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Key Takeaways
- Shares of Intuit, the maker of TurboTax software for taxpayers filing their own returns, slid Thursday as the IRS said it would broaden its free, direct tax filing program in 2025.
- The free IRS direct filing system will compete with Intuit’s TurboTax, which offers both free and paid tax filing software.
- Direct File from the IRS will be available for use by all taxpayers starting in the 2025 tax season.
- Intuit earlier warned that it expects to lose customers who use its free TurboTax program if the IRS offers the no-cost Direct File option to more taxpayers.
Shares of Intuit (INTU) fell nearly 6% Thursday as the Internal Revenue Service (IRS) said it will make permanent its new direct income tax filing program for everyone, beginning with the tax filing season in 2025, news that threatens demand for the company’s TurboTax software.
The IRS on Thursday said the decision followed the success of its Direct File pilot program with more than 140,000 tax filers in 12 states during the 2024 tax season, and partner feedback analysis.
‘Improved Ease of Tax Filing’ With IRS
The IRS noted that Commissioner Danny Werfel made the recommendation to Treasury Secretary Janet Yellen, citing “overwhelming satisfaction from users and improved ease of tax filing,” and that Yellen accepted.
Werfel said that the “clear message” was that many taxpayers wanted more than one free option for filing taxes electronically. He added that Direct File “fits squarely into our effort to make taxes as easy as possible for Americans, including saving time and money.”
Intuit Warns TurboTax Could Lose 1 Million Free Users
Last week, Intuit warned that it expected to lose 1 million customers who use its free TurboTax program this fiscal year, as many shift instead to the IRS Direct File option. Intuit projected total TurboTax filing units will drop 1% because of “share loss with pay-nothing and lower average revenue per return customer.”
Intuit in April blasted the IRS program in a press release, criticizing it for reaching only seven out of every 1,000 taxpayers who were eligible to use it, among other things. The company’s stock has been trending down in the last five days, but slid further after the IRS announcement Thursday.
The IRS said it would offer the new, broadened Direct File service while continuing to support other filing options, including tax prep software offered by private companies.
Intuit shares finished 5.9% lower at $562.97 Thursday. They’ve lost nearly 10% of their value since the start of the year.
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