ACN Stock Alert: Accenture Lands Massive Contract With IRS


  • IT services and consulting giant Accenture (ACN) garnered intrigue on Wednesday.
  • The company landed a massive contract with the IRS for system modernization.
  • ACN stock dipped, likely because of a relevancy concern.
ACN stock - ACN Stock Alert: Accenture Lands Massive Contract With IRS

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Supporting efforts to streamline and accelerate tax preparation, the Internal Revenue Service (IRS) awarded information technology (IT) services and consulting specialist Accenture (NYSE:ACN) with a blanket purchase agreement to modernize the tax agency’s systems. Despite garnering intrigue, ACN stock slipped almost 1% in early afternoon trading.

On a surface level, the news should be a significant lift to Accenture and, on a sentiment basis, for millions of taxpayers. Generally speaking, Americans have an aversion to paying taxes, in part because of underlying complexities. However, while the IRS contract theoretically benefits ACN stock, the devil lies in the details.

ACN Stock Seemingly Secures a Critical Win

According to a Reuters report, Accenture Federal Services disclosed that it inked an up to $2.6 billion deal with the IRS. While the contract was awarded for a seven-year period, it added that “…it will have to compete for future orders to support the IRS with creating new ways for taxpayers and professionals to interact with the agency.”

Earlier this month, the IRS said it would launch a free service, enabling taxpayers to file directly with the agency. Further, Reuters reports that this initiative could result in the launch of a full-scale IRS filing system. Naturally, such an upgrade would compete with private tax preparers, most notably Intuit (NASDAQ:INTU) and its TurboTax program.

Although the market didn’t respond impressively to ACN stock, it aggressively attacked INTU, which fell more than 7%. “This is really not a threat at all,” Intuit CEO Sasan Goodrazi said. Reuters mentioned that Goodrazi alluded to an IRS exploratory study that showed 72% of surveyed American taxpayers were “very interested in” or “somewhat interested in” using a government tool to file their tax returns electronically.

However, that’s also where ACN stock may encounter some friction.

Not a Wholly Relevant Idea

While the Accenture deal sounds like a breakthrough on paper, it may run into a relevancy problem. In January 2020, Ars Technica reported that the IRS dropped its longstanding promise not to compete against TurboTax. So, the news about the tax agency promoting its own in-house service wasn’t completely shocking to sector observers.

More critically, several free filing programs exist for people with incomes below $69,000 (about 70% of the U.S. population). It’s the other 30% where the tax-prep industry really earns its keep.

Moreover, workplace changes — such as the burgeoning gig economy — may expand that 30% segment. It’s also in this space where the brunt of tax system complexities falls upon taxpayers, which in turn keeps tax consultancy businesses like H&R Block (NYSE:HRB) in business.

Subsequently, HRB was the biggest winner during the midweek session, popping up about 3%.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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