IRS Moves Toward Free E-Filing

An anonymous reader quotes a report from the Washington Post: The Internal Revenue Service will spend $15 million studying a free, government-backed tax filing system under a provision in the sweeping climate and health-care law Congress passed this summer. It's a landmark step toward overhauling the way most Americans file their taxes and ending years of domination of tax prep by private corporations. Democrats have long lamented that millions of American pay for the privilege of filing taxes, and that corporate tax services take money from the neediest households. Hardly anyone uses the free e-filing options that industry supports because of restrictions on which returns qualify. But the IRS has lacked the funding -- or the clout to outmaneuver private lobbyists -- to seriously consider its own e-filing platform, current and former officials say, forcing taxpayers instead to deal with a consortium of private providers and setting the agency back decades in technology and customer service. "The IRS is completely beholden to the software companies at this point because it just doesn't have anything to replace them," said Nina Olson, who served as the national taxpayer advocate, the IRS's internal consumer rights watchdog, from 2001 to 2019. The commercial tax prep industry is gargantuan, worth $11.9 billion in 2022, according to market research firm IBIS World; 9 in 10 individual tax returns were filed digitally in 2021, the IRS reported. The largest players, Intuit TurboTax and H&R Block, offer narrowly tailored free e-filing options, and charge $59 and $55, respectively, for their lowest-paid tiers, plus variable filing fees and costs for state tax returns. Tax experts say a government-backed system could give more Americans access to free and trustworthy services, while increasing IRS efficiency by encouraging more taxpayers to file easy-to-process digital returns rather than cumbersome paper ones. But that would upset an ecosystem that by many accounts has served taxpayers and the government well for decades. The U.S.'s voluntary tax compliance rate -- the proportion of filers who pay federal taxes accurately each year -- is 83.6 percent by the most recent measurements, among the highest of developed economies.

Read more of this story at Slashdot.