Latest Announcement From The IRS On Free Online Filing
Many of us use professionals to help us file our tax returns. But many of our clients do not need that expertise as we are recently retired, disability income is modest or our children are students with modest income. Online tax filing services charge fees. They may entice us with “free” federal tax filings, but then switch to charging for the state or local tax return.
The IRS is on the cusp of implementing a true free filing service for taxpayers called “Direct File.” Below is the notice from the IRS setting forth the report made to Congress with links to the actual report>
IR-2023-103, May 16, 2023
WASHINGTON — The Internal Revenue Service submitted a report today to CongressPDF evaluating a Direct File option for taxpayers and is taking steps to begin a pilot project for the 2024 filing season following a directive from the Treasury Department.
The report to Congress, required by the Inflation Reduction Act, evaluated the feasibility of providing taxpayers with the option of a free, voluntary, IRS-run electronic filing system, commonly referred to as "Direct File."
The report finds that many taxpayers are interested in using a free IRS-provided tool to prepare and file taxes, and that the agency is technically capable of delivering a Direct File program. It also concludes that effective execution of a Direct File program would require sustained budget investment and careful management of the potential program's operational complexity.
The report focuses on three areas: taxpayer opinions, cost and feasibility. The report also includes an analysis conducted by an independent third party, as required by the statute. The report also lays out the potential benefits and challenges associated with the IRS implementing a Direct File program.
"The IRS is committed to delivering significantly improved services by providing taxpayers with tools, information and assistance to make it easier to comply with their tax filing obligations. Direct File – used by numerous tax jurisdictions around the world – has long been discussed as an option for improving the customer experience for taxpayers in the U.S.," said IRS Commissioner Danny Werfel. "The IRS review looked at the potential operational and administrative requirements of such a system. Ultimately, the results show there is taxpayer interest in an optional Direct file program and such a program is technically feasible. Any path forward should start with a limited pilot to assess operational factors described in this study."
As directed by Treasury, the IRS will move to gather further information through the implementation of a scaled Direct File pilot in the 2024 filing season to further assess customer support and technology needs and the ability to overcome the potential operational challenges identified in the report. Additional details on the Direct File pilot will be available in coming months.
The IRS report relied on information from the agency's Taxpayer Experience Survey (TES), which surveyed thousands of taxpayers on these topics. The IRS also reviewed and incorporated findings from an independently conducted survey by the MITRE Corporation.
The IRS supplemented data from these taxpayer surveys with user research and usability testing that was conducted using a basic internal prototype to better understand first-hand taxpayer perspectives.
The IRS report also includes a separate, independent analysis done by New America and Professor Ariel Jurow Kleiman on the Direct File concept.
The IRS looks forward to engaging with stakeholders around this important topic in the months ahead.
IRS Commissioner Danny Werfel's letter to Treasury Secretary Janet Yellen to accompany the Direct File reportPDF.
Page Last Reviewed or Updated: 16-May-2023