Treasury Secretary Janet Yellen announced that the department is exploring ways to expand the direct file pilot program, a free tax preparation service that has garnered both praise and criticism.
The program, which Democrats have hailed as a success, has faced opposition from Republicans and the tax preparation industry. Yellen suggested that the program could be broadened to include additional languages and pre-populated returns using previously logged wage information.
The Treasury Department is currently assessing the costs and benefits of continuing the program, which has been used by over 140,000 taxpayers this season.
Treasury Chief Janet Yellen (Credits: Wall Street Journal)
While users have reported positive experiences, the tax preparation industry has questioned the program’s costs, citing concerns that the reported $24.6 million expenditure is underreported. The industry has also pushed back against the program, citing concerns about the potential for the IRS to encroach on the tax preparation business.
The direct file pilot is part of a larger $80 billion overhaul of the IRS, funded by the 2022 Inflation Reduction Act. The overhaul includes increased enforcement efforts targeted at wealthy taxpayers and large corporations, as well as proposed tax increases for high-income households.
However, the Biden administration has promised not to increase tax rates or audit rates for individuals making less than $400,000 per year. Yellen described the pilot as a “very successful experiment” but noted that a final decision on its continuation has not been made. Democrats, such as Reps. Judy Chu and Linda Sanchez have praised the program as a much-needed, efficient, and free filing option for Americans.
Janet Yellen (Credits: The Hill)
“I heard … comments earlier about the success of the Direct File pilot program,” Rep. Judy Chu (D-Calif.) told Yellen Tuesday. “I would have called it a resounding success.” “It’s pretty clear that Americans are hungry for an efficient free and direct filing option with the IRS,” Rep. Linda Sanchez (D-Calif.) said.
The program has also received positive feedback from users, with 90 percent of respondents to a survey by GSA Touchpoints rating their experience as either “excellent” or “above average.”
However, the tax preparation industry has argued that the program’s costs are likely underreported, and that the $90 million in direct file refunds touted by the Treasury is not an accurate reflection of the program’s true costs. “The IRS claims of spending only $24.6 million taxpayer dollars on Direct File are clearly low,” a spokesperson for Intuit, the maker of Turbo Tax, said in a statement.
