IRS Considering Government-Run Tax Filing System

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Facts

  • The Biden admin. is considering whether to create a government-run alternative to companies like TurboTax and H&R Block, with Democrats and consumer advocates pushing for the Internal Revenue Service (IRS) to offer free online tax filing on its website.1
  • As the White House has weighed its options, TurboTax parent company Intuit — which also owns ​​QuickBooks, Mint, Credit Karma, and Mailchimp — has spent a first-quarter record of $980K in federal lobbying in the first three months of 2023.2
  • As the IRS is set to release a report on the potential direct file system — which would be similar to what commercial tax companies offer — shares of Intuit and H&R Block fell 5% and 9%, respectively, as of Monday morning.3
  • Companies do offer free federal tax returns, though people often pay to file state taxes as well. Taxpayers making less than $73K annually can also use the IRS Free File, which gives access to private software, though only 3% of 100M eligible taxpayers used it last year; Intuit and H&R Block also no longer participate in it.1
  • This comes as lawmakers allocated $80B to the IRS to bolster tax administration and enforcement and the agency added 5k workers to provide customer service this year.1

Sources: 1Wall Street Journal, 2OpenSecrets News, and 3Investing.

Narratives

  • Democratic narrative, as provided by The Hill. An IRS-issued free tax filing system has been proposed by both parties since the Reagan admin., so this should not be a polarizing issue. The sliver of funding given to the IRS to study such a proposal equates to 0.02% of the total $80B given to the agency, so no one should worry about our tax dollars being wasted on this. Just as paying a parking ticket doesn't require a third party to help you, filing tax returns should be a simple, cost-effective process that every American has access to.
  • Republican narrative, as provided by Americans for Tax Reforms. While the tax-prep industry has flaws, that argument is the shield big government supporters use to obtain more control over Americans' lives. Even if the IRS already has our information, giving it the power to prepare our taxes won't suddenly make it less of a money-grabbing institution. Furthermore, as is the case with the Dept. of Motor Vehicles and public healthcare, it will be a subpar program that makes taxpayers jump through bureaucratic hoops just to pay their taxes.