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IRS develops independent online tax filing system, prompting discontent among tax-preparation companies

The IRS is creating a system for taxpayers to electronically submit returns directly to the government at no cost, bypassing commercial options like TurboTax.

The agency intends to conduct a pilot test of the program in the upcoming year. Numerous other nations already provide taxpayers with a government-operated filing system. However, the proposed plan by the Internal Revenue Service (IRS) is likely to encounter strong opposition from the tax-preparation industry, which is valued at $14 billion.

Industry Opposition to IRS Direct E-File System

According to Rick Heineman, a spokesperson for Intuit, the company responsible for TurboTax, An e-file system that connects directly to the IRS is completely unnecessary and merely a solution looking for a problem. This solution will needlessly burden taxpayers with billions of dollars in costs and disproportionately harm the most vulnerable Americans.

American taxpayers already spend a significant amount of time and money on tax preparation. The average individual filer pays $140 per year.

Although an alliance of industry participants offers a free-filing alternative through the IRS website, only approximately 2% of taxpayers utilize it.

Read more: The IRS Contemplates Free Tax-Filing Service: Risks And Concerns

Democratic Support for Affordable Online Filing

The IRS is creating a system for taxpayers to electronically submit returns directly to the government at no cost, bypassing commercial options like TurboTax.


Senator Elizabeth Warren of Massachusetts stated, “That’s because the tax preparation companies undermined the program in order to continue profiting.”

TurboTax paid $141 million last year to settle a complaint that accused the company of advertising free tax preparation and then directing customers toward expensive upgrades. The company did not admit to any wrongdoing.

IRS commissioner Danny Werfel emphasized that filing tax returns directly with the government will remain entirely optional. During a conference call with reporters on Tuesday, Werfel stated, Taxpayers will always have multiple options for filing their taxes. 

They can use tax software, consult a trusted tax professional, or opt for a paper tax return. While we do encourage electronic filing, the choice ultimately rests with the taxpayers.

Many Democrats have long supported the idea of a direct filing option. Last year, legislation was passed allocating $15 million to the IRS for studying this concept.

During a hearing last month, Senate Finance Committee chairman Ron Wyden of Oregon said, “Democrats firmly believe that it shouldn’t cost hundreds of dollars and countless hours just to comply with the law when filing taxes online. The current situation is unacceptable.”

The Internal Revenue Service conducted surveys and discovered a considerable interest in a government-operated filing system, along with associated challenges

One survey indicated that 72% of taxpayers would be either very interested or somewhat interested in a system that enables them to file returns directly with the government at no cost. This option proved to be most popular among younger individuals, those with limited English proficiency, and self-preparers.

Read more: Potential Cases Of Social Security Benefit Garnishment For Old Debts: What You Need To Know


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