The case for making Direct File permanent

In the last few weeks, many Americans were reminded of one of the most fundamental ways they interact with their government: through their annual tax return.

Sadly, it’s an annual interaction many have come to dread. Americans generally must navigate a maze of private and semi-private filing options that charge opaque fees, have complex eligibility, and come with diminishing returns for taxpayers. On average, tens of millions of low- and middle-income Americans pay around $160 to file a return when they could be filing for free. Millions more find the process simply too daunting and skip filing all together, leaving up to $12 billion in unclaimed tax credits on the table every year.

But within the challenges of the tax filing system lies an opportunity to reimagine how we interact with government. By using technology to create an affordable, accessible, human-centered tax filing system, it is possible to build a modern 21st century digital government that works for everyone while delivering billions of unclaimed benefits to those who need them most.

That’s why this year’s pilot launch of Direct File – the first free, public, online tax filing system in U.S. history—is so exciting. For the first time, taxpayers with relatively simple returns in 12 states can file their returns directly with the IRS for free, using an interview-based, mobile-first, bilingual, plain-language filing tool. According to users, the process of filing with Direct File was fast, easy, dignified, and secure.

The Direct File pilot was a landmark event for the tax system and a victory for the civic technology movement. As civic tech organizations know well, a product like Direct File is the result of years working in partnership with government to develop more user-friendly, accessible, and trustworthy interactions. In launching Direct File as a small iterative pilot, with extensive user testing and feedback and scaled availability, the IRS incorporated human-centered technology practices that we have been working toward for over a decade.

With this pilot now behind us, it is time to take a moment to celebrate this milestone, commit to making it permanent, and gear up in three key ways for its expansion.

First, more people should have the chance to file for free. To do that, Direct File must expand to more states. In the U.S., most taxpayers must file two returns, one federal and one state. This year, based on a strategy developed by the IRS, Direct File taxpayers in New York and Arizona could also file their state returns based on their federal returns through FileYourStateTaxes, a state filing product built by Code for America in collaboration with state partners. This integrated process was an experimental new approach and offers a proof of concept for what is possible through careful user research and testing. Code for America is eager to support more states as they join Direct File in the future, and we are excited to see other technologists rally behind this effort. 

Second, Direct File must become even easier to use. Research shows that taxpayers who face high barriers to filing need a tool that does not require them to track down and transcribe their tax documents, providing data that the IRS generally already has access to. Direct File is well positioned to solve this problem, by pre-populating taxpayers' returns with IRS data. Indeed, the IRS already began pre-population on a limited scale late this filing season, and Treasury Secretary Janet Yellen testified in March that pre-population is a natural next step for the software. 

Finally, providing hands-on assistance to taxpayers who need it also is a critical component of creating an improved customer experience for users of Direct File. This year, that assistance came in the form of the first-ever IRS online chat customer service program (bilingual and available 15 hours a day), already a historic first. But the government can do even more to support filers. The IRS should continue to study the kinds of assistance taxpayers need and the mediums to best receive them. Taxpayers with high barriers and complex cases should be able to transition seamlessly from Direct File into the IRS’s long-running Volunteer Income Tax Assistance program, the most hands-on level of service available in free tax filing. Refining these assistance models and integrating Direct File with other offerings will be an iterative process.

While there is more work to be done, the road ahead is clear. With Direct File, we are beginning to see what a truly human-centered tax filing process looks like. If we stay the course, scale across states, introduce data automation, and integrate assistance programs, we will look back on this year as the moment we began to transform the US tax system away from something that Americans dread and into something that can make them feel like the government has their back.