100,000 have used IRS Direct File to submit their tax returns

The IRS is marking Tax Day with an announcement that it has met its goal of 100,000 taxpayers successfully filing their tax returns through the agency’s Direct File pilot. 

Interest in the tool has swelled recently, with over 50,000 taxpayers using the pilot to file online in the past week, according to a Treasury official. The IRS hit the 100,000 mark of accepted returns on Sunday. 

The pilot offers eligible taxpayers with relatively simple tax situations in 12 states an online option for them to file their federal tax returns with the IRS for free through the guided, interview-style online tool.

The IRS launched Direct File in mid-March after it conducted more limited testing. The agency is using funding from the Inflation Reduction Act to field the tool, which represents a marked change from decades of the IRS relying only on tax prep companies to offer most Americans a free way to file their taxes online.

“This is a milestone,” IRS Commissioner Danny Werfel told reporters when the tool launched. “Direct File marks the first time you can electronically file a tax return directly with the IRS through our website.”

The 100,000 mark comes as the IRS and its proponents on Capitol Hill have worked to promote the tool where it’s available, including via collaborations with comedian Hasan Mihaj and Rep. Alexandria Ocasio-Cortez, D-N.Y.

As of late last week, taxpayers had claimed over $50 million in refunds, in addition to saving filing fees, a Treasury official said on Friday, adding that the average wait time for customer assistance at the time was 10 to 20 seconds overall, and between one and two minutes during peak use. 

Earlier last week, the IRS also updated the tool so that it can pull the prior year’s adjusted gross income from information the IRS already has, according to a Treasury official, who said that was the most commonly made mistake among taxpayers using the pilot in the early weeks of Direct File. Taxpayers have to access the information from their online IRS account. 

“Direct File was built with and for taxpayers and has been continuously improved based on their feedback and experience,” Bridget Roberts, the Direct File lead, said in a statement last week. “This important update will allow Direct File users to take advantage of information the IRS already has to simplify the filing process even further.”

According to a readout of an early-April Treasury Department roundtable, taxpayers using Direct File said that it was easy to use, but were interested in the IRS exploring the ability to import the information it already has about taxpayers.

Whether or not the IRS fields the tool long-term has not been determined.

If it does, funding over time will be critical. 

A recent Government Accountability Office report dinged the IRS for its cost and benefit estimates for the pilot, stating that the tax agency hasn’t used best practices for those estimations. An IRS feasibility study on the program done before it was launched estimated that the cost of the tool could range from $64 million to $249 million.

If the IRS does decide to offer the tool long-term, it will have to further navigate how it integrates with state tax filing. Currently, users in some of the 12 states where the tool is being offered can opt to transfer to a state-level tool to finish filing their taxes.

“This is President Biden’s Inflation Reduction Act making government work for American taxpayers,” said Sen. Elizabeth Warren, D-Mass., in a statement. “I’m excited to continue to work with the IRS and the Treasury Department to permanently extend and expand this free and easy tax filing solution for Americans.”

Seven other Senate Democrats also released statements of support on Monday.

If the IRS offers Direct File long-term, it will bring the U.S. in line with many other countries worldwide, Nina Olson, the former National Taxpayer Advocate and current executive director of the Center for Taxpayer Rights, previously told Nextgov/FCW. 

Meanwhile, some Republicans on Capitol Hill and in state attorneys general offices, as well as tax prep companies, have argued against the tool.

David Ransom, counsel for the American Coalition for Taxpayer Rights — a tax prep coalition — said in a statement that the “IRS Direct File program is an unnecessary and expensive solution in search of a problem.”