Republicans who oppose the Internal Revenue Service’s online tax return preparation and e-filing program are hoping that it will end next month before the 2025 filing season starts.
Direct File, the free online program expected to be available to qualifying taxpayers in 24 states next year, eliminates intermediaries. Eligible taxpayers who use it prepare their 1040s and file the returns directly with the IRS. No tax preparer or commercial tax software needed.
The GOP has opposed the program from the beginning. They argue that Congress authorized the agency to explore such a program, but that the IRS overstepped by creating and implementing it without Capitol Hill oversight.
And this week, 29 Republican U.S. Representatives wrote Donald J. Trump asked that on his first day back in the Oval Office he issue an Executive Order ending Direct File.
Since the inauguration is set for Jan. 20, 2025, and the annual federal tax filing season usually starts the last week of the month, a Trump White House order could stop the program before repeat and potential new filers get a chance to use it next year.
GOP alleges IRS overreach: “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,” wrote the federal legislators, led by GOP Reps. Adrian Smith of Nebraska and Chuck Edwards of North Carolina.
“This is deeply concerning and a clear conflict of interest,” the 29 Republican signatories added.
“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,” according to the letter writers.
However, a member of the Government Accountability Office (GAO), which has examined and issued a report on Direct File’s cost, disagrees with at least one assertion in the letter.
Even though the IRS provides Direct File, the agency is not really operating as a tax preparer, said James McTigue, Jr., GAO’s director of strategic issues for tax policy and administration.
“The IRS Direct File system allows the taxpayer to prepare his or her own return through a series of questions that are derived from the tax code. Ultimately it is the taxpayer who is preparing the tax return,” McTigue told NextGov/FCW.
Just one of many free IRS-related options: Despite the political blowback, public reaction to Direct File has generally been positive.
Around 140,000 taxpayers used the program last filing season as part of a 12-state pilot program. Many of those taxpayers compared it favorably to their own states’ free, online direct filing programs.
IRS Direct File is set to offer more options in its second incarnation next year, allowing more taxpayers to use it.
Plus, note the IRS and Direct File advocates, the program is just one more offering for taxpayers. Filers do not have to use Direct File, and instead can choose from a variety of other no-cost tax filing options that the IRS already supports.
Free File, the IRS partnership with the Free File Alliance of commercial tax software manufacturers, is not affected by Direct File. In fact, Uncle Sam and the private sector group just extended the joint no-cost tax prep/filing offering for five more years.
Some taxpayers also will be able to get free, in-person tax form completion and electronic filing at Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) locations nationwide.
Even Elon Musk and Vivek Ramaswamy, co-leaders of Trump’s ad hoc Department of Government Efficiency (DOGE), have floated the idea of an IRS tax filing app.
Direct File already is accessible on mobile devices. Plus, IRS’ existing official mobile app, IRS2Go, allows individuals to check refund status, make payments, find free tax preparation assistance, and sign up for tax tips.
Another political shot at IRS: Since the DOGE due has yet to provide details on their IRS app, it’s unclear how similar or different it might be from Direct File. But it is clear that it would be more acceptable to Republicans since it would come with at least implicit Trump imprimatur.
The eliminate Direct File letter looks to be primarily another attempt by the GOP to kneecap the IRS. The party has long resisted IRS’ annual requests for budget increases.
When the Biden Administration was able to get an additional $80 billion for the IRS included in the Inflation Reduction Act, the GOP was successful in rescinding $20 billion as part of a deal to keep the federal government running in 2023.
And the IRS could soon lose another $20 billion that is supposed to be used by the agency for tax enforcement actions. This second $20 billion is frozen because the legislative mechanism keeping the government afloat inadvertently duplicated the one-time cut.
IRS support beyond Capitol Hill: Treasury Department and IRS officials, as well as the independent coalition BetterIRS.org and Charles Rettig, the former IRS commissioner appointed by Trump during his first term, support the added funding.
“Technological advances funded by the 2022 tax-and-climate law have so far allowed the IRS to improve both case selection and the pace of examinations. IRS data scientists now can identify and pursue issues of noncompliance that wouldn’t have been remotely possible just a few years ago,” wrote Rettig in a recent commentary piece, Congress Must Preserve Extra IRS Funding to Put America First, for Bloomberg Tax.
“Congress should help the IRS earn Americans’ trust and respect rather than attack it for their own political gain,” Rettig wrote. “There should be no further reductions to the supplemental funding designed to modernize the IRS for the benefit of those who are compliant. There must be a significant, multi-year, continued investment in the IRS workforce and its technology.”
You also might find these items of interest:
- 24 states will participate in IRS’ enhanced 2025 Direct File
- Trump looks to oust IRS commissioner, install his own tax agency head
- IRS Commissioner touts the tax agency's generational digital transformation
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CATHERINE KORELIN
The IRS never actually got the 80billion. It was over 10 years and some had already been redirected to places such as Ukraine.