IRS E-File Test Has the Likes of TurboTax Very Unhappy

Officials say it could save taxpayers billions, tax-prep companies say the opposite
By Arden Dier,  Newser Staff
Posted May 17, 2023 10:35 AM CDT
IRS to Test Free E-File Tax System Amid Pushback
The exterior of the Internal Revenue Service (IRS) building in Washington, on March 22, 2013.   (AP Photo/Susan Walsh, File)

Americans will soon be able to file electronic tax returns directly to the government—something residents of dozens of other countries have long been able to do. Congress approved $15 million in funding to study the possibility of a direct e-file system last year. Now, the IRS has announced a test program to be in place for 2024, though Republicans and "the $14 billion tax-preparation industry" are already putting up a stink, NPR reports. What you need to know:

  • Democrats say the program is necessary to correct an unacceptable status quo in which taxpayers have to pay companies like Intuit and H&R Block to file e-returns. The average individual filer in the US pays $140 per year. The IRS offers a free filing option for certain lower-income taxpayers, but just 2% of taxpayers use it.

  • "Dozens of other countries have provided free tax-filing options to their citizens, and American taxpayers who want to file their taxes for free online should have an accessible option," Treasury Department official Laurel Blatchford said Tuesday, per Politico. She added the new program "could potentially save taxpayers billions of dollars annually," per the AP.
  • Tax-prep companies, which stand to lose millions of dollars, disagree. "A direct-to-IRS e-file system is wholly redundant" and "will unnecessarily cost taxpayers billions of dollars," says a rep for Intuit, maker of TurboTax. "Taxpayers don't want the tax collector, assessor, auditor, and enforcer also to be their tax preparer," Intuit adds in a blog post.
  • The program has public backing, however. An IRS survey found 72% of taxpayers were interested in a free, government-run filing system. However, only 12% said they would use a system that doesn't incorporate state taxes, per the AP. That's one of several issues still to be worked out.

  • For now, the program is expected to cost $64 million annually for 5 million users, and up to $249 million for 25 million users, per the AP. It works out in the taxpayers' favor, says Blatchford. "We think there will be excitement," she adds, per Politico.
  • Not from Republicans. They are "already lining up against the plan, fearing it could eventually lead to a system where the IRS fills out people's returns for them, which they say is a conflict of interest since the agency also enforces tax laws," Politico reports.
  • The IRS doesn't anticipate doing that, Commissioner Danny Werfel said Tuesday. He added direct filing will be optional for taxpayers. "We'd rather they file electronically, sure. But they have that choice," he said, per NPR. "They can use tax software. They can use a trusted tax professional. They can use a paper tax return."
(More taxes stories.)

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