IRS Free Filing Program Successful, Future Expansion Uncertain

The Internal Revenue Service (IRS) experienced success during tax season as its free online filing platform gained popularity among users. Over 140,000 individuals utilized the new program to submit their returns and received a total of $90 million in refunds, according to IRS data shared with The Associated Press. However, it remains uncertain whether Direct File will be available next year as officials from both departments need more time to analyze further information before deciding on expanding the service nationwide. If implemented broadly, this free software could significantly impact the multibillion-dollar tax preparation industry, which currently charges over $200 annually for filing taxes using specialized programs or hiring a professional preparer (Washington Post). The IRS’s pilot program was accessible to people residing in certain states with and without income taxes, including Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, Arizona, Massachusetts, California, and New York. In the latter four jurisdictions where state tax agencies participated, filers could submit both their federal and local returns simultaneously (IRS). The Direct File program received overwhelmingly positive feedback from users who found it quicker than other filing systems they had previously utilized in previous years (Economic Security Project), with a reported 61% rating its efficiency higher. To date during the tax season, approximately 119.5 million returns have been filed so far by IRS recipients, an increase of nearly two million from last year’s figures at this point in time. The total value of refunds issued has also surged to $220 billion versus a reported amount of around $215 billion during the corresponding period twelve months ago (IRS).