NEW YORK — Most taxpayers are interested in filing their taxes directly with the IRS, according to a new report, and that option will be tested next year.
The IRS has spent the past nine months studying whether American taxpayers would like to see a free government-run e-filing system, and is now preparing to launch a pilot program.
The prospect of a free, government-run online tax filing system has been debated for a long time. Proponents argue that the option would make tax filing services more equitable and accessible to taxpayers across the country. But there has also been pushback from some of the big tax preparers.
Now, the IRS plans to launch a pilot program to test the “Direct File” system for the 2024 filing season and help the federal government decide whether it could potentially be used in the future, the IRS commissioner said. whether to proceed with the implementation or not. , Danny Werfel, and Treasury’s head of implementation. Officer Laurel Blatchford said Tuesday.
Some details about the pilot are not yet available as the agency determines the basic structure, but Werfel said members of the public will have the option of participating.
The IRS was tasked with investigating who “direct files” as part of the money received from the Cut Inflation Act, the Democrats’ flagship measure on climate and health care, which President Joe Biden signed last summer. How to make a system It gave the IRS nine months and $15 million to report on how such a program would be implemented.
The IRS released a feasibility report Tuesday outlining taxpayer interest in direct filing, how the system might work, its potential costs, operational challenges and more.
The report shows that the majority of taxpayers surveyed are interested in using the tools provided by the IRS to prepare and file their taxes electronically, and that the IRS is “technically committed to offering Direct File.” is capable, but doing so would require additional resources and additional complexity.” “. for IRS operations,” Werfel said on a call with reporters.
He said the IRS’ existing free electronic filing option available to low-income taxpayers would remain in effect. People of all income levels can also mail their returns for free, although paper returns can take months to process and taxpayers still have to buy postage.
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The new direct e-filing program being tested “could potentially save taxpayers billions of dollars annually,” Blatchford said, noting that an individual taxpayer pays an average of $140 each year to prepare their tax returns. Is.
The report’s preliminary cost analysis suggests that an IRS-administered pre-filing option “could cost less than $10 per return and would, of course, be free to taxpayers; by comparison, currently available to taxpayers Simple electronic filing options cost around $40.”
The study estimates that annual direct collection costs could range from $64 million for 5 million users to $249 million for 25 million users, depending on usage and program reach.
“We believe that today’s announcement is an important step toward revolutionizing the tax system to make it easier and more equitable. A free and simple direct file service will ensure that tax benefits reach more households in the United States.” receive what they deserve,” Amanda Renteria, executive director of Code for America, a civic technology nonprofit, said in a statement. ,
While supporters praised the pilot program, critics expressed skepticism about the IRS taking on the dual role of tax collector and tax preparer, arguing that the new service could create an imbalance of power between taxpayers and the government. .
Steve Ryan, general counsel of the American Coalition for Taxpayers’ Rights, an advocacy group for tax companies, said that “a direct electronic filing system is unnecessary, costly, and would divert attention and resources from the most pressing priorities.” from the IRS.