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This Week in Civic Tech: Tax Prep Services Fight IRS on Free Filing, OpenGov Acquires Ontodia

A look back at highlights and happenings in the world of civic tech.

This Week in Civic Tech presents a line-up of notable events in the space that connects citizens to government services. Topics cover latest startups, hackathons, open data initiatives and other influencers. Check back each week for updates.

Tax Lobby Hinders Free IRS Tax Preparation

Wouldn’t it be a relief if filing taxes was a free and automated experience? That’s exactly the option the IRS has tried to give citizens — and the No. 1 thing tax filing services like Intuit’s TurboTax and H&R Block have labored vociferously to prevent.

On Wednesday, April 13, the Sunlight Foundation highlighted a report by Massachusetts Democratic Sen. Elizabeth Warren that detailed how tax preparation companies have invested millions to halt the IRS’ efforts to create a free tax filing system. The report noted that “simple filing” or “return-free filing” — as the option is called — would allow the IRS to receive W-2 tax forms directly from employers calculating how much citizens get back or what they owe. The process would have the IRS send its figures to taxpayers in the mail, and citizens could approve or disapprove the figure. Disputes would just require filers to submit tax documents in the usual way.

The proposal, according to the report, has potential to save taxpayers a few hundred dollars each year. Warren’s analysis estimated that, on average, taxpayers spend 13 hours preparing returns and $200 paying for tax services each year. This amounts to about 10 percent of the average federal tax refund.

Sunlight reported that in the last five years, Intuit — TurboTax’s parent company — spent more than $13 million to lobby against software for simple filing; and between 2010 and 2013, Intuit’s lobbying dollars against simple filing policies totaled more than $1.9 million in the House and Senate. The spending is a rare instance when a tech company actually lobbies to make the government less digital and more dependent on the private sector.

To protect profits, according to Sunlight, the tax lobby has created what amounts to a token free filing service for Americans earning less than $62,000 a year. Under the banner of the “Free File Alliance,” the companies established a coalition that partnered with the IRS to provide the free filing services in exchange for an IRS promise it would not create its own software. According to the Wall Street Journal, the Free File program processed roughly 2.8 million filings in 2014 out of the 100 million that were eligible. If simple filing was the default, one can only imagine the number of free returns the IRS would collect.

In response to this, and in conjunction to its report, Warren’s office has introduced the Tax Filing Simplification Act of 2016, a congressional bill that, if passed, would demand that the IRS offer free software by 2018. At the same time, the bill prevents officials from entering into any prohibitive public-private contracts that hinder access to free tax software.

"Congress should be making it easier for Americans to file their taxes each year, not bowing to the interests of the tax prep industry," Warren said. "The Tax Filing Simplification Act is a commonsense bill that would help taxpayers all across this country file their taxes with less stress and fewer costs, and it would push the IRS to use the authority it already has to simplify Tax Day for all Americans."

OpenGov Acquires Ontodia

The financial transparency and analytics platform OpenGov appears to be in a state of constant growth. To date, the startup has raised more than $47 million — thanks to venture capital firms like Andreessen Horowitz — and this week, the company announced its acquisition of the open data publishing company Ontodia.

The deal expands OpenGov’s services and potential customer base. Like OpenGov, Ontodia’s services are centered on generating open data insights. This includes a handful of offerings that provide data publishing, data management and analytics through CKAN — an open-source data portal popularly known for its use in government and the federal open data site

With Ontodia’s tools, OpenGov Co-founder and CEO Zachary Bookman said in a blog post that his company would leverage Ontodia skill sets and data to contextualize and refine OpenGov's financial analysis. In 2015 the company launched OpenGov Comparisons, a set of tools for governments to compare themselves to similarly sized jurisdictions. Ontodia’s database brings additional U.S. Census information and Labor Department statistics into the equation for analysis. 

“By adding a flexible, open source, open data platform and service to our quickly expanding portfolio of government financial solutions, we are getting one step closer to realizing our vision of transforming how governments analyze, share, compare, and allocate public money …” Bookman wrote.

OpenGov and Ontodia did not disclose monetary or any other specific details about the acquisition.

Jason Shueh is a former staff writer for Government Technology magazine.