IRS looks into setting up a government-run tax filing system

The IRS is releasing a report this week on the possibility of a free government run tax filing service. Our very own Rachele Kupo is here with us to break this down. Rachele, what do you think we can expect from this IRS proposal? So as you mentioned there, it's a combination of the IRS and the U.S. digital service. Now they've been very tight-lipped on the details, but the Wall Street Journal and the Washington Post reporting that the agencies will lay out plans for this free government run self filing tax service this week. Now that's meant to focus on some of these straightforward tax filers, so not if you have a lot of these complex tax issues.

And we're supposed to be starting with a pilot test group in January of 2024. Now all of this really shouldn't come as much of a shock. I mean, you know, the Biden administration and consumer groups have been pushing for lower filing fees, lower fees for consumers overall, and $15 million was set aside in the Inflation Reduction Act to look into a direct e-filing program. Now according to IRS estimates, the average American spends about $250 each year in tax filing services. If you look at TurboTax parent company Intuit and H&R Block, they make up the bulk of the self filing tax market. Now the popularity of e-filing has skyrocketed, climbing 100% since 2009 before pairing back just a little bit since COVID. And of course those two names with the lion's share there.

Having a bit of an issue here when it comes to the stock price, we saw some selling action, but it has at least paired back at least a little bit for an hour. Yeah, Richelle, how worried should those investors be because H&R Block is still off almost 3% today on this news? Indeed. I mean, when you look at it, I mean, they had already been preparing a lot of their lobbying service money. When you look at 18% and 29% for Intuit and H&R Block respectively. Now they argue that they already offer a lot of these services, at least for the federal filing for free. And some of these other fees that you see are more about the state filing, some additional or specialised fees there. But they're basically saying, look, keep in mind, there's already an existing free filing service that the IRS has.

Now that's if you're earning under $73,000. And according to the most recent survey from the Government Accountability Office, over 70% of people who are eligible for it, only 4% of people are actually taking advantage of it. So even though it's there, people are not using it. Now you might be wondering why? If you're eligible for this, why aren't you using it? Well, part of it is this concern about perhaps filing on a website at the same organisation that's also going to turn around and potentially audit you at some point. You know, it's almost like a roach voting for raid. Why would I come in willingly to the IRS? That's not something that people are keen on. And also a caveat here that we saw from Kartik Metta, who's a North Coast Research Analyst.

He was saying that I guess what could break it is if the IRS said we're going to take all this information and create your tax return. So not really worried about the companies right now at the moment. He said they have strong balance sheets. And you know, again, you're not necessarily going to want to sign up to the IRS's free service. If you think it's going to get you closer to getting a little bit more scrutiny. I don't know about you Diane, but I don't know if I'm going to be that keen to do that. For sure.

I never thought I'd hear that on TV or digital space. Roach voting for raid. All right, that's the takeaway right there.

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