IRS could create government-run tax prep option

May 15, 2023, 3:16 PM UTC
The IRS could suggest an internal tax filing program this week.
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Tax day is in the rear view mirror, but the Internal Revenue Service might be about to rile some people up again once more.

The tax agency, later this week, will release a report that could be the first step toward creating a IRS-run tax filing program, multiple outlets reported. The study comes after a line in the Biden administration’s tax and climate law required it to submit a cost analysist and survey of taxpayer’s opinions on such a program. The deadline for that report is Tuesday.

Should the IRS recommend an internal tax filing program, that could stir up opposition from companies like Intuit and H&R Block, which could see a drop in business. House Republicans have also expressed concerns, saying the IRS’s free service will not be free to build or operate, and ultimately cost taxpayers money.  

“The report released by the IRS is not grounded in reality,” said Derrick Plummer, a spokesperson for Intuit. “The study ignores the harm a government-run system will have on vulnerable taxpayers and the true costs to taxpayers. The costs estimated in the study to build, operate, and maintain are laughable. … A direct-to-IRS e-file system is a solution in search of a problem, and that solution will unnecessarily cost taxpayers billions of dollars.”

The IRS does currently offer a tax filing service for free. IRS Free File is a program that provides free online tax preparation and filing with IRS partner sites. But taxpayers who wish to use it need to have made $73,000 or less in a given year.

Just under 10% of eligible users take advantage of that system. And last year, TurboTax agreed to a multi-state settlement, in which parent company Intuit agreed to pay $141 million to consumers who were tricked into paying for services that should have been free. (The company has since stopped participating in the program, as has H&R Block.)

An IRS-run tax filing service wouldn’t be something anyone could use. Should the agency create one, it would likely be tailored to people who have uncomplicated returns. A study written from the National Bureau of Economic Research estimated that between 64 and 73 million returns (42% to 48% of all returns) could accurately fill out people’s tax returns based on information it has from employers and other sources.

That, however, appears to be beyond what the IRS is likely to consider.

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