It's time to end the Direct File program
Mike Crapo
In May, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) made the mistake of converting the Direct File pilot program into a permanent, unauthorized, multibillion-dollar government detour into the tax preparation business. What is advertised by the Biden Administration and its allies as a government-run “easy and free” way to file federal tax returns is now slated to become a bloated government diversion, putting an already troubled agency into a deeper hole. I previously wrote about the problems with Direct File and the Attorney General of Idaho, Raúl Labrador, has similarly underscored such issues. New post-filing season data confirms the program’s flaws.
As part of the Inflation Reduction Act, Democrats led an effort to require the IRS to write a feasibility report on creating a new tax preparation online portal called Direct File. The following year, the IRS submitted the report which consisted of multibillion-dollar, long-term cost estimates that the IRS’s own auditor flagged as being “subject to considerable uncertainty.” Sidestepping the red flags raised in the report and by other stakeholders — including Congress — the IRS announced it would undertake a “pilot” of Direct File the same day it issued the feasibility report. With its recent decision likewise avoiding these concerns, the IRS will now spend considerable taxpayer dollars to not only compete with tax preparation companies — many of which provide these services at little to no cost — but also with its own programs.
For decades, the private tax software industry has spent billions of dollars developing products to file and legally lower customer’s taxes. To the benefit of many, the private sector already provides much of its tax software for free. For example, in 2023, the private tax software industry filed 23.8 million tax returns for free. Unlike Direct File, which is labeled “free” but will cost taxpayers billions of dollars, these private tax preparers genuinely come at no cost. In addition, the Free File, Volunteer Income Tax Assistance (VITA), and Tax Counseling for the Elderly (TCE) programs — all run by volunteers for the IRS — prepare millions of returns a year and will also be Direct File’s competition.
Become a Subscriber!
You have read all of your free articles this month. Select a plan below to start your subscription today.
Already a subscriber? Login
