I see a couple of ways in which it might not be as favorable:
1. It costs more than $100 per tax payer per year to implement (about the cost of Turbotax). However the flat $100 or so that most people pay to Turbotax can be seen as a kind of regressive tax.
2. It is less effective at finding the biggest possible return.
The question is valid, but the numbers do not add up. TT asks ~$50 for federal return. If everyone in US used the service, the cost would amount to over 16 billion dollars. That is more than the entire IRS budget[1] right now.
The better question is how much it costs TT to operate returns, and how much of that $50 is profit-taking.
There is no way an e-File system run by IRS would costs additional 9 billion dollars per year. They already do most of the calculation internally.
Anyway, the government needs to collect and verify all information anyway. So, the sum total of TurboTaxes value is creating screens to collect information. If they can do a better job than the government then let them charge for it. But, by banning the free option they are saying they don’t actually create value.
That's a great point. IRS already has most of the information and infrastructure to fill out your taxes. Third-party solutions have to build large chunks of the same thing from scratch.
Eventually. Not necessarily by the time you file, and not necessarily on every return. Remember, the IRS only audits a small fraction of returns for accuracy. Auditing every return would be a much bigger job than they currently do.
I'm not saying they shouldn't, but it isn't as trivial as a lot of people here seem to think.
The idea that some business gets to ban the government from offering a service and some people argue that it's good for eveyone is totally absurd to me.. from a country where I log in to our version of the IRS, where my salary information is pre-filled, I only need to add stuff if I had some other income.. and the system is totally free to use for everyone, and most people just spend about 5 minutes once a year to declare their taxes.
It needs to be able to (eventually), but it doesn't. Setting up a system where this was possible requires some significant changes to the tax code, process, and the IRS itself. Of course, this shouldn't stop us from trying.