Inside the IRS’s E-Filing System

By: James Flippin · May 18, 2023 · Reading Time: 3 minutes

Free Federal Filing

After nine months of research and evaluation, the IRS is gearing up to test the waters with a new government-run online tax filing system. This free e-filing pilot program is part of the government’s attempt to streamline the filing process for US taxpayers.

According to a recent report, a majority of taxpayers are open to using an IRS-provided tool to file their taxes electronically.

The Treasury’s Chief Implementation Officer believes this new direct e-file program could be a financial game-changer, saving taxpayers time and stress — not to mention billions of dollars every year.

Two Sides

The introduction of a government-run tax return service has stirred some debate.

Advocates of the program believe it could level the playing field, making tax return services more equitable and accessible to taxpayers across the country. They argue that such a service could mean a significant step toward greater financial transparency and independence for many.

On the flip side, major tax preparation programs like H&R Block (HRB) and TurboTax (INTU) are less than thrilled about this development. With 60 million taxpayers using those services alone, the proposed system could disrupt the industry and erode its customer base.

Despite these concerns, the intent of the IRS remains clear: to explore ways of simplifying the tax filing process for the average American.

Taxpayer Pros & Cons

There’s also a growing concern among some taxpayers about the IRS taking on dual roles as both the tax collector and tax preparer. Critics suggest this new service could create an imbalanced power dynamic between the government and taxpayers. Some question if it would yield the most beneficial outcomes for taxpayers, such as the largest refunds or smallest tax bills.

At the same time, IRS officials emphasized that any government-provided filing program would remain optional, and filing with third-party tax software or a professional would remain acceptable alternatives. Meanwhile, many workers have levied criticism at tax prep companies for charging excessive fees.

The IRS will pilot the program to a limited number of taxpayers starting next year in order to test the waters and identify potential pitfalls. User feedback will be factored into consideration while refining the system.

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