Claiming high user satisfaction, IRS will decide on renewing free tax site

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The Biden administration announced Friday that its first-of-its-kind free tax filing website came in under budget and earned high marks from users, and that officials will decide this spring whether to renew the experimental program for another tax season.

The software, which resembles commercial offerings from companies like Intuit and H&R Block, allows taxpayers to file directly to the government free. Experts say a nationwide rollout could someday disrupt the multibillion-dollar tax preparation industry; Americans spend more than $200 a year, on average, to file a return using software or a tax preparer.

On Friday, IRS commissioner Danny Werfel said that 140,803 households completed their tax returns using the new Direct File software which was available partway through tax season in 12 states and only to people with limited types of income and tax circumstances.

Tax prep companies and Republicans in Congress and statehouses have been fiercely critical of the Direct File program. But a senior Treasury Department official, who answered reporters’ questions about the program on Friday on the condition of anonymity, said that the Biden administration would make a decision in the coming weeks about whether to renew the software for the next tax filing season. Asked whether the results of November’s election would play a role in whether Direct File continues, he answered, “Not at all.”

Before the development of the website — which was coded by IRS employees, the White House’s U.S. Digital Service and the General Services Administration in a matter of months — IRS officials told Congress that it might cost $64 million to $249 million per year to run a free tax filing website, depending on how many people chose to use it. During the months of Direct File’s development and use, some members of Congress complained that the IRS was not being transparent about how much it was spending on the website; the Government Accountability Office issued a critical report days before the end of tax season saying the IRS should have been more forthcoming about the costs.

Werfel said Friday that the site cost much less than forecast. The IRS spent $10.5 million to develop the site and $2.4 million to run it during tax season, which would amount to just $17 in operating costs per tax return processed, or $92 in total costs per filing. The agency also spent more than an additional $10 million for an initial study and report to Congress on the idea of a free filing site.

But those numbers do not include the costs borne by the U.S. Digital Service or other government agencies, whose employees largely built the software, or the costs of other changes to IRS technology necessary to both Direct File and other tax filing improvements.

“The IRS claims of spending only $24.6 million taxpayer dollars on Direct File are clearly low, inaccurate, and the IRS even acknowledges conveniently leaving out necessary costs to build and run the pilot,” Intuit spokesman Rick Heineman wrote in an email to The Washington Post. “Facts matter.”

Werfel promised a more detailed report on costs, and interviews with taxpayers, state officials, and software companies, before a decision is made on whether to renew the program.

Republicans in Congress have already signaled their opposition. When Werfel testified at a Senate Finance Committee hearing earlier this month, Republican committee leader Sen. Mike Crapo of Idaho called Direct File “wasteful and duplicative.” Sen. Thom Tillis (R-N.C.) questioned Werfel about the full costs of the program, saying, “I for one hope … at some point you just decide it’s not worth it, because the private sector options are so much better.”

According to the GSA, which surveyed more than 7 percent of Direct File users during tax season, reported that more than 9 out of 10 rated it “excellent” or “above average.” An advocacy group that promoted the site, the Economic Security Project, said that 60 percent of users said it took less than an hour to file their taxes on the site, according to a survey out this week. And 61 percent found the free site more straightforward than the method they used the previous year.

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