What happened: The IRS is working on a free digital tax filing system that could launch as soon as next year and potentially disrupt the $14.4B tax-prep and filing industry.
Details: According to The Washington Post, a small pilot program of the prototype system is set to begin in January 2024, funded by $15M in the Inflation Reduction Act set aside to create a user-friendly, free e-file system.
What the numbers show: Nearly half of Americans use software, such as TurboTax, to file their taxes, according to a survey of 1,200 U.S. adults commissioned by The College Investor. Only around 25% of people filed their taxes for free, despite the IRS estimating around 70% eligibility. Overall, 58% said they paid $50 or more to file their federal tax return.
What it means: The main factor in choosing tax software was ease of use. In the survey, TurboTax was the top choice due to its user-friendly interface, followed closely by H;R Block. The new IRS system could help millions of Americans file taxes more easily and affordably, as it could offer customer service support through secure online portals that could compete with the premium offerings from tax-prep companies.
