Tax & Accounting News

IRS Receives $15 Million to Create Free TurboTax Alternative

IRS Receives $15 Million to Create Free TurboTax Alternative

In July, the Internal Revenue Service (IRS) announced a five-year plan to improve the overall American taxpayer experience. 

In an official release, the IRS pledged to "help meet the changing needs of taxpayers and members of the tax community."

Amid the news that the IRS is focusing on improving its services came the introduction of The Tax Filing Simplification Act of 2022.

The federal bill was introduced by longtime Senator Elizabeth Warren (D-MA) and has support from nearly two dozen of her colleagues. The bill is co-sponsored by Representatives Katie Porter (D-CA) and Brad Sherman (D-CA).

Per Accounting Today, the legislation is intended to fix problems with the IRS’s traditional Free File program, and even requires the agency to create a completely free filing system that would eliminate the need for Americans to use TurboTax and other third-party software options.

Following the passing of Democrats' Inflation Reduction Act of 2022 -- which President Biden signed into law on August 16 -- Treasury Secretary Janet Yellen gave the IRS a six-month deadline to present a "modernization plan."

The Inflation Reduction Act provides the tax agency with $80 billion in additional funding and resources to hire 87,000 new employees.

Now, The Washington Post has confirmed that $15 million of this $80 billion boon is earmarked for the development of a new government-backed free file platform that is intended to rival TurboTax and other tax preparation software options. 

Per the Post's report:

The Internal Revenue Service will spend $15 million studying a free, government-backed tax filing system under a provision in the sweeping climate and health-care law Congress passed this summer. It’s a landmark step toward overhauling the way most Americans file their taxes and ending years of domination of tax prep by private corporations.

The U.S. Government Accountability Office (GAO) notes that fewer than 3% of taxpayers use the IRS's existing free file service, which is limited in its scope and typically is not an option for those who work in the gig economy, own cryptocurrency, or have other complex tax issues. 

At this time, an official timeline for the rollout of the government's new free file system has not been confirmed.

Through November 16, the IRS is seeking taxpayer input for its video conferencing appointments. 

What do you think about the IRS revamping taxpayer services?

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Rebekah Barton

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