It was March 7 and Bridget Roberts, who had most recently been the Internal Revenue Service's acting transformation and strategy officer, had that combination of nervousness and excitement that often accompanies the launch of a major project. This was the night before the official public rollout of the brand-new Direct File program, the agency's free online tax preparation system being piloted in 12 states.
Tapped to lead this initiative in May 2023, Roberts and her team had been given less than a year to design, develop and roll out the new software package from scratch, a challenge for even private tech firms, let alone the IRS. She did not yet know that, once filing season was done, over 140,000 taxpayers will have successfully filed their returns using this new system. That night, the only thing she knew for sure was that everything they'd been doing since last year—all their planning, all their work, all their effort—was now coming to a head, and success was not guaranteed.
"I know the team was really excited to put this product in front of a real taxpayer to see if everything we had worked so hard on actually played out in reality and if it was easy to use and simple as we had been hoping … There is a lot of pressure to deliver on. It was a lot of nerves and a lot of excitement," she said.
The idea for an IRS-run free tax program had been around since at least 2002 when, as part of its
The Direct File program itself originated in the 2021 Inflation Reduction Act which, among many other things, mandated a third-party study to examine the feasibility of this system.
"How a taxpayer responds to a survey question will always be influenced by their assumptions built into the question. A better way to get feedback was to build a prototype and put it in front of taxpayers, something tangible, and ask for their opinion on it, so it's not based on what they think may or may not be available but to actually interact with it and get a feel for what the experience might be like… That is what then led to the pilot," she said.
The study concluded in
Roberts conceded this was a very short time window to develop a complete solution from the ground up, especially for the federal government, but the agency felt confident it could meet this goal.
Development
While it's a common practice among federal agencies to contract with private entities to build software solutions, the IRS did not take that route with the Direct File program. Instead, it was developed entirely in-house with a blended team of government workers and private partners. Specifically, the team was a mix of workers from the IRS,
Roberts stressed that this was not a job done piecemeal by different entities, but a unified team that worked as one unit to develop this program. While headcount rose and fell over the course of the project, at its largest the production team was about 75 people.
"Everyone worked shoulder to shoulder on Direct File, it wasn't like you had one vendor working on one part and another one working on another, everyone left their organizational affiliation at the door. We were all just one cohesive blended team which is something I think is different … but it was very successful and I do attribute that to a lot of our success: We had such great people from all across the tech industry and government working together," she said.
From the start, she knew the IRS needed to keep things simple. Faced with resource constraints after repeated budget cuts over the years, it did not have the power to make the same kinds of technology investments enjoyed by major vendors. With this in mind, the team emphasized simplicity and efficiency, taking care the entire time to ensure their reach did not exceed their grasp. This, too, she credits as a major part of the IRS's success.
"We really took a look at what we could realistically deliver in the nine months we had from May to launch. So we had a limited tax scope, we were very upfront about that, we didn't take on all the various pieces of individual income taxes and take years and years to develop this. We wanted to start small with the tax scope and the number of states with how we launch our product," she said.
"Simple" does not necessarily mean "easy," though. One of the biggest challenges the team faced was the sheer complexity of the Tax Code, even for the relatively limited scope of the project. Even in the most simple of returns, there remained myriad considerations, both technological and administrative, that had to be kept in mind.
"The challenge of breaking down those provisions into those foundational parts of the tax law, especially with dependents, breaking that into small pieces so the team could develop iteratively and the challenges of coordinating all that between designers and engineers and IRS council support was an unexpected challenge," she said. "People thought because of the relatively limited scope it would be easier."
One thing that helped, though, was the fact that they had access to all the resources in the IRS, especially its staff. For instance, Roberts said they had access to some of the best tax law specialists in the country, and the team greatly benefited from their expertise. At the same time, she stressed that it was important for the team to not rely on the fact that they were in the IRS when building the solution.
"One of the things that was really important to us was treating Direct File returns no different than any other electronically filed returns, which meant making sure we were going through the same Modernized e-File certification as other e-filers. We held ourselves, even though we're inside the IRS, to the same standards as any other electronic filer," she said.
Also vital to the pilot program was cooperation from state governments, as the IRS wanted Direct File to be able to send information to them as well. Roberts understood that establishing these partnerships might be a tall order, because by June 2023 state budgets and priorities had already been set. She was gratified to find that there were still a number of states intrigued by the project, and what's more the IRS did not have to approach them to ask: Instead, they approached the agency.
"We were really, really fortunate in the states that volunteered, who said, 'Yes, we know this is just a pilot and we'll have to work together and figure it out as we go along,' but they were really excited to join this pilot," she said.
New York was the first state to join the program, and ultimately, the IRS wound up with 12 different states partnering with them on this project, including California, Texas, Florida and Massachusetts.
Deployment
Internal testing began in February, starting with a single IRS employee. That person filed their taxes, and the team identified "a few minor things and fixed them," according to Roberts.
After that, five IRS employees from non-income tax states tested the system, which she said mostly went well. Then they found five more IRS employees with state income tax returns to file, and while they had some problems with transferring data from one of the filers, they "quickly fixed that." In total, about 1,850 people comprising both IRS and some state revenue agency employees took part in initial tests.
"And in those early phases, where it was invitation-only, federal government and state employees volunteered and it was great to see where taxpayers were running into issues, where the language wasn't clear, where there were knowledge articles our customer support reps needed," she said.
Roberts added that they had initially trained the customer support reps to help taxpayers navigate Direct File, thinking that this would be the main point of confusion because it was a new system, but most of the queries had more to do with tax questions, particularly around eligibility for programs, and so they provided further training. She also noted that the IRS overestimated how much customer support would be needed, which she said spoke well to the program's user-friendliness.
Following the first round of testing, the IRS then opened Direct File to brief public tests before, finally, on March 8, it was open round the clock every day to eligible taxpayers in all 12 participating pilot states.
As one might imagine, there were some differences from the initial tests, not least of which being an uptick in rejected returns.
"When we were using only the volunteers in early phases, we had very few returns getting rejected. Not surprising — IRS agents are very compliant taxpayers. So one thing we did see when we launched more widely that we hadn't seen earlier was an increase in rejected returns — which we expected but didn't have that experience in earlier phase, so one of our goals was to be able to, as we see issues during the filing season, to make changes and address challenges," she said.
Still, thousands of people used IRS Direct File every day during tax season to do their taxes. The experiences — and frustrations — of these thousands of people guided further improvements implemented in the middle of the filing season.
Roberts noted, "The product that the first filer saw on Feb. 1 is not the same product people saw on April 15." She said the team was "constantly" making changes such as additional language support and more tips and guidelines. The biggest change, she said, was giving Direct File the ability to import the previous year's adjusted gross income; the lack of this ability was the biggest reason returns were getting rejected.
"Maybe the taxpayer typed a number wrong, or didn't have last year's return and just guessed and guessed wrong. Because Direct File was new, they weren't able to pull up last year's return. … we were able to come up with additional production functionality to help resolve that issue," she said.
What's next
By the end of the filing season, over
However, she is not looking to rest on her laurels. There is much she would like to do to improve customer service, the user experience, and giving taxpayers the ability to import even more information from their online accounts. She would also like to have the program be available in more states next year.
She would also "definitely" like to expand the scope of the program to allow even more people to be eligible. However, much like her thinking early in development, she felt it was important to concentrate on what's doable and building on what's already worked versus going full throttle into becoming an all-encompassing tax solution for every conceivable purpose.
In this sense, while she theoretically could see Direct File one day be used for other kinds of taxes, the team right now is highly focused on the individual income tax returns, and expects to remain so for the foreseeable future.
"We're really focused on individuals and how we can expand to make Direct File an option to the vast majority of lower-middle-income working families. I don't anticipate we would include every sort of type of deduction and credit out there; there are some that are super niche and serve a relatively small audience, like the
She specifically cited gig economy workers as "an important population we would like to reach and bring more things like that into scope in the next few years."
