’s findings prompted lawmakers to recommend a statutory requirement for the mandatory examination of the president’s taxes, with “disclosure of certain audit information and related returns in a timely manner.”

Senate Finance Committee Chair Ron Wyden, D-Ore., said he will work to pass the bill through the Senate. House Speaker Nancy Pelosi said the chamber would “move swiftly” to advance the legislation.

The issue highlights frustration with the so-called tax gap, which is the difference between how much money is owed to the federal government and how much is paid. IRS data released in October projects that for 2017 to 2019, the estimated average gross tax gap will be $540 billion per year.

Treasury Secretary Janet Yellen said in August, and has repeated at various speaking engagements, that the new funds allocated by Congress would be used to increase audits on high-wealth individuals, firms and complex pass-throughs.

“This is challenging work that requires a team of sophisticated revenue agents in place to spend thousands of hours poring over complicated returns, and it is also work that has huge revenue potential,” she told former IRS Commissioner Chuck Rettig in August.

In an application of the IRS policy on mandatory presidential audits, well-trained agents, forensic experts, tax attorneys and others would be required to oversee a presidential audit as complicated as Trump’s, which included hundreds of businesses, properties and complex business interests.

The congressional report highlighted the lack of staffing and availability of experts to examine Trump’s taxes. The report states that the IRS believed that accuracy of his filings was ensured because he had legal counsel and an accounting firm representing him.

The question of whether presidential tax documents should be disclosed is another matter of debate among tax experts and advocates.

Rep. Kevin Brady of Texas, the top Republican on the Ways and Means Committee, said Congress would be setting a “dangerous new precedent” by releasing the presidential records. Koskinen said that “it’s a significant serious precedent for a committee to seek returns and then release them.”

“I see two big issues here — what is the IRS going to do to ensure presidents are audited regularly, and what’s the rationale for releasing these returns,” Koskinen said.

Rosenthal said he thinks presidential returns should be publicly disclosed to ensure proper oversight.

“When this information is made public, the president is going to be more wary about cheating on their taxes and making them public — the results would put both the IRS and president on their best behavior,” he said.

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WASHINGTON (AP) — Responding to an increasing number of threats borne of conspiracy theories that agents were going to aggressively target middle income taxpayers, the Internal Revenue Service announced Tuesday that it was conducting a comprehensive review of safety at its facilities.

The climate, healthcare and tax legislation signed into law by President Joe Biden last week included $80 billion in funding for tax collection efforts. Although Treasury Secretary Janet Yellen specifically directed the agency to not focus its attention on taxpayers with middle class incomes, misinformation spread rapidly on line that agents were going to crack down on taxpayers of all earnings levels.

The baseless assertions also said the IRS would distribute firearms to employees authorized to used deadly force, prompting threats to the IRS employees.

Now agency leadership has launched an examination of agency safety.

“We are conducting a comprehensive review of existing safety and security measures,” said Chuck Rettig, IRS commissioner about the agency’s 600 office locations nationwide. “This includes conducting risk assessments,” he said, by monitoring perimeter security, designations of restricted areas, exterior lighting, security around entrances of facilities and other measures.

“For me this is personal. I’ll continue to make every effort to dispel any lingering misperceptions about our work,” Rettig said in a Tuesday letter to employees. “And I will continue to advocate for your safety in every venue where I have an audience.”

Rettig, whose term at the IRS ends in November, is tasked with developing a plan on how to spend the new infusion of funds included in the Inflation Reduction Act.

Along with anonymous online forums, high-ranking Republican politicians have spread falsehoods about the IRS workforce and how the newly allocated funds would be spent.

Sen. Rick Scott, R-Fla., sent an August 16 open letter to Americans, calling on them not to take any new IRS positions, reinforcing false information about open roles at the agency and their access to firearms.

“The IRS is making it very clear that you not only need to be ready to audit and investigate your fellow hardworking Americans, your neighbors and friends, you need to be ready and, to use the IRS’s words, willing, to kill them,” he said in the letter.

Tony Reardon, president of the National Treasury Employees Union, said members have been vocal about their fears and worries about their safety.

“IRS employees are certainly very hard working and honest, they do the business of funding the government. They’re saying they don’t deserve to be treated as the enemy of the government,” he said.

He added that members who are of retirement age have expressed a greater desire to retire due to the increased attention on their jobs. More than half of the IRS’ enforcement workforce of 80,000 is retirement eligible.

Reardon said several workers have talked about being reminded of the 2010 Austin, Texas suicide attack, where Andrew Joseph Stack III deliberately crashed his single engine plane into the Echelon office building, killing himself and Internal Revenue Service manager Vernon Hunter.

“The rhetoric we’re hearing now is dangerous” Reardon said. “It’s putting these patriotic Americans at risk.”

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WASHINGTON (AP) — The IRS said Monday it will suspend the use of facial recognition technology to authenticate people who create online accounts after the practice was criticized by privacy advocates and lawmakers.

The agency said it would no longer use a third-party service, called ID.me, for facial recognition. Critics of the software said the database could become a target for cyberthreats. They also expressed concern about how the information could be used by other government agencies, among other concerns.

Earlier Monday, Senate Finance Committee Chair Ron Wyden, D-Ore., called on the agency to end its use of the ID.me software. After the IRS announced the practice would be suspended, Wyden said “the Treasury Department has made the smart decision to direct the IRS to transition away from using the controversial ID.me verification service.”

“No one should be forced to submit to facial recognition to access critical government services,” he added.

The IRS is currently grappling with a worker shortage and an expanded workload from processing tax filings and administering pandemic-related programs. Legislation that would have given the agency billions of dollars to more expeditiously process returns is stalled.

“The IRS takes taxpayer privacy and security seriously, and we understand the concerns that have been raised,” said IRS Commissioner Chuck Rettig.

“Everyone should feel comfortable with how their personal information is secured, and we are quickly pursuing short-term options that do not involve facial recognition.”

The agency said the transition would occur “over the coming weeks in order to prevent larger disruptions to taxpayers during filing season.”

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Dr. Ruiz Advocates for Constituents Who Haven’t Received Their Stimulus Checks

Congressman Raul Ruiz, M.D. (CA-36) is calling on the Internal Revenue Service (IRS) to provide updates on the status of Economic Impact Payments (EIP) and urging the IRS to take immediate action to speed up the delivery of the remaining payments. In a letter to IRS Commissioner Charles P. Rettig sent Monday, Dr. Ruiz and 77 other members of Congress expressed concern about the quality and timeliness of IRS responses to constituent inquiries and urged the IRS to act with urgency in disbursing the remaining payments.

“Every day, our offices are fielding hundreds of calls and messages from constituents who, through no fault of their own, are in dire need of financial assistance to pay for essentials like rent, gas, and groceries,” Dr. Ruiz and the other members wrote in the letter. “There are still too many taxpayers across the country who have waited for several weeks and without relief in sight. We share their concerns and urge you to take immediate action to speed the delivery of these payments.”

In March, Dr. Ruiz voted for H.R. 748, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which is now law and authorized $425 billion in funding to provide direct payments to individuals. Over 160 million Americans have received their stimulus payment while many are still waiting. Meanwhile, 36.5 million Americans filed unemployment claims in the last eight weeks.

You can read a copy of the letter below.

Dear Commissioner Rettig,

We write to express concerns about the quality and timeliness of the Internal Revenue Service (IRS)’s responses (or lack thereof) to questions from our constituents about the delivery status of Economic Impact Payments (EIP). We appreciate the significant operational challenges that the coronavirus poses to the agency and understand that there are legitimate reasons for processing and disbursement delays. However, there are still too many taxpayers across the country who have waited for several weeks and without relief in sight. We share their concerns and urge you to take immediate action to speed the delivery of these payments.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is the largest stimulus package in American history. The CARES Act authorized $425 billion in funding for the EIP program. That funding is distributed in $1,200 payments (sometimes referred to as “stimulus checks”) to each American making $75,000 per year or less. Congress worked quickly to draft this and other COVID-19-related relief bills to address the severe economic hardships necessary to protect public health.

Last month, the National Bureau of Economic Research declared that the U.S. economy entered its first recession in over a decade. The unemployment rate in May was in the double digits—about 16 percent. Over the eight weeks ending on May 9th, 36.5 million Americans filed unemployment claims. Across the country, people are hurting. Every day, our offices are fielding hundreds of calls and messages from constituents who, through no fault of their own, are in dire need of financial assistance to pay for essentials like rent, gas, and groceries.

We appreciate that the IRS has gone to great lengths to implement the EIP program and distribute funds to eligible individuals as quickly as possible, while also attempting to minimize fraud. The scope of these efforts is particularly notable given the IRS’s historic underfunding. Congress has reduced the agency’s budget by 20 percent over the past decade. In that same period, the number of full-time IRS staff decreased by 22 percent.

Given the significant hurdles that the IRS faces in overseeing the implementation of the EIP program, we request the following information so that we may better-assess the IRS’s capacity to carry out the directives contained in the CARES Act:

1. Weekly updates on the status of EIP program implementation. Those updates should include, to date: the number of payments that have been deposited by the recipient, the number of payments that have been mailed by the IRS, and the percentage and number of payments that were sent through each method of disbursement, including paper checks, direct deposit payments, and prepaid debit cards,

2. The number and associated percentage of IRS staff tasked solely with implementing the EIP program,

3. The number of calls received by IRS telephone operators on the topic of missing stimulus checks—along with the number and associated percentages of calls returned by the IRS,

4. Aside from underfunding and associated understaffing, any additional hurdles the IRS is facing that are contributing to the delay in EIP program implementation, and

5. The amount of additional funding needed by the IRS in order to process and deliver all remaining stimulus checks no later than July 15th.

As Members of the U.S. Congress, our responsibilities lie not only in creating programs like EIP, but also in overseeing their implementation. For weeks, our constituents have used the appropriate channels to inquire as to the status of these payments. Those inquiries have been ignored.

The relief programs created in the CARES Act are time-sensitive, as indicated by the speed with which the legislature drafted and enacted this law—along with the historic funding levels that the law authorized. We ask that the IRS provide updates to the American people with the same degree of urgency.

We look forward to your response, which we hope to receive no later than June 30th.

-Hernan Quintas

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