That's such a nonsense argument, though. Having the IRS pre-fill basic forms for you would not obligate you to accept them. People could still compute their taxes themselves (or pay someone else to do it).

Ok, I disagree with the TurboTax reasoning, but I think your argument doesn't make sense... if most people have their pre-filled tax forms making them pay more than they should, then everyone is going to compute their taxes themselves anyway to avoid paying too much... at that point, why is it better than the current system?

(Edited to correct an error)

About 20% of people (particularly low income people) have simple tax returns and file using 1040EZ. If the IRS computed that form, then what they send out would be ideal for the majority of taxpayers. So it would benefit those by eliminating the expense of tax preparation without actually costing them more in taxes.

Then there are those like myself who fall into an in-between area. I have more complex taxes, although not as complex as a lot of people, but would gladly pay more than is strictly necessary in order to not have to bother with figuring them out. In fact, I already do, in the form of paying a tax preparer (I fully consider the expense of tax preparation as a tax itself.)

Those whose taxes are more complex are very likely aware of that fact, and would continue to do their own tax preparation.

Also, if the IRS provided a prefilled 1040EZ, that would make computing your own taxes easier because you could use the figures supplied as a reference.

1040EZ died after tax year 2017: https://www.irs.gov/forms-pubs/about-form-1040-ez

To nuance this - they've been refactoring/shuffling the forms around.

  2017 Form 1040EZ goes up to box no. 14
  2017 Form 1040 goes up to box no. 79

  2018 Form 1040 has no boxes for $ amounts!
  2018 Form 1040 Schedules 1-3 is where they all went, if you needed them.

  2019 Form 1040 added boxes back up to 11b
  2019 Form 1040 Schedules 1-3 also exist

Basically, Form 1040 is now "EZ" by default. For those with more complicated tax filings, you've had your work scattered to the four winds - I mean, three schedules.

Great, sounds like TurboTax will still be able to compete if the IRS gives people tax filings precalculated, as TurboTax can say "We can save you $XXX!"

I’m sure for a large percentage of Americans like myself the “$XXX” that they saved you is just the standard deduction. Maybe at some point in my life an itemized deduction will actually save me more money, but every time I have filed taxes TurboTax looks at my info and decides that the standard deduction is the best I’m going to get. So for some percentage of Americans TurboTax won’t be able to compete because they can’t save you more than the IRS already did with its deductions.

> So for some percentage of Americans TurboTax won’t be able to compete because they can’t save you more than the IRS already did with its deductions.

Except many people will try TurboTax or a competing solution anyway, just in case they can get a little bit of money back.

I would expect that to be common for the first couple years but after a couple years of realizing that they aren’t saving any additional money or are saving less than they are paying for TurboTax I’d expect that to drop off.

Unless using TurboTax actually saves people money. I wouldn't expect the IRS to have enough information to be able to predict in advance the deductions people might be able to take -- stuff like business expenses, mortgage interest, charitable donations, state taxes, etc.

Tax evasion and overstating deductions are common partly because the IRS doesn't have access to the information necessary to verify everything -- that's the same information the IRS would need in order to pre-fill tax forms accurately for the 1/3 of taxpayers who itemize their deductions. 1/3 of American taxpayers a pretty big market for TurboTax and similar services to thrive in.