Mixed Reactions as Some Americans Utilize IRS Direct File Pilot for Free Filing in 2024: The IRS’s Direct File pilot program allowed over 140,000 individuals in 12 states to file their taxes for free this year, but its success is controversial.
The IRS processed nearly 5,000 accepted returns daily on April 15, the last day of tax season. Taxpayers using Direct File submitted over $90 million in tax refund claims and $35 million in tax balances. According to the report, Americans saved $5.6 million in federal tax preparation fees.
IRS Commissioner Danny Werfel stated, “We wanted to test new ways to provide taxpayers with a simple, accurate, and free way to file their taxes online directly with the IRS.”Most Direct File users liked the pilot’s speed and simplicity.”
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Was the pilot of Direct File a success?
The IRS found that 90% of over 11,000 Direct File users rated the service “excellent” or “above average.” Most participants liked Direct File’s reliability, user-friendliness, and cost-freeness.
The majority of poll participants (86%) said Direct File increased their confidence in the IRS. 90% of customer assistance customers rated their experience “excellent” or “above average.”
The agency wouldn’t say if a full deployment is imminent. Yet, it’s “conducting an analysis of the pilot’s outcomes and collecting feedback in order to inform our trajectory moving forward with regard to Direct File.” Werfel said “We expect to make an announcement regarding future plans later this spring.”
The industry maintains a scept
Direct File is unneeded because commercial and volunteer organizations offer free filing, claim critics. The trial program found low demand for IRS-compliant files, which is concerning given their cost.
The American Coalition for Taxpayer Rights (ACTR), a non-profit that supports financial services settlement businesses, calls this a ‘great victory’ only in Washington. The IRS estimates 100,000 filed at the time, fewer than the 140,000 who used the service and a fraction of the 19 million eligible to use Direct File this year.
A Treasury official predicted “at least several hundred thousand” February participants. The IRS lowered its March target to 100,000, but it was exceeded.
IRS reported spending $24.6 million after the experimental program. Direct File spent $2.4 million on customer service, cloud computing, and authentication.
In a study this month, the Government Accountability Office slammed the IRS for failing to account for all program costs, including beginning costs. “Estimations may underestimate the total amount of resources required for the IRS to develop and maintain a permanent Direct File program in the absence of a comprehensive cost accounting,” GAO said.
“ACTR said that the millions of dollars spent on Direct File should be better directed toward promoting Free File, a long-standing public-private partnership that provides free returns to low-income Americans.” IRS customer service offers Free File.
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Some agreed with the government that Direct File was successful and supported its expansion.
“To make this year’s pilot a success, the IRS had to make the tool user-friendly and create a stable, functional prototype,” said Economic Security Project vice president of campaigns and political strategy Adam Ruben. “According to our survey, Direct File users adored this free and streamlined tax preparation option, which they discovered to be quicker, cheaper, and simpler.” As the IRS populates additional data, Direct File can expand to more states, tax conditions, and states next year.
Define direct file.
The purpose of the Direct File pilot program was to assess the viability of developing a system that would enable filers to offer a free service when submitting their federal income tax returns to the IRS.
It was initially made available during the most recent tax season, but only to a restricted subset of taxpayers hailing from a dozen states. The mandate for the program originated from the Inflation Reduction Act.
In 2024, who utilized Direct File?
Direct File was accessible to simple tax return filers in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington State, and Wyoming.
The IRS advised people whose tax situations fell outside the pilot to use the Free File program, which offers free software from private companies, to file their taxes.
With 33,328 users, California had the most residents, followed by Texas with 29,099 and Florida with 20,840. The top five were completed out by Washington, with 13,954 users, and New York, with 14,144 users.
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