Baldwin Calls on Biden Administration to Expand Free IRS Direct File Program

WASHINGTON, D.C. – Today, U.S. Senator Tammy Baldwin (D-WI) and a group of her colleagues applauded the successful pilot of the IRS Direct File program and urged the Biden Administration to make it permanent and expand its reach. The IRS Direct File program was launched in 12 pilot states during the 2024 tax season, allowing taxpayers to file their returns for free, directly with the IRS.

“[W]e write to commend you on the historic and resoundingly successful launch of Direct File, the first free, public, electronic federal tax filing tool in U.S. history. Taxpayers want and deserve a free and easy filing option, and thanks to this year’s pilot, taxpayers used Direct File to claim over $90 million in tax refunds and save $5.6 million in estimated filing fees,” said the lawmakers. “We applaud your leadership and Direct File’s incredible success this year, and we call on you to make Direct File a permanent program, expanding it and improving it further next year and in the years to come.”

“The IRS’s delivery of this new, wildly successful filing tool… demonstrates the huge returns from investing in the IRS and in government technology in general,” continued the lawmakers. “[W]e hope Direct File will support additional sources of income, integrate with more states, offer more flexible identity verification procedures, and accommodate additional tax benefits, with a focus on refundable credits available to low- and middle-income families. Direct File should also continue streamlining the filing process by using taxpayer data that the IRS already has.”

“[W]e congratulate you on the success of the Direct File pilot and stand ready to work with you on making the program permanent and expanding it. We believe that the IRS can offer free and easy tax filing to every American taxpayer who wants it — and that, with Direct File, it will,” concluded the lawmakers. 

The Biden administration announced in May of last year that they would be launching a Direct File pilot in 2024. This past tax season, over 140,000 taxpayers used the tool across 12 pilot states, saving taxpayers more than $90 million in refunds and an estimated $5.6 million in tax preparation fees on their federal returns alone. A survey of 11,000 users found that 90 percent ranked their experience with Direct File as “Excellent” or “Above Average,” and 90 percent of survey respondents who used customer service similarly found the experience “Excellent” or “Above Average.”

In the Senate, the letter was led by Senators Elizabeth Warren (D-MA) and Tom Carper (D-DE), and also signed by Senators Michael Bennet (D-CO), Richard Blumenthal (D-CT), Cory Booker (D-NJ), Laphonza Butler (D-CA), Ben Cardin (D-MD), Thomas Carper (D-DE), B Casey (D-PA), Christopher Coons (D-DE.), John Fetterman (D-PA), Kirsten Gillibrand (D-NY), Maggie Hassan (D-NH), Martin Heinrich (D-NM), John Hickenlooper (D-CO), Mazie Hirono (D-HI), Tim Kaine (D-VA), Mark Kelly (D-AZ), Angus King (I-ME), Amy Klobuchar (D-MN), Ed Markey (D-MA), Jeff Merkley (D-OR), Patty Murray (D-WA), Alex Padilla (D-CA), Jack Reed (D-RI), Bernard Sanders (I-VT), Brian Schatz (D-HI), Charles Schumer (D-NY), Jeanne Shaheen (D-NH), Tina Smith (D-MN), Debbie Stabenow (D-MI), Chris Van Hollen (D-MD), Peter Welch (D-VT), Sheldon Whitehouse (D-I), and Ron Wyden (D-OR.) In the House, the letter was led by U.S Representatives Don Beyer (D-VA-08), Katie Porter (D-CA-47) and Brad Sherman (D-CA-32)

The full letter is available here and below.

Dear Secretary Yellen and Commissioner Werfel,

With the 2024 tax filing season at its end, we write to commend you on the historic and resoundingly successful launch of Direct File, the first free, public, electronic federal tax filing tool in U.S. history. Taxpayers want and deserve a free and easy filing option, and thanks to this year’s pilot, taxpayers used Direct File to claim over $90 million in tax refunds and save $5.6 million in estimated filing fees, with 90 percent of surveyed users rating their experience positively and 86 percent saying their experience with the tool increased their trust in the Internal Revenue Service (IRS). We applaud your leadership and Direct File’s incredible success this year, and we call on you to make Direct File a permanent program, expanding it and improving it further next year and in the years to come.

In May 2023, the IRS and Treasury Department announced plans to pilot a Direct File tool in 2024, noting that the pilot would allow “the IRS to test functionality for some taxpayers, evaluate success, and use lessons learned to inform the growth of the tool.” At the time, many of us wrote to you in support of Direct File. This filing season, the tool launched as a phased, limited-scope rollout in line with tech industry best practices.

The Direct File pilot has been a clear and resounding success. Over 140,000 taxpayers used the tool across the 12 pilot states, with a survey of 11,000 users finding that 90 percent ranked their experience with Direct File as “Excellent” or “Above Average,” and 90 percent of survey respondents who used customer service similarly found the experience “Excellent” or “Above Average.” Other surveys found 96 percent of users were satisfied with integrated state filing, 82 to 87 percent would recommend Direct File, and 74 to 93 percent prefer it to the previous filing method they used.

Individual users also raved about the time and money they saved and the quality of the service they received:

• “I don’t want to call myself a dummy, but this is taxes for dummies right here,” said the first Direct File user, an HR specialist in Texas who saved nearly $400 in tax prep fees. “I just see it being helpful for so many millions of people.”
• “It was the fastest I’ve ever done my taxes,” said one taxpayer in California. “I didn’t have to worry about someone upselling me.”
• “There were no random ads, like ‘What am I clicking on?’” said another taxpayer in Texas, who saved the $80 she typically spends to file her taxes
• “I finished this and I was like, wait, I’m done? That was so easy,” reported a New York filer. “It’s not just that you’re saving, you know, 80 bucks on TurboTax or whatever. It’s so much less of a stressful thing.”
• “It was one of the greatest experiences I have had doing [my taxes],” said an Arizonan.
• It was the most convenient way I’ve ever filed my taxes,” said a taxpayer in Washington State. “I got to be honest, it surprised me how simple it was.”
• “It was a walk in the park,” said another Californian, who “basically did my taxes on my lunch break” and saved $100 that he would have otherwise spent to file his taxes.

The IRS’s delivery of this new, wildly successful filing tool less than 18 months after receiving significant new funds from the Inflation Reduction Act demonstrates the huge returns from investing in the IRS and in government technology in general. As the Atlantic wrote: “That Direct File exists at all is shocking. That it’s pretty good is borderline miraculous… It’s a glimpse of a world where government tech benefits millions of Americans.”

Direct File’s success is even more notable given the failures of the U.S. tax filing system to date. The average American spends $150 and nine hours to file their taxes each year. Free File – the IRS’s partnership with private tax preparation companies to offer free online filing – has fallen far short of expectations, reaching only 2% of taxpayers while 70% qualify. Meanwhile, Intuit (the owner of TurboTax) and H&R Block have misled taxpayers into paying for tax preparation services they are supposed to receive for free, according to the Federal Trade Commission. A recent analysis also found paid preparers targeting low-income Black and Brown communities, often making costly errors and marketing predatory payday lending products. This broken filing system blocks millions of families from accessing critical tax benefits enacted by Congress like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).

We now call on you to make Direct File a permanent program and to expand its functionality and scope, eventually making it available to most taxpayers, further increasing its impact. Specifically, we hope Direct File will support additional sources of income, integrate with more states, offer more flexible identity verification procedures, and accommodate additional tax benefits, with a focus on refundable credits available to low- and middle-income families. Direct File should also continue streamlining the filing process by using taxpayer data that the IRS already has. As Secretary Yellen recently said: “If [taxpayers] like [Direct File], it would be very natural to continue to build on it… One day we hope, for example, information that taxpayers receive – W-2s and other things – could be used to pre-populate the program, making it even more usable and friendly.” The pilot has already shown the value of this approach, with an April 8th update to Direct File that allowed users to import previous-year adjusted gross income data required to validate their current year returns.

Such expansions will turbocharge Direct File’s usefulness. In fact, a recent report by the Economic Security Project finds that a fully-fledged Direct File – including the functionality referenced by Secretary Yellen – could save taxpayers $11 billion per year, while also delivering up to $12 billion a year in unclaimed benefits, generating over $100 of value for taxpayers for every dollar spent.

Again, we congratulate you on the success of the Direct File pilot and stand ready to work with you on making the program permanent and expanding it. We believe that the IRS can offer free and easy tax filing to every American taxpayer who wants it — and that, with Direct File, it will. We also applaud your broader efforts to invest funding that we passed in the Inflation Reduction Act to improve taxpayer services and to ensure the wealthy and large corporations pay what they owe, and we will continue to fight to protect the funding that makes this progress possible.

Sincerely,

An online version of this release is available here.

NOTE: This press release was submitted to Urban Milwaukee and was not written by an Urban Milwaukee writer. While it is believed to be reliable, Urban Milwaukee does not guarantee its accuracy or completeness.