The IRS is building its own online tax filing system allowing taxpayers to directly send electronic returns to the government at no cost, bypassing commercial options like TurboTax. In a pilot test planned for next year, the IRS aims to offer an alternative to the $14 billion tax-preparation industry.
However, industry players argue against the system, deeming it redundant and potentially harmful to vulnerable Americans. Despite the availability of a free-filing option on the IRS website, it remains underutilized, with allegations of sabotage by tax prep companies.
While the government assures taxpayers of continued choices in filing methods, Democrats favor the option for lower costs and streamlined processes. Surveys show strong interest in a government-run system, particularly among younger individuals and those handling their own taxes. Nonetheless, concerns persist about potential conflicts of interest and the accuracy of refunds or tax bills. The IRS estimates an annual cost ranging from $64 million to $249 million for the system, with challenges including integrating state tax returns and automated data entry.
It is worth noting that the impact on online sellers, whose taxes tend to be more complicated, remains uncertain. While the new system offers a free and direct filing option, the complexity of seller taxes may still require the assistance of an accountant or tax professional.
As the IRS prepares for a pilot program, further details regarding its scale and participant eligibility are yet to be determined.
