A limited number of taxpayers get to try out the new program before it gets considered for the rest of us.
We’re a little closer to getting to file our taxes directly with the IRS. The agency just submitted a report to Congress detailing plans to launch a test run of free, government-run tax filing software for the 2024 filing season. If the free direct e-file system is successful and the government rolls it out to the rest of the country, maybe we’ll get to do an end run around tax filing corporate giants like Intuit when we file without poring over endless convoluted forms and calculations.
Who knows? Maybe this will even open the door to pre-filled tax forms that we only have to confirm rather than anxiously filling out numbers the government already knows. After all, the IRS seems to know when you got it wrong, so why not let it just tell us what we owe or what we’re getting back in the first place?
According to the release, the IRS was directed by the Treasury Department to begin the pilot program, which will involve an unspecified number of taxpayers, letting it gather more information about the ability of the IRS to manage such a system.
Required as part of The Inflation Reduction Act that passed last year, the report (PDF) breaks down how hard it would be to develop direct filing options, what it would cost, and a survey of taxpayer opinions about the program. Ultimately, the IRS concluded that “many taxpayers are interested in using a free IRS-provided tool” to do their taxes and that creating one is within its capabilities, provided it gets sustained representation in the government’s budget.
IRS Commissioner Danny Werfel, who submitted the report to Congress, was quoted in the release as saying government-run Direct File programs are common in other countries:
“The IRS is committed to delivering significantly improved services by providing taxpayers with tools, information and assistance to make it easier to comply with their tax filing obligations. Direct File – used by numerous tax jurisdictions around the world – has long been discussed as an option for improving the customer experience for taxpayers in the U.S.,” said IRS Commissioner Danny Werfel.
This news is the latest chapter in an ongoing saga that has its most recent roots in a bombshell 2019 ProPublica report that detailed how e-filing companies like TurboTax creator Intuit had been working to prevent the public from accessing free, easy filing alternatives.
In a nutshell, ProPublica showed the ways companies like Intuit reneged on an agreement with the IRS where they promised to give free direct file options to low- to middle-income taxpayers, all in exchange for the IRS not creating its own such program. And they did create them — they just didn’t link to them or talk about them and added code that would prevent them from showing up in Google searches.
Following ProPublica’s report, the IRS updated the Free File agreement to explicitly restrict commercial tax preparation entities from hiding those pages while also striking its own commitment to leave the creation of simple filing software to companies like Intuit and H&R Block. The IRS could now create its own program.
In 2021, Intuit announced it would exit the Free File program, saying it was just too hard to comply with the program’s restrictions. In 2022, it was fined $141 million for tricking people into paying for the TurboTax “Free Edition.”