The Biden administration on Thursday made permanent and expanded a program that gives the IRS the power to calculate the amount of taxes each participant owes to the federal government.
In October, the administration launched the IRS Direct File as a pilot program in 13 states. It allows users to have the IRS calculate their taxes for free.
President Biden and his Treasury Department touted the program as a way for Americans to save time and money by having the IRS do their taxes instead of paying a tax preparer service.
Critics, including 13 GOP attorneys general who organized to stop the program, say it’s an unlawful government-run tax service that is little used and mismanaged.
The program launched last year in Arizona, California, Massachusetts, New York, Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.
It allowed taxpayers with relatively simple returns to upload their information directly to the IRS for free. The IRS then calculated how much the participants owed and spit out a bill. Under the program, the IRS has the authority to veto deductions or credits up front.
Treasury Department officials hailed Direct File as a rousing success and plan to make it permanently available for the 2025 tax season in all 50 states and the District of Columbia.
The pilot program saw 140,000 participants claim more than $90 million in refunds and save an estimated $5.6 million in filing costs.
“The numbers speak for themselves: the Direct File Pilot was a success, saving American taxpayers countless hours and millions of dollars filing their taxes. Now, we’re bringing the program to a national audience. It’s just one more example of how President Biden’s Investing in America agenda is lowering costs for communities across the country,” said White House Deputy Chief of Staff Natalie Quillian.
Administration officials say Direct File earned positive reviews from taxpayers, with 90% rating their experience as “Excellent” or “Above Average.”
However, participation in Direct File was limited. Of the 19 million taxpayers eligible for the pilot program, just 0.7% participated, according to IRS data. The same report also showed that the average Direct File refund was $892, about $2,100 less than the average return.
A coalition of state attorneys general has organized against Direct File, saying the tax collector should not also be the tax preparer. They say if Direct File isn’t ended, they threatened a lawsuit.
“Congress has never granted the Department of the Treasury authority to create a Direct File program,” they wrote in a letter sent to Treasury Secretary Janet Yellen. “We urge the Department to end the IRS-run Direct File pilot program.”
Led by Montana Attorney General Austin Knudsen, the attorneys general said tens of millions of Americans can already file their taxes for free, at no additional cost to taxpayers, using existing software.
They also warned that the program puts the livelihoods of thousands of tax preparers in jeopardy.
• Jeff Mordock can be reached at jmordock@washingtontimes.com.