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IRS to Roll Out Pilot Free-File System Next January

S.J. Steinhardt
Published Date:
May 16, 2023

The IRS plans to introduce a pilot program for its own free direct-file system in January 2024, The Washington Post reported.

The system was developed by the IRS and the U.S. Digital Service, the White House’s technology consulting agency, which has been testing the software and will make it available to a small group of taxpayers then, the Post reported.

Fifteen million dollars were allocated to the IRS by the Inflation Reduction Act to report on the cost of the agency’s developing and operating a free, direct e-file tax return system. The report will be issued by think tank New America, a choice to which two leaders of the U.S. House of Representatives’ tax-writing committee previously objected.

“There’s something very important about the fact that even beyond making it easy and beyond making it free, this is something you could do directly with your government,” Gabriel Zucker, associate policy director for tax benefits at the advocacy group Code for America, told the Post. The group constructed its own tax filing prototype.

Currently, the IRS offers a Free File program for taxpayers whose adjusted gross income (AGI) is $73,000 or less, Accounting Today reported. The program is a public-private partnership between the IRS and the tax preparer and filing software industry companies; these companies provide free online tax preparation and filing for taxpayers who qualify. Seventy percent of taxpayers qualify for this program, but fewer than 3 percent use it, the U.S. Government Accountability Office reported in 2022.

IRS Commissioner Daniel Werfel was urged to simplify the tax filing process and to expand access to free e-filing options in an April 25 letter from 29 U.S. senators. Anticipating the New America report, they wrote that if “the report concludes that such a system is feasible, we urge you to roll it out as quickly as possible.”

The two House members who objected to the New America study, Reps. Jason Smith (R-Mo.), chair of the Ways and Means Committee, and David Schweikert (R-Ariz.), chair of the Means Oversight Subcommittee, wrote then-Acting Commissioner Douglas O’Donnell that “[t]axpayers have numerous options for preparing and filing their federal income taxes, including many free options," and that "they may prepare and file their own tax returns, use one of many tax preparation software companies, rely on a tax return preparer, or rely on” the IRS Free File Program.

They also expressed “general concerns over designating the IRS as both tax collector and tax preparer.”

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