The Boring Newsletter, 6/2/2024

Hi Friendos,

Today I am writing about positive news out of the IRS. Janet Yellen, Secretary of the Treasury, accepted the recommendation from Danny Werfel, IRS Commissioner, to make the Direct File program permanent!

Direct File was a trial program that ran earlier this year, allowing taxpayers in 12 states to file their 2023 tax returns directly with the IRS at no cost. The IRS started the limited pilot program slowly, so they could test the system and make needed adjustments throughout the tax season, to ensure no system overwhelm or other major problems.  The IRS reports that during the last week of the filing season, “more than 5,000 taxpayers submitted returns each day using Direct File, and the system stood up well under the high-volume push of the tax season’s final days.”

The IRS was intentional in its choices of who would be eligible for the pilot, aiming to “accommodate the needs of a significant portion of low- to middle-income working individuals, couples, and families with wage income.” Eligibility criteria considered prevalence (how many taxpayers would be eligible), complexity (of implementation), ease of explanation (if taxpayers would easily understand whether they could participate), and customer support (for participants).

The goal was 100,000 tax returns filed through the program. Ultimately, “more than 3.3 million taxpayers started the Direct File Eligibility Checker, 423,450 taxpayers logged in to Direct File, and 140,803 taxpayers submitted accepted returns.”

After filing through Direct File, taxpayers could complete an optional survey. Of the more than 15,000 people who did, 90% said their experience was “Excellent” or “Above Average” and more than half said their filing experience was “much easier” than last year. The “Treasury Department estimates that Direct File users saved $5.6 million in tax preparation fees.” Most people (86%) said the experience increased their trust in the IRS.

Here is what one person told the IRS about their experience with Direct File:

“One user research participant described how she had lost her job this year, was short on cash, and the tax software she had used previously would cost $70 for filing a 1099-G for unemployment compensation. Usually, she would have filed at the beginning of tax season, but this year, money was so tight that she thought she would need to wait for her next paycheck to be able to cover the cost of filing her taxes. She decided to use Direct File because it was free. Asked to rate her experience using Direct File, she said, ‘10 out of 10,’ and was happy about her choice because it was easy to use, and she had received the same refund without being charged a fee to file.”

Here is what someone else said:

“A taxpayer with accessibility experience wrote, ‘I design many forms for my job and conduct accessibility audits of them, and this entire experience just made my heart leap for joy. A few years ago, I was brought nearly to tears the first time I filed my taxes with paper forms. Since then, I’ve studied a range of best practices and standards for easily usable and accessible online form design, and this Direct File system nailed every single one of them. I am so beyond impressed, and I sincerely hope this program continues and expands in the future.’”

And another:

“Todo el proceso es de lo mejor, preciso y eficiente.” (The entire process is top notch, precise and efficient.)

And another:

“Greatly appreciate the opportunity to file directly with the IRS rather than a third-party provider. The system was easy to use and understand.”

The IRS had 400 people providing live chat customer support. They provided feedback so that improvements could be made continuously throughout the tax season. One of the support people said, “Having the opportunity to see our suggestions come to fruition so quickly? This is so much fun. Normally things move at the speed of government, but this really feels like we are an extremely important part of shaping the future of the IRS and how we interact with the country as a whole.”

The report discusses many areas for future improvement. Taxpayer complaints included the identity verification process during sign up, confusion around certain information on tax forms (such as boxes 12 and 14 on Form W-2), and what information should be entered regarding estimated taxes. One of the most common feature requests was to pre-populate the forms with tax information the IRS already has.

Last Thursday when the IRS announced this program will be a permanent option for tax filing, they said they are looking into expansions such as including more states and additional tax situations. The IRS’s After Action Report notes some possible future benefits of a Direct File program:

• “Accessing past year and information return data that the IRS already has, such as W-2s or 1099s, to reduce burden and catch issues before you file,”
• “Assisting you with updating your withholding to avoid unexpected tax bills,”
• “Helping you stay on top of estimated tax payments if you’re self-employed,”
• “Connecting you with other government programs for which you might be eligible, including SNAP, TANF, Medicaid/CHIP, WIC, CCDF, LIHEAP, and more,” and
• “Making it easy to enroll in Social Security and Medicare as you approach retirement age.”

I grew up during the 1980s and 1990s and heard over and over Ronald Reagan’s quip: “The nine most terrifying words in the English language are: I’m from the government, and I’m here to help.” That statement is at odds with parts of my own lived experience, where I have gotten a new driver’s license with an updated photo in less than 12 minutes (that’s right, the Brooklyn DMV on Atlantic Ave absolutely rocks), received advice on masonry work for my old housing cooperative (thank you NYC Department of Housing Preservation and Development), and personally participated in volunteer income tax prep for low income people (the IRS VITA program).

It is so uplifting to think about workers at the IRS dreaming of how they could make government work more effectively and efficiently for all of us! A better world is possible.

-Stephanie