Yellen: Treasury explores ways to expand free tax filing program

Treasury Secretary Janet Yellen told lawmakers Wednesday that the department is looking at ways to expand the limited direct-file pilot program with possible functionality extensions and applicable tax credits under debate.

The free program, which is like a scaled-down version of the popular tax preparation software, has encountered strong opposition from Republicans and the tax preparation industry, which once maintained a non-compete clause with the IRS specifically prohibiting its encroachment on the tax preparation business. tax returns.

In testimony before the House Ways and Means Committee on Tuesday, Yellen said the direct file could be expanded to include additional languages ​​beyond English and Spanish and that previously recorded salary information could be used to pre-populate returns .

“There are other things that could be incorporated besides expanding the types of income and deductions that are considered,” she said.

The Treasury is now evaluating the costs and benefits of running the program, and the jury is still out on whether the direct process will be reopened.

“These are things for the future, if it is decided to continue with [direct] file,” Yellen said. She described the pilot project as “a very successful experiment”, while warning that the Treasury “has not yet fully analyzed the information” about it.

Democrats have applauded the program, eager to call it a success in the wake of other government services that have had more difficult transitions to digital formats, most notably the launch of health.gov in 2013 as part of the Affordable Care Act.

“I have heard… previous comments about the success of the Direct File pilot program,” Rep. Judy Chu (D-Calif.) told Yellen on Tuesday. “I would have considered it a resounding success.”

“It’s abundantly clear that Americans are hungry for an efficient, free and direct filing option with the IRS,” said Rep. Linda Sanchez (D-Calif.).

Direct File counted more than 140,000 U.S. taxpayers as users this season, which the Treasury said exceeded its goal of 100,000 users, although an IRS official said earlier this year that they anticipated usage levels in the “high range.” hundreds of thousands.

Users have reported favorable experiences with the software, with 90% of respondents in a survey conducted by GSA Touchpoints rating their time with the systems as “excellent” or “above average.”

The tax preparation industry is unimpressed with the $90 million in direct refunds presented by the Treasury, arguing that the program’s costs are likely underreported.

“IRS claims of spending just $24.6 million of taxpayer dollars on Direct File are clearly low,” a spokesperson for Intuit, maker of Turbo Tax, said in a statement.

The direct file pilot is part of an $80 billion operational overhaul currently underway at the IRS, made possible by Democrats’ Reducing Inflation Act of 2022. More than half of this amount is intended to increase inspections aimed at wealthy taxpayers and large companies.

The Biden administration has proposed tax increases for some of the richest U.S. families in its latest set of revenue proposals, but has promised not to raise tax or audit rates on people earning less than $400,000 a year.