"To have another sort e-tax software available is really immaterial. It's the way we think about it. And I'll remind us, by the way, it's actually not free — this is going to cost taxpayers billions of dollars," Goodarzi told analysts on a late Tuesday earnings call.
The Inflation Reduction Act (IRA) signed into law in 2022 ordered the Internal Revenue Service (IRS) to assess the feasibility of developing and operating a government-run e-filing system for taxes. Such a system, if implemented, would be voluntary for taxpayers.
The report's findings were mixed at best on the risk to Intuit's TurboTax and tax-prep competitors like H&R Block (HRB).
One survey in the report found that 68% of taxpayers who presently use self-preparation software for their taxes would be either be "very likely" or "somewhat likely" to switch to a free IRS-powered tool.
In another survey, 60% of respondents said they would choose their current commercial tax software if the IRS system could not prepare or file state returns.
Nevertheless, the mere discussion of this IRS-run free filing option — which could snatch sales away from a paid service like Turbotax — has weighed on Intuit's stock price.
Shares of the owner of TurboTax, Credit Karma, and MailChimp are off about 13.5% since hitting a record high in August 15, 2022. The Inflation Reduction Act was signed into law on August 16, 2022, by President Joe Biden.
For the fiscal year ended July 31, 2022, TurboTax represented about 31% of Intuit's sales, according to SEC filings — or $3.9 billion. So the market angst is understandable.
Despite the threat, Wall Street analysts have stuck with upbeat ratings on Intuit's stock.
To this community, a free government-run tax software option is off in the distance — if it's there at all.
And even if the government stands up the filing platform, it has a well-documented, less-than-stellar track record in developing software that people would like to use, experts contend.
"We don't expect this initiative to gain much traction given a number of issues, including lack of government track record in creating user-friendly software, conflict of interest (no government incentive to maximize refunds), consumer trust, no state tax filing, and wide availability of free options from commercial vendors, including Intuit. But there may be initial disruption at the margin due to consumer confusion," Jefferies analyst Brent Thill wrote in a recent client note.
That vibe was echoed by BTIG analyst Isaac Boltansky.
"Everything relating to the IRS remains politically charged and Congressional Republicans have a particular disdain for this effort," Boltansky said in a client note. "Creating a system like this one would require a meaningful investment in tech and taxpayer support, and private alternatives have structural benefits given their state-level offerings, consumer comfort with the interfaces, and an embedded belief that private service providers have incentives to provide the taxpayer with the best possible return."
Intuit's Goodarzi sounds like a CEO unfazed by Uncle Sam entering the tax software game. Only time will tell if that confidence is proven out.
"Our vision has been from what we declared four years ago — to really become a consumer platform of choice," Goodarzi said on the call.