Tax management platform
"If you want to prepare your return, or print and file your return, or electronically file your return, we will make that free," said CEO Andrew Argue in an interview.
The release will come in phases. Instead's tax solution will officially roll out after the April 15, 2025 tax year deadline, at which point users will only be able to file extended returns through the product. Argue said his company only recently gained approval as an official e-filer with the IRS and 10 state-level tax authorities for the 2024 tax year and is currently working on securing the rest. While he's confident the company would have all required approvals by the 2025 tax year, as they are generally granted shortly before the tax season begins, he felt it would be problematic to fully roll out so soon afterward
"So [for the 2025 tax year] there will be a little bit of a limitation there for the individuals, because it's just the very first year the product goes out. It's a big product. We want to make sure we do right by them," he said.
During this time, users will need a PTIN to file. However, once the solution rolls out in earnest for the 2026 tax year, this requirement will end.
Argue said that, for now, the free options will not include more complex filings like Forms 990 or 706. However, if someone that year wanted to, say, enter their 1099 data into the system so they could then file a 1040, they would be be able to do so absolutely free.
Changing markets, changing attitudes
Asked why Instead is offering this solution for free to everyone, Argue said it's because he believes tax filing should be free just on general principle. But moreover, he believes that tax preparation services need new revenue models to match the accelerated changes happening in the market right now. As technology improves and processes become more efficient, said Argue, the cost to prepare and file a tax return has gotten lower and lower. He noted that even major providers like Intuit's TurboTax have millions who file for free already, but even paying customers generally don't spend that much. With the mass adoption of AI in the accounting profession, these trends will not only continue, but accelerate. This means firms will soon not be able to rely on simple filings for their income, if they even do now.
"From a business model perspective, you have this sort of paradigm that we've all been living in for decades, but then you have this massive artificial intelligence boom. What does that really mean in terms of how much things should cost? Are we going to live in a post-AI world where the cost of tax [filing] is way up? Probably not. They are already so low. So how much lower can you go? What would it look like to make it free? And that's the way we're going to roll it out," he said.
Not that the company plans to become a charity. The filing will be free. But other services that Instead already offers will not. Tax strategy and advisory will remain paid offerings, as will training and education, along with more advanced services such as cost segregation studies. Especially intense AI use cases will also cost money, for example, if someone is using it to ingest hundreds of pages of PDFs in order to process a huge batch of K-1s. On top of that, Instead plans to build an API product that will also be a revenue generator through both usage fees and API partnerships. And if people want to not just file but also pay their taxes through Instead, they'll pay a small transaction fee.
While none of these things are strictly necessary for preparing and filing a return, he felt there was enough value in them to keep the revenue flowing.
"If you want to just file your return, print your return, electronically file your return, enter in all the data, like people are doing today, we will make that free. You don't need to use AI to file the return. It just makes it go faster. And you don't need to do all these different tax strategies. But if, for you, there are savings, and you find those savings make sense for you, and you want to work with us to get those savings, then there will be additional products and services available for that," he said.
Argue feels we are approaching a moment where professionals don't make money from tax prep but from generating actual tax savings for clients, which he said is where the true economic value lies.
"AI is pushing the prices down on everything. … But people are still going to be willing to pay for savings, even if AI is getting it done quickly. In fact, you might be willing to pay more if AI can get it done quickly, just to get the savings right now as opposed to six months. You're getting an actual economic return. That's what you're paying for," he said.
He said this reflects wider changes happening in the profession. As automation improves and costs keep going down, charging by the hour will start working against firms. Leaders need to consider new revenue models that will sustain them through the AI revolution.
"I think the way the industry needs to move is charging for the outcome and charging for the value versus charging for the time to get it done," said Argue. "Because AI is going to be doing the vast majority of the prep and file very soon. It already is going to do huge portions this tax season… We're nearing the total automation of tax preparation, and I think in the next couple of tax years that'll be true."
