The IRS Says Its New Direct File Program Was A Huge Success — Giving Tax Filing Services Reason to Worry - The Average Joe


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    The IRS Says Its New Direct File Program Was A Huge Success — Giving Tax Filing Services Reason to Worry

    Noah Weidner

    April 30, 2024

    It doesn’t matter who you ask: nobody likes taxes, and nobody likes the Internal Revenue Service (IRS). But with a hefty $80B in new funding, the IRS is pursuing a more aggressive stance against high-income taxpayers, offering faster and better customer support, and taking on the titans of tax season with IRS Direct File.

    Direct File, a new program tested in 12 states last year, gave 19M eligible taxpayers a free way to file basic W-2 returns. With tax season over, the IRS says the program was a success — and will now have to decide whether to supersize it.

    Free for all: The IRS says that over 140K taxpayers used Direct File to complete their 2023 return during the agency’s pilot — exceeding their 100K goal. The Treasury Department estimated that filers saved a significant $5.6M on tax prep fees, while free live customer support assisted over 25K filers in seconds.

    • More than 3M Americans checked to see if they were eligible to file, showing a strong demand for free filing.
    • According to a poll by the General Services Administration, 90% of Direct File users rated the service as “above average” or “excellent.”

    Trouble down the Block

    Though the IRS will likely expand Direct File in tax year 2024, critical Republicans argue that private sector options are superior. According to a report by Newsweek, TurboTax owner Intuit ($INTU) agrees, saying that “a government-run tax filing solution will not offer any improvement over filing options currently available.” But while Intuit holds firm that the program won’t affect its business, it has some harsh words:.

    • Intuit calls Direct File “a thinly veiled scheme” that will waste billions of dollars for “something already completely free of charge today.”
    • Competitor H&R Block ($HRB) reiterated that there are “more than 30 free tax filing choices” in the market — and insists the IRS should focus funding on existing services.

    Saying the quiet part out loud: For decades, these firms have lobbied to prevent such an option like IRS Direct File from coming to market — mostly because of the unknown impact that a no-frills, free file option could have on their business. Regardless, billions will still be up for grabs every tax season for more complex returns, which the IRS has no plans to tackle in the near future.

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