Paul L. Caron

Tuesday, May 16, 2023

WSJ: IRS Weighs Creating A Government-Run Tax-Prep Option; Americans Don't Want It


Wall Street Journal, IRS Weighs Creating a Government-Run Tax-Prep Option:

WSJThe Biden administration is considering creating a government-run alternative to TurboTax and H&R Block, drawing resistance from Republicans and companies fearing a loss of business.

Democrats and consumer advocates have been pushing for the Internal Revenue Service to offer free online tax filing on its website, particularly for people with straightforward returns. Their core argument: Tax-preparation companies charge middle-income Americans for what advocates think should be a free public service.

The companies, meanwhile, are boosting lobbying spending and leaning on lawmakers to fight a change that could shrink their revenue, and they are emphasizing free options already available for taxpayers. They see the changes under consideration as a first step toward an even bigger threat in which the IRS could use information it gets from employers and other sources to prepare a first draft of taxpayers’ returns for them.

The IRS is due to release a report this week on a possible Direct File system—think TurboTax but on the agency’s website—and the Biden administration will then decide whether to pursue it. ...

Many countries already offer versions of the options the IRS is studying. A 2022 study co-written by Treasury economists found that the U.S. could accurately fill out nearly half of individual tax returns using information it already has from employers and elsewhere. 

That step, which would go beyond what the IRS is currently considering, would be a real threat to the tax-preparation industry, which is trying to stop the IRS from getting close. Intuit’s lobbying spending rose 18% in the first three months of 2023, compared with the same quarter a year earlier. H&R Block increased its lobbying costs by 29% over the same interval.

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