Editorial: IRS Direct File Tax Program a ‘Bust’

(Dreamstime)

The Wall Street Journal ripped the IRS for its Direct File tax program and called on Republicans in Congress to shut it down.

An editorial in the newspaper Thursday read: “Beware a tax collector bearing gifts — in the latest case an offer to calculate and file your taxes for you. That’s the story of Direct File, which President (Joe) Biden is touting as a new ‘free, secure, simple way to file your taxes.’ Sure.

“This is another brainstorm from Sen. Elizabeth Warren, who stuck $15 million into the Inflation Reduction Act to study if the IRS could prepare tax returns for taxpayers. The IRS dove right in and built a prototype program before it even released the required ‘independent’ study from a liberal think tank. A pilot program for 19 million taxpayers in a dozen states went live in March.

“So far it’s a bust. The IRS predicted ‘several hundred thousand’ would use direct file. But as Monday’s tax deadline approaches, sources tell us the IRS has accepted fewer than 60,000 returns via Direct File — about 0.003% of the eligible pool. Until this week, the agency had failed to enable users to import crucial details to validate their returns before filing.”

The Journal, noting the tax code has been an honor system in which Americans prepare their own returns, added that “progressives want to give the IRS power to present taxpayers with nonnegotiable tax bills. Sen. Warren, (a Massachusetts Democrat,) is selling Direct File as an alternative to ‘greedy, reckless’ tax preparation firms. It’s a scandal the tax code is so complicated it requires such help, but that’s the fault of Congress.”

The Journal said that most Americans have access to free tax preparation and filing systems.

“Those services are superior to Direct File in their features, support and technology,” the Journal said. “This is why former chief information officer for the Obama administration, Tony Scott, last year predicted Direct File was ‘virtually guaranteed to fail,’ as it is ‘unnecessary’ and ‘ill conceived.’”

The Journal said the IRS has budgeted $114 million for the pilot program in 2024 and said the Direct File may also be illegal.

The internal revenue code doesn’t grant the agency authority to prepare returns other than when taxpayers fail to file or file fraudulent returns, the Journal said.

“Thirteen GOP state attorneys general raised the legal issue in a January letter to Treasury Secretary Janet Yellen demanding that Direct File be shut down,” the editorial read. “When Republicans get the chance, they can help the public by shutting down the Direct File boondoggle.”