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The Internal Revenue Service said this week it plans to pilot its own tax prep software next year.

If the plan becomes a reality, it could spell major danger for TurboTax, H&R Block, and the rest of the tax prep industry, which is worth $14.3 billion, according to market research firm IBISWorld. But in the meantime, the project is getting pushback from critics who arent keen on seeing the IRS take on new functions.

The case for making the IRS your accountant

Direct-file advocates like Sen. Elizabeth Warren have long argued that preparing returns through a .gov site would make the process simpler and cheaper for Americans. The IRS estimates it could cost the government just $10 per taxpayer, a steep discount from TurboTaxs cheapest paid option: $69.

With $80 billion in new funding over the next decade courtesy of the Inflation Reduction Act, the IRS commissioned the think tank New America to complete a feasibility study on whether the government should provide the service. The groups research, released this week, found that building a direct-file tool is something the IRS can handle. And the group determined that 72% of Americans might use it.

Not everyone is into the new take on tax day

Least thrilled about the direct-file tool are the folks whose bread and butter is your tax return. H&R Block and TurboTax-parent Intuit (both offer a free basic version of their services) spent a combined $35.2 million on lobbying lawmakers about direct file and other issues since 2006, according to the Associated Press.

Intuit spokesperson Tania Mercado told us the IRSs plan is a solution in search of a problem that would unnecessarily cost taxpayers billions of dollars. She also said the governments cost estimate is laughable.

Meanwhile, some Republican lawmakers (who generally oppose any expansion of the IRS) see the government playing the dual role of tax collector and preparer as a conflict of interest.

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Others worry it might not be worth the investment: Low uptake would be the main risk of the program, according to Alex Muresianu, a policy analyst at the Libertarian think tank the Tax Foundation. He points out that only 3% of eligible taxpayers use an existing free tax filing program for low-income people. New Americas report itself referenced a survey showing that, while taxpayers were into the idea in general, there was much less interest in an IRS tool that didnt include state tax returns in addition to federal ones.

Looking ahead though the pilot is in the works, it would be years before the direct-file tool became the tax season companion for millions of Americansif it ever did. Nonetheless, some hope the IRS might one day go even further, with direct filing paving the way for automatic tax deductions with no return required, a reality in places like the UK, Japan, and Germany.SK

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The taxman might soon be your tax preparer - Morning Brew