Treasury Secretary Janet Yellen told lawmakers Wednesday that the department is considering ways to expand the limited direct-file testing program, including possible enhancements and applicable tax credits.
The free program is a scaled-down version of popular tax-preparation software, but it faces fierce opposition from Republicans and the tax-preparation industry. The tax preparation industry previously maintained non-compete clauses with the IRS, specifically barring them from entering the tax preparation business.
In testimony before the House Ways and Means Committee on Tuesday, Yellen said Direct File could be expanded to include languages other than English and Spanish, and that pre-recorded wage information could be used to pre-populate tax returns. He said it could be used.
“In addition to expanding the types of income and deductions considered, there are other things that can be incorporated,” she said.
The Treasury Department is currently evaluating the costs and benefits of implementing this program and has not reached a conclusion as to whether direct files will be reapplied.
“If we decide to continue, these are things for the future.” [direct] File it,” Yellen said. She said the pilot was a “very successful experiment” but warned that the Treasury had “not yet fully analyzed the information” about it.
Democrats are rooting for the program, which comes in the wake of other government services that have made a greater shift to digital formats, most notably healthcare.gov, launched in 2013 as part of the Affordable Care Act. We would like to consider this program a success.
Rep. Judy Chu (D-Calif.) told Yellen on Tuesday that she had “heard comments previously…about the success of the Direct File testing program.” “I would call it a huge success.”
“It’s clear that Americans are hungry for efficient, free direct filing options with the IRS,” said Rep. Linda Sanchez (D-Calif.).
Direct File has more than 140,000 U.S. taxpayer users this season, and while the Treasury Department said it had exceeded its goal of 100,000 users, IRS officials said earlier this year that usage levels were “in the low numbers.” He said he expected the number to be 100,000.
Users report positive experiences with the software, with 90% of respondents in the GSA Touchpoints survey rating their time using the system as “excellent” or “above average.”
The tax preparation industry is unimpressed with the $90 million direct file refund touted by the Treasury Department, arguing that the program’s costs are likely underreported.
“The IRS’ claims that it spent only $24.6 million of taxpayer dollars on Direct File are clearly understated,” a spokesperson for Intuit, the company that developed Turbo Tax, said in a statement.
The Direct File pilot was made possible by Democrats’ Inflation Control Act of 2022 and is part of an $80 billion operational review currently underway at the IRS. More than half of that amount will go toward increased enforcement targeting wealthy taxpayers and large corporations.
The Biden administration has raised taxes on some of America’s wealthiest households in its latest revenue proposal, but it has promised not to raise taxes or audit rates on people making less than $400,000 a year.
Copyright 2024 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
