US IRS may develop free e-file tax return system, but tax-prep firms oppose

The US IRS is considering a government-operated electronic free-file tax return system, causing concern among big tax-prep companies like Intuit and H&R Block, which stand to lose millions. The IRS has been tasked with reporting on how it might work and how much it would cost. Advocates for taxpayers say it would reflect good governance and help taxpayers, while critics worry the IRS taking on both tax collector and tax preparer roles could create an imbalance of power. The Free File Alliance agreement, which prevented the IRS from creating a free system, expired in 2019, but its provision to provide free services for low-income taxpayers remains.

The US Internal Revenue Service (IRS) has been tasked with developing a free government-operated electronic tax return system. The move is seen as a way to ease the burden on taxpayers and is part of an $80bn funding package aimed at bolstering the tax agency.

But the idea has met with resistance from commercial tax preparation firms such as Intuit and H&R Block, which have spent millions of dollars lobbying against it. The IRS is set to release the first of several reports next month on the feasibility of the proposal.

The Free File Alliance agreement that prevents such a move expired in 2019.