By now, most people have already filed their taxes and are glad to have that particular monkey off their backs for the next few months. Yet, new reports that suggest that taxes may be about to get a little simpler are hitting big tax preparers like H&R Block (NYSE:HRB) and Intuit (NASDAQ:INTU) right where they live. Both are down in Monday afternoon’s trading.
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The whole problem started as a report leaked out that featured a proposal that would allow the IRS to start letting people file their taxes directly with the agency. That’s part of what the IRS spent its recent allocation of $80 billion on, setting up the necessary systems to allow that ultra-direct filing to happen. The Economic Security Project’s Adam Ruben noted that it was “…time for the IRS to create a free and simplified public tax filing option.”
However, with taxpayers paying an average of $250 to get their tax returns done annually, based on reports direct from the IRS, it’s easy to see why Intuit and H&R Block went down. Of course, such firms would still have a market; contractors and the self-employed, who pay their taxes quarterly, would likely still have a need for accounting software and accountants. Though it’s easy enough to wonder if an IRS public-facing system would be sufficiently simple to be useful.
Regardless, it’s still likely to hit both Intuit and H&R Block, though both rallied off their lows of the day. H&R Block came off the worst in the exchange; analyst consensus calls it a Hold, and with an average price target of $35, it offers a 12.5% upside potential. Meanwhile, Intuit, a Strong Buy, offers 17.42% upside potential thanks to an average price target of $496.13.
