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The IRS considers its free Direct File test program a success

LEILA FADEL, HOST:

April 15, or Tax Day, has come and gone. But this year, the Internal Revenue Service piloted a new program in 12 states.

A MARTÍNEZ, HOST:

That's right. It's called direct file - direct because for the first time, some taxpayers could file federal tax returns directly with the IRS for free.

FADEL: The agency considers it a success. Lots of people tried it. In fact, the number of taxpayers who used direct file far exceeded the IRS's goal of 100,000 users, and the system didn't crash. Vanessa Williamson studies tax paying as a senior fellow at the Urban-Brookings Tax Policy Center.

VANESSA WILLIAMSON: There was a huge surge at the end. You know, they had only had 60,000 returns a week before Tax Day, and they got to 140,000, so just doubling in a week and the system survived and handled that increased workload and people got their taxes filed.

MARTÍNEZ: Williamson says that from what she observed, direct file made filing taxes easier for lots of people.

WILLIAMSON: Direct file is a simple program for people with simple taxes. The site for figuring out if you were eligible was extremely straightforward. I directed people to it rather than explain how the system worked because it was such a straightforward set of screens to go through. The system appears to have been very user friendly and it's certainly something that would save people money.

FADEL: Five point six million dollars in tax preparation fees according to the IRS. So why didn't they launch this program years ago?

WILLIAMSON: It's been held up by IRS under funding, right? The IRS got a big funding boost with the Inflation Reduction Act a few years ago. But before that, the IRS was really struggling to have enough money to just do the things it was already doing, never mind develop a new program.

MARTÍNEZ: The IRS wants to expand direct file beyond the 12 states that were part of the pilot program, but they say the future of the program is uncertain.

WILLIAMSON: Unfortunately, as much as it would be great to be able to say that this decision was going to be made based on the data, It's going to be made with a lot of politics as well.

FADEL: And private tax preparation services like Turbo Tax and H&R Block have been lobbying against it in Congress, but Williamson doesn't think direct file poses a big threat to those companies.

WILLIAMSON: The direct file and commercial software - it's apples and oranges right now. It's only in certain states. Commercial tax repairs provide services that are more expansive than that, and plenty of people would want those services even if direct file were available everywhere.

MARTÍNEZ: While the IRS decides whether to restore direct file in 2025, one thing is for sure - America's favorite pastime, complaining about filing taxes, will most definitely carry on. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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