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With tax season over, the Internal Revenue Service has used the rest of the second quarter to introduce new policy updates, as well as to address a data breach that resulted in a criminal conviction and impacted many taxpayers.
The IRS is reviving the Direct File free tax filing system after a successful pilot program. The agency determined success after analyzing data collected during the pilot, held a number of meetings with various groups of stakeholders and elicited feedback from individual Direct File users, state officials and representatives across the tax landscape. It heard directly from hundreds of organizations across the country, over 100 members of Congress, and from those interested in using Direct File in the future. The agency has also heard from a limited number of stakeholders who believe the current free electronic filing options provided by third-party vendors are adequate.
“We’re mindful that the most important decision we made during the pilot was to focus on executional certainty,” IRS Commissioner Danny Werfel said during a press call in May. “Accuracy and comprehensive tax credit uptake will be paramount concerns to ensure taxpayers filed a correct return and get the refund they’re entitled to. And our North Star will be improving the experience of tax filing itself and helping taxpayers meet their obligations as easily and quickly as possible.”
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The IRS is simultaneously attempting to recover from a data breach from one of their own former contractors after Charles Littlejohn used his position within the IRS to access and illegally copy tax returns and related documents, which he then provided to the investigative news site ProPublica. This breach has significant implications, not only because of the sensitivity of the data involved but also due to the delayed notification to the affected taxpayers, which only started in April 2024 — long after the breach was discovered and following Littlejohn’s sentencing.
Tax professionals now have the responsibility to guide clients through the aftermath of this breach. Mark Friedlich, Esq., CPA, vice president of U.S. government affairs at Wolters Kluwer Tax & Accounting, recently offered suggestions for assisting clients affected by the breach in an AT Think column for Accounting today.
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“The IRS data breach has further shaken the public’s trust in the tax system,” writes Friedlich. “As tax professionals, we have a critical role to play in helping our clients protect their confidential data. We should encourage clients to proactively monitor their tax and financial accounts. and assist them in obtaining transcripts, applying for IP PINs and addressing any suspicious activity. In an era of escalating cyber threats, proactive risk management is essential to protect both your firm and your clients.”
Read more about recent IRS developments to watch from Q2.
