TSCPA News

IRS Submits Report to Congress on Direct File Option

May 16, 2023

The IRS recently submitted a report to Congress evaluating a Direct File option for taxpayers and is taking steps to begin a pilot project for the 2024 filing season following a directive from the Treasury Department.

The report to Congress, required by the Inflation Reduction Act, evaluated the feasibility of providing taxpayers with the option of a free, voluntary, IRS-run electronic filing system, commonly referred to as "Direct File."

The IRS stated in a news release that the report found many taxpayers are interested in using a free IRS-provided tool to prepare and file taxes, and that the agency is technically capable of delivering a Direct File program. The IRS also said the report concluded that effective execution of a Direct File program would require sustained budget investment and careful management of the potential program's operational complexity.

The report focuses on three areas: taxpayer opinions, cost and feasibility. It also includes an analysis conducted by an independent third party, as required by the statute. In addition, the report lays out the potential benefits and challenges associated with the IRS implementing a Direct File program.

As directed by the Treasury, the IRS will gather further information through the implementation of a scaled Direct File pilot in the 2024 filing season to further assess customer support and technology needs and the ability to overcome the potential operational challenges identified in the report. Additional details on the Direct File pilot will be available in coming months.

The IRS report relied on information from the agency's Taxpayer Experience Survey (TES), which surveyed thousands of taxpayers. The IRS also reviewed and incorporated findings from an independently conducted survey by the MITRE Corporation. Additionally, the IRS supplemented data from the taxpayer surveys with user research and usability testing that was conducted using a basic internal prototype to better understand first-hand taxpayer perspectives.

The IRS report also includes a separate, independent analysis by New America and Professor Ariel Jurow Kleiman on the Direct File concept.