IRS To Begin Trial of Its Own Free Tax-Filing System

The Internal Revenue Service is rolling out a free option for filing federal tax returns this year to some residents of a dozen states. From a report: Last month, the agency published details of its plan to test an in-house filing system, in which taxpayers submit their federal tax returns directly to the agency online at no cost. Residents of 12 states are eligible to participate if they meet certain criteria. "This is a critical step forward for this innovative effort that will test the feasibility of providing taxpayers a new option to file their returns for free directly with the I.R.S.," Danny Werfel, the agency's commissioner, said in a recent statement. While the direct filing system is starting on a limited basis, it has already faced some resistance, particularly from commercial tax-preparation companies. A spokeswoman for Intuit, Tania Mercado, criticized the direct file project as a "half-baked solution" and a waste of taxpayer money. "The direct file scheme is a solution in search of a problem," she said. Intuit makes the TurboTax tax preparation software. Democrats in Congress generally support the idea of free, direct filing, while Republicans contend that the idea, part of President Biden's plan to overhaul the I.R.S., would give the agency even more power over ordinary taxpayers. US lawmakers said earlier this month that federal tax credits that Intuit received could have been better spent to build a free government alternative to Intuit's popular online tax preparation software TurboTax. The IRS estimates it would cost $64 million to $249 million annually for the agency to run a free-filing program. In the fiscal year ending in July 2023, Mountain View, California-based Intuit received $106 million in federal research and experimentation credits, which amounted to about 4% of its total R&D expenses, according to a regulatory filing.

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