IRS Revolutionizes Tax Filing Unveils Cutting-Edge E-File Program Set to Reshape Tax Preparation Industry

As part of a pilot initiative, the Internal Revenue Service (IRS) has announced the debut of Direct File, a free e-file tax return system that is presently accessible in 13 states. This represents a dramatic change in the way that Americans prepare their taxes and pay them.

Richard Kaplan, a law professor at the University of Illinois Urbana-Champaign and specialist on U.S. tax policy, says that because the system is free, the largest tax preparation companies, such as Intuit and H&R Block, are likely to view the IRS as a threat.

Through the Free File Alliance, the IRS has been working with private tax software businesses for years to provide free online tax preparation and e-filing services on its website. Nevertheless, the initiative has had difficulties; after over 20 years, H&R Block and Intuit withdrew from the collaboration.

70% of eligible taxpayers used Free File during the 2021 tax season, but just 4% of them actually used it, according to a Government Accountability Office audit. Anticipated to be more comprehensive and intuitive, the new Direct File system has the potential to emerge as the go-to way for paying taxes.

According to Carol Portman, president of the Taxpayers’ Federation of Illinois, excellent tax policy is determined by how simple and accessible tax filing is. Numerous taxpayers who participated in the poll acknowledged that they felt more at ease disclosing personal information to the IRS directly than to a third-party tax agency.

Nonetheless, powerful tax preparation firms like Intuit and H&R Block oppose the IRS. Last year, Intuit said that “taxpayers don’t want the tax collector, assessor, auditor, and enforcer also to be their tax preparer” in a blog post criticizing the IRS’s efforts.

Americans prefer the third-party private systems that are now in place, according to Tom Gannon, Chief Government Relations Officer of H&R Block, and the IRS should concentrate more on enhancing current taxpayer services than on developing new ones. According to Tania Mercado, a spokeswoman for Intuit, “the direct file scheme is a solution in search of a problem, and this half-baked solution is not ‘free’ and could end up wasting billions of taxpayer dollars,” she was equally critical of the new IRS program.

The Direct File pilot program will offer insightful information about how to enhance the system. According to an IRS survey, 68% of taxpayers said they would be “very likely” or “somewhat likely” to go to a direct filing option that the IRS offers for free.

Among the many advantages of the Direct File system are its accessibility, convenience of use, and data security. In terms of modernizing and streamlining the tax preparation process, it is a major step forward for the IRS. Whether the IRS can compete with private tax preparation companies in the future will depend on how well the Direct File pilot program does.

By Caleb Anderson

Caleb, a seasoned journalist with a passion for storytelling, has dedicated his career to bringing the latest news to the public. With a keen eye for detail and a commitment to unbiased reporting, He navigates the dynamic world of journalism, covering a wide range of topics from local events to global issues. Caleb's insightful articles reflect his dedication to keeping readers informed and engaged in the ever-evolving landscape of news.

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