The Internal Revenue Service and the Treasury Department officially launched the
The IRS
"The early results from Direct File have shown that taxpayers like the ease and convenience," said IRS Commissioner Danny Werfel during a press conference Tuesday. "Many taxpayers we've heard from filed their taxes in less than 30 minutes using Direct File. By opening up this full-scale launch today on IRS.gov, this will give more taxpayers the chance to use this free option."
Accounting Today asked him about whether the IRS encountered any technical issues during the early testing phase that caused it to
"We've been fortunate that we haven't seen any major issues," Werfel replied. "The Direct File service is working very effectively. We're getting a lot of positive feedback on it from the thousands of taxpayers that have used it. During the testing phase, like all good product development we would stand down the service for a while to just do some assessments, do some further testing of the product behind the scenes, and then put it back up online. Now we are ready to keep it open permanently 24/7 through the end of the filing season. But during the testing phase, we decided — consistent with best practices — to have the service closed at times for just ongoing maintenance and further testing."
Werfel noted that once taxpayers start their return on the Direct File site, it won't take long to complete the return, but they can save their progress and come back if they need to take a break. Taxpayers can securely sign back into Direct File anytime before the April filing deadline. They can also get special support from IRS representatives through Direct File's live chat feature. Like other electronic filing options, Direct File allows taxpayers to get tax refunds within 21 days or fewer when using direct deposit.
The IRS is also working closely with states on the pilot. After completing a federal tax return on Direct File, taxpayers in the states with a state income tax like Arizona, California, Massachusetts and
In Arizona, Massachusetts and New York, the information should move automatically from the federal return on Direct File to the state software. In the case of California, taxpayers may need to reenter some of the same information.
"When we launched the pilot, we reached out to states to see who wanted to be a part of the pilot, and we had a lot of state interest," said Werfel. "We have a lot of states that are monitoring and are interested as Direct File goes forward in working with us next year. We were in a state of readiness with Arizona, Massachusetts and New York to move that information seamlessly into the system. California is in mid-readiness. but even with the California participants, so far very positive experience in terms of the overall platform."
In addition to an English language version, the IRS is also offering a Spanish language version, which launched at 1:00 p.m. ET on Tuesday.
The IRS designed the Direct File pilot to follow best practices for launching a new technology platform by starting small, making sure it works and then building from there. The pilot is limited to cover relatively straightforward tax situations. The Direct File pilot is an option for taxpayers who fall into these categories:
- Report income earned from jobs that generate a Form W-2; including taxpayers with more than one job with W-2 wages;
- Claim Earned Income Tax Credit, Child Tax Credit and the Credit for Other Dependents;
- Claim the standard deduction and deductions for educator expenses and student loan interest; and,
- Lived in the same state for the entire calendar year 2023.
The Treasury Department estimates that one-third of all federal income tax returns filed could be prepared using Direct File, and that 19 million taxpayers may be eligible to use it this filing season, including 5.2 million in California, 3.8 million in Texas, 2.8 million in New York, 2.4 million in Florida, and 1.1 million in Washington.
"Thanks to President Biden's Inflation Reduction Act, millions of American taxpayers have a free, secure option to file online directly with the IRS for the first time," said Deputy Secretary of the Treasury Wally Adeyemo in a statement. "Direct File ensures taxpayers get their full refund by showing them the numbers and explaining credits they are eligible for. Our priority in launching this new service is to save taxpayers time and money they can spend on themselves and their families."
Not everybody is onboard with the Direct File pilot program, and it has attracted opposition from not only the commercial tax prep software industry, but also Republicans in Congress and state governments. "Twelve state attorneys general joined Ways and Means Committee Republicans in condemning the Biden administration's efforts to unilaterally establish Direct File without authorization from Congress, and I look forward to working alongside them to stop this bureaucratic grab in its tracks," said Rep. Jason Smith, R-Missouri, chairman of the tax-writing House Ways and Means Committee, in a statement Tuesday. "We have a duty to protect the American taxpayer from an already supercharged IRS that exerts too much control over their lives."
Democrats are more supportive of the program, which leveraged funds from the Inflation Reduction Act. "The historic Inflation Reduction Act continues to lower costs and make lives easier for the American people, and now, for the first time ever, many taxpayers can file directly with the IRS," said House Ways and Means Committee ranking member Richard Neal, D-Massachusetts, in a statement. "Direct File is a free, simple and secure way for people to file their taxes, and will save millions time and money."
TurboTax maker Intuit expressed its opposition to the program. "Direct File is not free tax preparation, but rather a thinly veiled scheme where billions of taxpayer dollars will be unnecessarily used to pay for something already completely free of charge today, " Intuit spokesperson Tania Mercado said in a statement emailed to Accounting Today. "Today 100% of Americans — regardless of their income level or tax complexity — can file their federal and state taxes completely free of charge. Whether people are simple filers like those eligible for IRS Direct File, or complex filers with gig work and investments that IRS Direct File excludes, there is a filing option available today so every American can easily and accurately file their taxes with confidence.
"Direct File is asking Americans to file their taxes directly with the IRS after the organization publicly acknowledged systemic inequities that see low-income filers and Black taxpayers targeted for audit at disproportionately higher rates," she added. "Filing taxes without someone advocating for your highest refund could be a recipe for overpaying the Internal Revenue Service and Departments of Revenue, organizations with titles that clearly state their focus, generating revenue for the government. IRS Direct File is a solution in search of a non-existent problem, and that solution will unnecessarily cost taxpayers billions of dollars for something completely free of charge today — free to taxpayers, and free to the government."
Intuit has also posted a
