Free electronic tax filing for Minnesotans could be provided by state soon
Walz, top lawmakers strike preliminary deal on taxes, new spending
The agreement calls for $4 billion in new spending, $4 billion in tax cuts, and leaves $4.2 billion on the budgetary bottom line in case the economy worsens. But it includes no final agreements and leaves every detail for lawmakers to sort out with one week left in the 2022 session, raising the possibility that lawmakers won't meet those expectations.
ST. PAUL, Minn. (FOX 9) - Stressing over your tax returns? Lawmakers are considering the creation of a free electronic tax filing system that would be available for Minnesotans in the future.
Under a new proposal authored by Rep. Aisha Gomez (DFL-Minneapolis), Minnesota's Department of Revenue would establish a direct free filing system for individual income tax returns.
"Most people’s tax forms are very simple," Rep. Gomez told the House Taxes Committee on Thursday, noting that dozens of other states already offer a similar program for its residents. "Putting together a system that serves those folks and doesn’t drive them to a product that will cost them is what we’re trying to do."
According to Na Madden of the Minnesota Budget Project, the average tax filer in Minnesota spends nine hours, and $150, to successfully complete their returns. Only 4% of Minnesotans file their taxes through free options currently available.
If approved by lawmakers and Governor Tim Walz, Minnesota would establish the electronic filing system through which taxpayers could directly file their individual income tax return. The system would be required to include enough tax forms that an estimated 70% of individual Minnesota taxpayers could file using the system by tax year 2025 (or 2026).
A commissioner would contract a software vendor to develop the filing system, which would be barred from offering paid tax preparation services. The commissioner would also coordinate the state filing system with federal direct-file options.
Although popular, Rep. Gomez said companies such as TurboTax and HR Block can be problematic for many users – offering services upfront that seem beneficial, but can have ulterior motives.
"These for-profit companies are in a situation where they’re offering free [tax] filing to people who meet income limits, while also doing what for-profit companies do – taking your data," Rep. Gomez told the committee. "The integrity of our tax system depends on the ironclad data protections associated with the information that is on our tax form; it’s considered sacred. In order for us to have a system that people trust, they need to know their data is secure."
Testifiers spoke to the committee on behalf of the bill, saying a state-offered option would improve the tax-filing process for Minnesotans, while linking it to the federal system would create a more "unified experience."
In March, the Internal Revenue Service (IRS) announced its own direct file pilot in 12 states, allowing residents to file their taxes for free directly with the department. Minnesota, so far, is not included in the program.
"We don’t think it’s appropriate for private firms to profit off a public requirement from the government," said Eric Bernstein of We Make Minnesota.
In addition to the electronic filing system, Bernstein said an increase in free walk-in services could also help ease the burden on Minnesotans.
During discussion among lawmakers, GOP representatives questioned the budget for the program ($2 million in 2025, and $2.6 million in both 2026 and 2027), as well as, whether the state would be able to successfully ramp up such a system throughout next year.
Although unclear on specifics, Rep. Gomez said several other states utilize a backend system for their tax systems that Minnesota could model its program after.
The bill was ultimately laid over for inclusion in the 2024 tax bill – a collection bill known as an omnibus bill.