Washington News

The Treasury Inspector General for Tax Administration (TIGTA) has completed an analysis of the IRS Direct File pilot program. The report indicated there were several recommendations given to the IRS to improve the Direct File program.

Direct File is a free Federal tax preparation tool. It was offered by the IRS as a pilot program during the 2024 Filing Season. The program was offered initially to IRS employees and staff. After approximately 1,850 IRS employees tested the program, Direct File was offered to taxpayers in 12 states. Over 140,000 taxpayers used the basic Direct File program.

The TIGTA report reviewed three Direct File recommendations and the IRS response.

1. Health Insurance Checker — The report suggested that the initial program did not have sufficient information for taxpayers to understand whether they were qualified to use the health insurance coverage section. The Direct File program had an eligibility checker to clarify whether taxpayers who purchased insurance through the “Marketplace” offering were qualified. The IRS agreed that this eligibility checker needed to be improved and updated the program on March 27, 2024.

2. Spanish Translation — The report notified the IRS that the Spanish translation for the Direct File eligibility checker had missing entries. The IRS created a program to allow individuals to determine whether they were eligible to use Direct File. Because Direct File was limited to very basic tax return information with limited deductions and credits, many individuals were not qualified. The IRS agreed the Spanish language version of Direct File was not complete and updated the pilot version on March 12, 2024.

3. Direct File Milestones — The report indicated TIGTA notified the IRS there needed to be metrics or milestones that would allow the IRS leadership to decide when to expand the program. The IRS generally agreed with the creation of various milestones. The IRS noted it had been reviewing a wide range of comments from users and these responses would enable the IRS leaders to decide when to expand the program.

The IRS is also reviewing the Customer Support Chat information to determine when and how it should expand the program. The IRS had 297 Live Chats with 600 questions that were designed to show the operation of the Direct File pilot program.

Editor's Note: The Direct File program covered W-2 wage income, Social Security income, unemployment compensation and interest income of up to $1,500. Eligible credits were limited to the Earned Income Tax Credit, the Child Tax Credit and the Credit for Other Dependents. Taxpayers could claim a standard deduction as well as a deduction for student loan interest and educator expenses. The IRS stated, "The Direct File pilot was intentionally built with limited scope." The primary goals were to assess the viability for middle-income taxpayers in 12 states. The IRS now plans to expand Direct File program for next year.