from the not-in-to-it dept

For three years now, a select group of states have had a pilot program through the IRS for its Direct File program. For years and years, companies like Intuit had gotten away with all kinds of shady tactics designed to lure people in with the promise of free tax prep filing using online software, only to have aggressive or deceptive methods for turning them into paying customers when they never should have been. Intuit’s tactics were so bad that the FTC ruled the company can’t advertise its services the way it had been previously along with nine-figure paybacks to the customers it had deceived.

Direct File and these shady doings by the tax-prep industry are directly related. The IRS already has all the information needed to prepare returns for a huge percentage of Americans that file simple tax returns and are typically in lower income brackets. Nobody has heard of any significant negative reaction to the Direct File pilot program, which expanded this year to more states, other than by the tax preparation industry themselves. If there was a problem with the program, we would have heard about it by now. By all accounts, it has been entirely successful.

So, of course, the Trump administration is reportedly planning to do away with it.

“The program had been in limbo since the start of the Trump administration as Elon Musk and the Department of Government Efficiency have slashed their way through the federal government,” the AP article said. “Musk posted in February on his social media site, X, that he had ‘deleted’ 18F, a government agency that worked on technology projects such as Direct File.”

The AP wrote that “two people familiar with the decision to end Direct File said its future became clear when the IRS staff assigned to the program were told in mid-March to stop working on its development for the 2026 tax filing season.” The IRS will lose about a third of its staff this year through layoffs and employees accepting resignation offers, The New York Times reported yesterday.

The House GOP, which pushed for this move, couched its request as combatting a conflict of interest at the IRS. Keep in mind as you read this that the IRS already has the information that is populating its Direct File returns.

As you know, during the last tax year, the IRS rolled out its Direct File pilot program in 12 states, through which taxpayers file their taxes directly to the IRS instead of through a trusted accountant or reputable third-party preparation service. Under the guise of offering a convenient “free-to-file” alternative preparation service, the IRS asserts itself as the tax assessor, collector, preparer, and enforcer—all in one—when the program is used.

This is deeply concerning and a clear conflict of interest. The IRS has little incentive to ensure hardworking Americans do not pay more than they owe in taxes and may instead benefit from families and small businesses paying greater amounts than they are required by law. Furthermore, it is highly inappropriate for the IRS to serve as a tax preparer for taxpayers while also being the final enforcer of tax violations.

The letter goes on to complain that the Direct File program amounts to costing taxpayers roughly $800 per return based on the program’s budget. You should be able to see immediately how deeply silly this all is, but here are a couple of highlights.

Again, the government already has the information used in the Direct File returns. That’s how they’re created in the first place. The taxpayer then goes in and validates the information the IRS has, gets some input on the return itself, denotes either payment or refund information, and then they’re done. The IRS is already the enforcer of tax payments and would use the same information it has in any audit it was going to conduct. The letter from the GOP worries out loud about the IRS ramping up tax audits on individuals, which is very strange since the use of Direct File would eliminate any audits for those using it, since it’s all based on information the government already has. Whatever conflict of interest the GOP claims to have identified is entirely undiscoverable by this writer.

The letter goes on to complain about the national debt, which is very odd to include in the same letter that complains about there being too much enforcement around tax collection audits. In its complaint about the cost-per-return, it also entirely ignores the economy of scale the program would benefit from as it is rolled out to even more taxpayers. Were it to do so, the cost per return would almost certainly drop, and drop significantly, as much of what powers the service would already be in place as a sunk cost.

As for the trust the American people had in this program and the IRS after using it? Well, from the Treasury Departments own website…

• 90 percent of respondents ranked their overall experience as Excellent or Above Average.
• 90 percent of survey respondents who used customer support rated that experience as Excellent or Above Average.
• When asked what they particularly liked, respondents most commonly cited Direct File’s ease of use, trustworthiness, and that it was free.
• 86 percent of respondents said that their experience with Direct File increased their trust in the IRS.

And so what Trump is reportedly planning to do is take an IRS program that people enjoyed using, and one which caused them to have more trust in the IRS and government, and one which is still in pilot and which would become more cost efficient with wider use… and eliminating it. Without, mind you, any stated good reason.

Somewhere, in some ivory tower, the Intuit board is certainly cheering.

Filed Under: direct file, free file, irs, taxes
Companies: intuit