IRS May Become Competitor in Online Tax Filing Arena

The Clinton administration’s fiscal 2001 funding request includes a requirement that the IRS provide tax preparation and filing services at no charge on its web site. Members of several computer and software associations are claiming that this measure could be the death knell for computerized tax preparation programs such as Intuit’s TurboTax, Kiplinger’s TaxCut, and others.

A letter, signed by leaders of the Computer and Communications Industry Association, the American Electronics Association, and the Software Information Industry Association, claims that this attempt to regulate or compete in the electric commerce industry would "conflict with the President's e-commerce policy directive in every respect."

editor's opinion:
On the other hand, look what happened when Microsoft tried to break into the tax preparation market for the 2000 filing season. Their TaxSaver program, which was years in development, provided no opportunity for state filing and was not as easy to use as the competitor’s programs, and Microsoft ultimately pulled the plug. Imagine the results of the IRS trying to break into the area of software development.

Creating a program that could complete successfully with the established programs is not something that can be accomplished quickly. It may be wiser for Clinton to revisit his request for a $10 tax credit for e-filers rather than think about getting the IRS into the software production market.

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