IRS Direct File Provides Free Tax Filing, Boosts Tax System Equity

Eligible taxpayers in 12 states can file their taxes this year directly with the IRS securely, quickly, and for free using Direct File, a new digital tax filing tool from the IRS. April 15 is the last day for most eligible filers to use IRS Direct File during this pilot year. The IRS launched Direct File as part of its strategic operating plan and modernization of the tax filing system using funds from the Inflation Reduction Act.

The Direct File pilot is just one way funding from the Inflation Reduction Act has helped the IRS to improve the taxpayer experience. And by lowering the cost and lessening the complexity of tax filing, Direct File can increase the equity of the tax system.

Direct File is the first electronic tax filing tool designed completely by the IRS, which the agency created and launched in under a year.

Direct File has elevated the tax filing industry by offering an option that reflects the needs and experiences of tax filers with low to moderate incomes. Direct File offers a screener tool for people to check their eligibility before starting to use the tool; is mobile-friendly; is available in English and Spanish; provides daily, live customer support by trained IRS representatives; uses interview-style prompts for people to populate their tax return; prioritizes security and fraud prevention; uses seamless integration to file state tax returns in participating states; and is free to use.

One of the greatest benefits of Direct File is the time and money it can save users. The IRS estimates that an average taxpayer spends nine hours and $150 each year filing taxes. Many Direct File users have shared that they completed their taxes in less than one hour, including time spent contacting live support. Within five years Direct File could save users as much as $11 billion annually, according to the Economic Security Project.

The IRS has prioritized the tax filer throughout each stage of the Direct File pilot. As the agency designed the tool, it conducted multiple user testing sessions to understand and incorporate the needs of filers with low and moderate incomes. Once Direct File was ready for use, the IRS opened it up in phases, starting with IRS employees, to allow for further testing and refinement. This iterative approach contributed to a successful public launch on March 12. The IRS expects at least 100,000 taxpayers to use Direct File this year.

Direct File has received broad taxpayer support. The IRS’ 2022 Taxpayer Experience Survey found that 73 percent of taxpayers would be “very interested” or “somewhat interested” in using an IRS-provided, free online tax filing tool. In February, between 90 and 95 percent of respondents supported Direct File in a five-state poll.

This support is consistent with Direct File user feedback, which has been overwhelmingly positive. The first Direct File user, Dixie Warden, said, “I don’t want to call myself a dummy, but this is taxes for dummies right here.”

Outreach is critical in these final days of the tax season. More Direct File users will generate more data, helping to determine the future of Direct File. The Coalition for Fair and Free Filing has created outreach materials in English and Spanish in addition to the IRS’ Direct File outreach resources that any anyone can use to spread the word that eligible tax filers can file their taxes for free with Direct File.

After tax season, the IRS will evaluate the Direct File pilot to determine if it will continue and expand. Congress should prioritize funding the IRS to make Direct File available to more taxpayers in the future.