IRS rolling out pilot program of free online tax preparation service for select individuals

Brian Niemietz, New York Daily News
·2 min read

The Internal Revenue Service is rolling out a test program to help taxpayers prepare their returns online for no charge. A successful launch could challenge tax services like H&R Block, TurboTax and Jackson Hewitt.

The trial run will be offered to select individuals preparing their 2024 returns in January. It was made possible by the August passing of the Inflation Reduction Act, which gave the IRS $15 million and nine months to explore the possibility of such a system. It’s not yet clear who will qualify to participate in the program when 160 million Americans begin to prepare their 2024 filings.

Democratic lawmakers have argued that individuals spending an average of $140 a year to file their taxes should be offered a gratis digital option to ease their burden. Republicans have largely opposed a direct filing system that could cost the government up to $249 million a year to operate, according to NPR. The $14 billion tax-preparation industry would likely be impacted by a competitor that minimized demand for their services. Challenges on Capitol Hill are expected.

IRS commissioner Danny Werfel reportedly said taxpayers will still have an option to use tax software, pay professionals or file a paper return. “We’d rather they file electronically, sure,” he told reporters Tuesday. “But they have that choice.”

A study found 72% of taxpayers expressed interest in a free, IRS-operated electronic tax filing service, according to CNN. Treasury Secretary Janet Yellen green-lit the test program. The Wall Street Journal says a report is expected this week.

The IRS currently offers a “Free File” service to taxpayers earning no more than $73,000 annually. That option, which CNN says is used by roughly 4% of people who file, is described as “a public-private partnership between the IRS and many tax preparation and filing software industry companies.”

In a statement to the Daily News, H&R Block called the IRS’s direct e-file pilot “a solution in search of a problem.”

“With more than 30 organizations already offering free tax preparation, this pilot is unnecessary and faces significant barriers to providing comprehensive tax preparation services,” the tax preparation company said.