The U.S. Department of the Treasury has announced the pilot Direct File program will be a permanent free filing option for all 50 states, starting in filing season 2025.
The initiative invites participation from all 50 states and the District of Columbia, following a successful pilot program in filing season 2024 which saw 140,803 taxpayers file returns using the system, claiming $90 million in refunds and saving $5.6 million in tax preparation fees.
In addition to financial benefits, the Direct File system offers taxpayers a significantly enhanced user experience, with 90 percent of users rating their experience as “above average” or higher.
Concerns About IRS Oversight
The program has not been without its detractors, chief among them for-profit tax preparation services which have seen the advent of a public filing option as an existential threat to their continued existence. Intuit
Intuit
A primary concern revolves around the prospects of the IRS taking charge of both calculating taxes owed and receiving tax payments—raising some level of conflict of interest. Critics argue that having the IRS manage both aspects could lead to issues of fairness and accuracy—the concern being the IRS may not be impartial when it comes to determining tax liabilities, and choose to deemphasize, for instance, credits and deductions a taxpayer is entitled to.
The chief concern can be summarized as the belief taxpayers need an independent party to calculate their taxes, separate from the collecting authority, to ensure there is oversight in the system.
The reality is that the IRS already possesses all the information necessary to accurately calculate most taxpayer’s liabilities. Each year, employers, financial institutions, marketplace facilitators, and online financial platforms report earnings, interest, and other taxable income directly to the IRS.
This data forms the basis for what the IRS expects to receive in tax payers and, in instances where a taxpayer or their for-profit preparer’s calculations differ from the IRS records, it is not the taxpayer’s figures that generally prevail—at least not without some further substantiation.
The IRS reviews and audits these discrepancies, and the taxpayer must provide evidence to support their claims—and Direct File does not alter this fundamental dynamic.
Direct File does not change which party is the ultimate authority on tax calculations, and the IRS has long been in the position to correct any discrepancies and enforce compliance with their calculations. Direct File merely streamlines the existing process and cuts out for-profit tax preparation services, which have had their problems.
By providing a free and secure option, with a streamlined process, Direct File enhances the efficiency in tax filing and does not alter power dynamic between taxpayer and tax authority. It enables the vast majority of taxpayers to manage their taxes directly with the IRS, eliminating the need for third-party intermediaries—and the system expanding nationwide should be celebrated as a win for the integrity of the tax filing process.
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