Advocates hail Biden Administration decision to expand and make IRS Direct File permanent 


May 31, 2024

The IRS announced this week that it will both make permanent and expand Direct File, which this year for the first time enabled 140,000 filers in 12 pilot states to file their taxes quickly, easily, and, most important, for free. 

The announcement stated that all 50 states plus Washington D.C. will be invited to participate in the program. It will be months before the agencies know which states will agree to participate in 2025; some states may lack the political will to do so while others might not be prepared by next year. 

Also unknown – to be determined in the coming months – is who will be eligible to participate. This year, filers generally could only participate in the pilot program if they filed simple tax returns, such as using the W-2 form. 

Regardless, the news was welcomed by advocates who see Direct File as a service that could eventually help millions of Americans with low incomes save money on filing their taxes because they could avoid using for-profit companies such as TurboTax and H&R Block, or other firms, big or small. 

“Filing your taxes should, for most people, be easy, fast, and free. That is the premise – and the promise – behind the IRS Direct File program, which after a successful pilot year will be made permanent, as officials announced today,” the Institute for Taxation and Economic Policy said in a blog post. “While there is plenty of room to expand Direct File at the federal level, states can take matters into their own hands and bring this benefit to their residents by opting into the program.” 

The agency’s announcement came after 138 members of Congress earlier this month asked it to expand Direct File. 

“With the 2024 tax filing season at its end, we write to commend you on the historic and resoundingly successful launch of Direct File, the first free, public, electronic federal tax filing tool in U.S. history,” the members said in a letter. “Taxpayers want and deserve a free and easy filing option, and thanks to this year’s pilot, taxpayers used Direct File to claim over $90 million in tax refunds and save $5.6 million in estimated filing fees, with 90 percent of surveyed users rating their experience positively and 86 percent saying their experience with the tool increased their trust in the Internal Revenue Service.” 

The Coalition for Free and Fair Filing and its more than 125 member groups applauded the decision. 

“The Direct File pilot has already shown us how this program can transform tax filing for taxpayers across the country, and we are incredibly excited that the IRS announced today that Direct File will be a permanent government offering, and that all 50 states and the District of Columbia will be invited to participate,” the coalition said in a statement. “This year’s Direct File pilot proved that the government is more than capable of providing a free, public e-filing service that saves taxpayers time, money, and headache. Users from this year’s pilot reported near-unanimous satisfaction and indicated that it helped build their trust in government.”  

But the announcement drew immediate pushback from a trade association that represents for-profit companies such as TurboTax and H&R Block, which stand to lose millions of dollars if Direct File becomes rooted in the nation’s tax-filing culture. 

According to Axios, the Taxpayers Protection Alliance, a conservative think tank, said expanding Direct File will “radically increase the IRS’s authority and scope” and “have devastating consequences.” 

Private tax services, spokesperson Kara Zupkus said, “have every incentive to find the deductions that will yield them the best return.” 

But Rep. Brad Sherman (D-CA), an accountant and senior member of the House Financial Services Committee, disagreed. And he told Axios he wants to further expand Direct File, calling for a “self-populating form.” 

“Why in the heck should you have to fill out your return when the government has all the information?” he asked. “They know what’s on your W-2 form before you do. They know what’s on your 1099…Do you know how many mistakes people make?” 

A Government Accountability Office study found that individuals who file their taxes without outside assistance do make plenty of mistakes – but for-profit tax preparers make even more. The study found that individuals had a 50 percent error rate but the private sector preparers’ error rate was even higher – 60 percent. Errors refer to changes either to the tax due or refund amount. 

Sen. Elizabeth Warren (D-MA), like Sherman one of the leading advocates of expanding Direct File, also praised the IRS’s decision. 

“Filing your taxes should be easy and free, and now with this program’s permanent expansion, millions more Americans will get the option to file directly with the IRS,” she said in a statement. “Rather than waste an average of nine hours and $150 with shady tax prep giants like Turbo Tax and H&R Block, the successful Direct File pilot demonstrated that this program can save you time and money…I urge every state and the District of Columbia to adopt the Direct File program and make paying taxes easy, free, and fair for taxpayers.”