Yahoo Finance IRS Expanding Program That Lets Taxpayers File Directly For Free
The Internal Revenue Service said Thursday it will ramp up a program that allows taxpayers to electronically file their taxes directly to the IRS, but the extent of the expansion will depend on how many states partner with it.
The Direct File pilot saw 140,803 returns filed this spring from users in a dozen states out of the 144 million filed nationally, but the overwhelmingly positive response was enough to convince officials to invite all 50 states and the District of Columbia to join it.
Treasury Secretary Janet Yellen told reporters on a conference call that 90% of the pilot program’s users gave it a positive rating.
“Direct File saved users $5.6 million in filing fees and helped them receive $90 million in refunds,” she said.
The move was hailed by a coalition of progressive groups that support the program, but it was criticized by Intuit, the software company behind the popular TurboTax program.
“Between streamlining the tax filing experience and proving that the government can deliver on promises, it is clear that not only did the IRS make the right decision to continue the program, but it should be scaled to reach a wider swath of Americans,” the Coalition for Free and Fair Filing said in a statement.
The group urged Treasury to expand eligibility for Direct File and look at ways to make it even easier to file, like automatically filling in parts of tax forms with data the IRS already has access to.
For-profit companies have countered there’s no need for Direct File, that the IRS’s estimates of how much the program will cost are too low and that users of the system got lower refunds than other taxpayers.
“Today’s decision by Treasury and the IRS to expand Direct File doesn’t change the fact that this program is a solution in search of a problem and every American can already file their taxes for free, without any cost to the government or taxpayers,” said Intuit spokesperson Tania Mercado.
“The data is clear, taxpayers continue to want and benefit from having an advocate when filing their taxes to help ensure that they pay only what they owe and receive the maximum refund they are eligible for,” she said.
IRS Commissioner Danny Werfel said it was unclear how many more taxpayers would be eligible to use the program next year and thus how much the expansion would cost.
“Later this year we’ll be able to report out the final number of states that have signed on for next year,” he said.
For a placeholder, Werfel said, the agency included an estimate of $75 million for the program in its budget submission to Congress. The pilot program with 12 states cost the government $31.8 million, with almost $25 million of that coming from the IRS.
In addition to being limited to less-complicated returns for now, only residents of states that join the Direct File program will be able to use it, as the Treasury Department wants users to have a smooth transition between Direct File and similar filing programs run by the states.
Werfel and Yellen said they expect the existing program in which commercial tax prep companies offer free services, called Free File, to continue, despite the expansion of Direct File.
“I have spoken directly with members of the software industry. I shared with them the absolute important role that they play, that we believe a successful tax filing system requires their ongoing participation,” he said.
