Free IRS Filing Program Draws Few Users

Free IRS Filing Program Draws Few Users

The IRS announced last week that upwards of 19 million people in 12 states are eligible to file their taxes for free using Direct File, a new program the tax agency is testing this year. But eligibility hasn’t translated into many actual users, and the test program is struggling to attract taxpayers less than two weeks ahead of the April 15 filing deadline.

According to The Hill’s Tobias Burns, about 50,000 people have used the Direct File system so far, far less than the hundreds of thousands the IRS projected earlier this year and the millions eligible to use it as of late March. The low number has come as something of a surprise, given the general popularity of electronic tax filing, which now accounts for more than 90% of all tax returns.

One problem is that the Direct File software is still in the testing phase and can handle only basic returns in a limited number of locations. Another is that it became available for use just a few weeks ago, well after millions of people had already filed their taxes.

The biggest issue, though, may be that there is so little public awareness of the free filing effort, which is funded through the $80 billion Congress provided to the IRS in the Inflation Reduction Act for modernization and enforcement — a 10-year total that has already been reduced to $60 billion as part of a debt-limit deal between White House and Republicans, who oppose additional funding for the tax agency. While the IRS is pressing ahead on the development of the Direct File program despite the funding cuts — and despite strong opposition from for-profit filing services and some Republican lawmakers — it has spent very little to promote it.

The Coalition for Fair and Free Filing, a consumer advocacy group that supports the Direct File effort, has reportedly spent several hundred thousand dollars promoting the program in the 12 states where it is available. But that number is dwarfed by the advertising dollars flowing from the $14 billion for-profit tax filing industry. According to data from MediaRadar cited by The Hill, TurboTax alone spent $100 million on advertising its services in the last year.

Still, the IRS is trying to get the word out. Deputy Treasury Secretary Wally Adeyemo was in Texas recently promoting the program and defending what he said is its long-overdue development. “The American people should have a free option for filing their taxes like people all over the world do in countries that are similar to the United States,” he told The Dallas Morning News. “The last time the IRS dramatically improved its technology was in the 1960s … before we sent a man to the moon, before we had an ATM, before we had the personal computer.”