UNITED STATES NEWS

IRS moves forward with free e-filing system in pilot program to launch in 2024

May 16, 2023, 1:08 PM

NEW YORK (AP) — Most taxpayers are interested in filing their taxes directly to the IRS for free, a new report says, and that option will be tested next year.

The IRS has spent the past nine months studying whether U.S. taxpayers want to see a free, e-filing system run by the government — and is now preparing to launch a pilot program.

The prospect of a free, government-run, online tax filing system has been debated for a long time. Supporters argue that the option would make tax return services more equitable and accessible for taxpayers nationwide. But there’s also been pushback from some big tax-prep companies.

Now, the IRS plans to launch a pilot program for the 2024 filing season to test a “direct file” system and help the federal government decide on whether to move forward with potentially implementing it in the future, IRS Commissioner Danny Werfel and the Treasury’s Chief Implementation Officer Laurel Blatchford confirmed on Tuesday.

There’s still limited details about the pilot as the agency determines the basic structure of the program, but Werfel said that members of the public will have the option to participate.

The IRS was tasked with looking into how to create a “direct file” system as part of the funding it received from the Inflation Reduction Act, Democrats’ flagship climate and health care measure that President Joe Biden signed last summer. It gave the IRS nine months and $15 million to report on how such a program would be implemented.

The IRS published a feasibility report Tuesday — which lays out taxpayer interest in direct file, how the system could work, its potential cost, operational challenges and more.

The report shows that the majority of surveyed taxpayers would be interested in using an IRS-provided tool to prepare and file their taxes electronically — and that the IRS is “technically capable of delivering direct file, but doing so would require additional resources and add complexity to IRS operations,” Werfel said on a call with reporters.

The IRS’s existing free e-file option, available to lower income taxpayers who qualify, will remain in place, he added. Individuals of all income levels can also still submit their returns for free via the mail — although it can take months to process paper returns and taxpayers will still have to buy postage.

The new, direct e-file program being tested “could potentially save taxpayers billions of dollars annually,” said Blatchford, who noted that an individual taxpayer pays an average of $140 preparing their tax returns each year.

The report’s initial cost analysis show that a pre-file option run by the IRS “could cost less than $10 per return to provide, and of course would be free to taxpayers — by comparison, simple electronic filing options currently available to taxpayers are around $40.”

The study estimates that annual costs of direct file may range, depending on the program’s usage and scope, from $64 million for 5 million users to $249 million for 25 million users.

“We believe today’s announcement is a significant step toward revolutionizing access to the tax system so that it is easier and more equitable. A free and simple direct file service will ensure that more families in America receive the tax benefits they are eligible for,” Amanda Renteria, CEO of civic tech nonprofit Code for America, said in a statement.

While supporters applauded the pilot program, critics have expressed skepticism about the IRS taking on the dual roles of both tax collector and tax preparer, arguing that the new service could create a power imbalance between taxpayers and the government.

There’s also concern about historic racial disparities and bias seen in the IRS’s enforcement of tax laws. In a Monday letter to the U.S. Senate, Werfel confirmed the IRS found that Black taxpayers may be audited at higher rates.

Big tax preparation companies also have millions of dollars to lose if the program comes to fruition. Last year, more than 60 million taxpayers were serviced between Intuit, the parent company of TurboTax, and H&R Block.

Neither H&R Block nor Intuit were immediately available to comment on Tuesday.

An Associated Press analysis shows that Intuit, H&R Block, and other private companies and advocacy groups for large tax preparation businesses, as well as proponents in favor of electronic free file, have reported spending $39.3 million since 2006 to lobby on “free-file” and other matters. Federal law doesn’t require domestic lobbyists to itemize expenses by specific issue, so the sums are not limited to free-file.

Werfel on Tuesday acknowledged concerns surrounding a possible direct file system, notably operational challenges, but maintained taxpayers should chose the filing option that works best for them and that “the IRS cannot run the tax system alone.”

“We rely on an extensive network of partners across tax professional groups, the software communities, the payroll community and countless dedicated organizations that work directly with taxpayers,” Werfel said. “This report changes none of that.”

United States News

Associated Press

Question of whether Nebraska public money can go to private schools still set for November ballot

Nebraska’s top election official has ruled that voters will get to decide this year whether to repeal a law that gives taxpayer money for private school scholarships. But both Nebraska Secretary of State Bob Evnen and state Sen. Lou Ann Linehan, who authored the school choice law and sought to have the repeal effort kept […]

4 minutes ago

Associated Press

New York Attorney General says a county must rescind its ban on female transgender athletes

NEW YORK (AP) — New York Attorney General Letitia James on Friday demanded that a county on Long Island scuttle its new prohibition against transgender women and girls competing in female sports. Nassau County Executive Bruce Blakeman issued an executive order on Feb. 22 banning sports organizations from county-run athletic facilities if they allow transgender […]

20 minutes ago

Associated Press

Pentagon to lift ban on V-22 Osprey flights, 3 months after fatal crash in Japan

WASHINGTON (AP) — The Pentagon will lift the ban on flights by the grounded V-22 Osprey next week, U.S. officials told The Associated Press on Friday, following a high-level meeting where Defense Secretary Lloyd Austin endorsed the military services’ plans for a safe and measured return to operations. The officials said that Naval Air Systems […]

52 minutes ago

Associated Press

United Flight from London diverted to Maine because of disruptive passengers

BANGOR, Maine (AP) — A United Airlines flight traveling from London to Newark, New Jersey, diverted to Bangor International Airport because of unruly passengers on Friday, an airline officials said. The two passengers who appeared to be intoxicated became disruptive, and both were removed from United Airlines Flight 883, upon landing late Friday morning in […]

57 minutes ago

Associated Press

Appeals court ruling that vacates Capitol rioter’s sentence could impact dozens of Jan. 6 cases

A federal appeals court in Washington has ordered a new sentence for a retired Air Force officer who stormed the U.S. Capitol dressed in combat gear, in a ruling issued Friday that could impact dozens of other cases stemming from the Jan. 6, 2021, attack. While a panel of the U.S. Court of Appeals for […]

2 hours ago

Law enforcement officials and medical personnel work the scene of an officer involved shooting near...

Associated Press

Missouri police charge man with 2 counts first-degree murder after officer, court employee shot

A man was charged Friday with two counts of first-degree murder for the killing of a court employee who tried to serve an eviction notice at a home in Independence, Missouri, and an officer who responded, prosecutors said. Larry Acree was also charged with first-degree assault in the wounding of the other officer who responded, […]

3 hours ago

Sponsored Articles

...

Day & Night Air Conditioning, Heating and Plumbing

Day & Night is looking for the oldest AC in the Valley

Does your air conditioner make weird noises or a burning smell when it starts? If so, you may be due for an AC unit replacement.

...

Fiesta Bowl Foundation

The 51st annual Vrbo Fiesta Bowl Parade is excitingly upon us

The 51st annual Vrbo Fiesta Bowl Parade presented by Lerner & Rowe is upon us! The attraction honors Arizona and the history of the game.

...

Sanderson Ford

The best ways to honor our heroes on Veterans Day and give back to the community

Veterans Day is fast approaching and there's no better way to support our veterans than to donate to the Military Assistance Mission.

IRS moves forward with free e-filing system in pilot program to launch in 2024