A group of Republican lawmakers have sent a letter to President-elect Trump asking him to end the IRS Direct File service, ideally via a day one executive order.
The IRS piloted the program—developed as part of the Inflation Reduction Act of 2022—this past tax season and made it available in 12 states: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming. Around 140,000 taxpayers used the service, and the response, according to surveys of users, was very positive, with over 90% rating their experience either “excellent” or “above average.” The IRS plans to double the reach of the program next filing season to 24 states.
Republicans have long been critical of the program, saying it was not officially authorized and its overall implementation has been highly wasteful. The letter divides the total amount budgeted by the total number of taxpayers who took part and concluded that the cost was $814 per return. Beyond procedural issues and costs, Republicans have also raised concerns claiming that Direct File makes the IRS a tax assessor, collector, preparer and enforcer in one, which they believe represents a clear conflict of interest as well as an invitation for government overreach. The letter sent to Trump and other members of the incoming administration went over these points again, saying the government can find better use of its resources.
“This is not an efficient use of government resources, especially when the private sector offers better tax preparation services at no cost to the federal government and taxpayers already have the option to file their taxes for free using the pre-existing public-private partnership between the IRS and many tax preparation and filing software companies—Free File. The IRS can, and should, spend a fraction of the resources it spent on creating a government run program on promoting existing free options. The results of such efforts would be better for all taxpayers,” said the letter.
In contrast, Democratic lawmakers in October urged the IRS to make the Direct File program more accessible, specifically by relaxing some of the identification requirements. The service, said the Democrats, operates at a significant disadvantage compared to commercial tax prep services due to its stringent identity verification requirements in the form of the ID.me service, which is used by both the federal government and several state governments. ID.me credentials are assessed against the National Institute of Standards and Technology’s Identity Assurance Level 2 standard. The letter noted that private tax preparation companies are not assessed against IAL standards but basically operate on a Level 1 basis, as users simply assert their identity.
“Requiring them to use ID.me is creating yet another needless barrier to exactly these taxpayers who need Direct File most to claim tax benefits, as it has been with other government benefits,” said the Democrats’ letter.
