Groups oppose deep cuts to IRS, an end to Direct File 


June 17, 2024

Ahead of last week’s House Appropriations Committee consideration of the FY25 2025 Financial Services and General Government (FSGG) bill, nearly 100 groups wrote leading House appropriators in opposition to a proposal that could cut funding for the IRS by billions of dollars and end the popular Direct File project, which allows some taxpayers to file quickly, easily, and for free. 

The letter, which was circulated by Americans for Tax Fairness and signed by the Coalition on Human Needs, states that the proposed cuts would “reduce revenues, exacerbate the nearly $700 billion tax gap, undermine our ability to invest in families, and imperil improvements in taxpayer services.” 

“Specifically, we urge Congress to reject provisions in the House FY 2025 FSGG appropriations bill that would slash the IRS’s regular annual funding, reducing it to levels not seen since the early 2000s, as well as a policy rider that would prevent its Direct File program,” the letter states. 

In addition to cutting $350 million from overhead, the proposal would cut $2 billion from enforcement, a move that would actually cost the federal government money because it would seriously harm the agency’s ability to pursue high-income tax cheats. As a result of past budget cuts, the letter states, the audit rate for the highest income filers – those with incomes of $10 million or more — “dropped by 87 percent between 2010 and 2021 – while that for the largest corporations – those with assets of $20 billion or more – dropped by 82 percent over the same period.” 

During this period, the letter notes, the IRS “focused instead on the simpler returns of low-income taxpayers, who are disproportionately households of color. After the budget cuts, EITC filers became about as likely to be audited as someone in the top 1 percent of income earners.” 

The letter traces how recent investments in the IRS, through the Inflation Reduction Act, improved customer service. In 2021, the letter notes, 9 out of 10 taxpayer phone calls to the IRS went unanswered, “leaving individuals and small business owners without the help they needed.” 

But during the 2024 tax filing season, the IRS reached an 88 percent level of service for calls to the taxpayer helpline and access to face-to-face support was increased. 

The letter was highly critical of a proposal to end the IRS’s popular Direct File program, which launched this past year as a pilot project and allowed 140,000 taxpayers in 12 states to file their taxes easily and for free. Human needs advocates were pleased when, last month, the IRS announced Direct File would be expanded and made permanent, with all 50 states and D.C.  now invited to participate. 

This year, the letter notes, taxpayers using Direct File were able to recoup $90 million in refunds and saved $5.6 million in tax preparation fees. “At full capacity in a few years, Direct File could save taxpayers $11 billion a year between filing fees and time costs, while also helping taxpayers access $12 billion in tax credits for families that qualify but are currently missing out,” the letter states. 

Last week, the House Appropriations Committee passed the FSGG bill with cuts to IRS funding and the Direct File policy rider 33-24. House Appropriations Ranking Member DeLauro (D-CT) referenced the letter during Thursday’s markup and in the Appropriations Committee Democrats fact sheet. You can read the entire letter and see the list of signers here. ATF will be re-opening the letter if/when the FSGG bill heads to the House floor (tentatively the week of July 24) and welcomes other organizations to join the list of signers. 

Budget and Appropriations
Direct File