Direct File: IRS’ Successful Free Tax Filing Program Claims Over $90M in Refunds During Pilot Phase but Future Uncertainty Remains

The Internal Revenue Service (IRS) witnessed success during tax season as its free online filing platform received an overwhelming response from users who embraced the new service. More than 140,000 individuals utilized Direct File to submit their returns and claimed over $90 million in refunds according to IRS reports provided to The Associated Press (AP). Despite positive feedback regarding Direct File’s efficiency during this tax season, it remains uncertain whether the program will be available next year. Officials from both departments stated that further analysis of data is required before making a decision about expanding its scope.
The free software allows individuals to submit their returns directly to the government without any fees; financial experts anticipate a national rollout would challenge established players in the $20 billion tax preparation industry. Americans typically spend over $200 annually on filing taxes using commercial software or hiring professional preparers, as reported by The Washington Post (WaPo).
Direct File was accessible to specific categories of filers across twelve US states during this year’s pilot program: Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming. Four other participating states with a state income tax were also part of the initiative; their respective tax agencies assisted individuals in filing both federal and state taxes simultaneously on Direct File.
Direct File received high ratings from users who praised its efficiency during this year’s pilot program. According to data obtained by WaPo, 96% of respondents rated it as “excellent” or “above average.” In a separate poll conducted by the Economic Security Project (ESP), an advocacy group reported that Direct File was deemed easier to use than other filing systems by sixty-one percent of users who previously filed taxes elsewhere. The ESP further found that over half, sixty per cent, spent less than one hour completing their tax returns via this new system compared with prior platforms they utilized in the past.
As a part of this year’s filings, the IRS has received 119.5 million returns as against last year’s corresponding figure which stood at 117.3 million during an equivalent period. The total value of refunds issued by the agency currently stands at $220 billion compared with a similar timeframe in the previous tax season, when it amounted to $215 billion (IRS data).