From Nasdaq:

Tax season began this week, allowing taxpayers to file for refunds with the IRS. A new program called Direct File was launched, available for federal and state workers in 12 states with plans to expand to private sector workers, potentially reducing business for tax preparation companies nationwide. Tax refunds can be expected within 21 days of filing electronically, and the IRS distributed $236 billion in tax refunds in 2023 with an average of $2,753 per refund.

The launch of Direct File has sparked controversy among tax preparation companies like H & R Block and Intuit, with shares of H & R Block down 1.2% on Tuesday. Critics claim a conflict of interest in having the IRS develop tax preparation software, while supporters view it as a more equitable and accessible way for taxpayers to access tax returns. The pilot program is likely to affect ETFs in the financial sector, as companies offering tax preparation services lose market share.

Companies like H & R Block, Intuit, and several others could be affected by the new program, with both of the ETFs Global X FinTech ETF and iShares Expanded Tech-Software Sector ETF’s holdings compromised. The pilot program has the support of politicians and activists who view it as a more equitable and accessible way for taxpayers to access tax returns and have been pushing for a free tax filing system. The program is projected to affect ETFs in the financial sector due to market share loss from companies offering tax preparation services.



Read more: Tax Season Is Here: Meet The New Federal Program That Can Eat Away At Tax Preparation Companies