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IRS could launch free online filing system next year

The IRS issued a report outlining what it would need to begin offering Americans free electronic tax filing.
IRS could launch free online filing system next year
Posted at 11:48 AM, May 17, 2023
and last updated 2023-05-17 13:18:59-04

The Internal Revenue Serviceissued a report to Congress on Tuesday outlining plans to implement a free online filing service for American taxpayers. 

The report says that the IRS is “technically capable” of delivering a free tax filing service. The IRS added that effective execution of a direct file system would “require sustained budget investment and careful management of the potential program's operational complexity.”

The IRS said it could have a direct filing system up as soon as next year, “but successfully meeting such a date would require that the IRS rapidly address the primary challenges identified” within the report.

"The IRS is committed to delivering significantly improved services by providing taxpayers with tools, information and assistance to make it easier to comply with their tax filing obligations. Direct File — used by numerous tax jurisdictions around the world — has long been discussed as an option for improving the customer experience for taxpayers in the U.S.," said IRS Commissioner Danny Werfel.

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Although the IRS says it is capable, the agency says the program would need to be phased in. The report recommends the program start with a limited initial tax scope and add additional tax situations over time.

The 105-page report indicated that a majority of Americans support a direct filing system. The report noted, however, that some taxpayers are concerned about the IRS’ motives and potential implications for tax enforcement.

It is still unclear exactly how many people would use such a service. The number of users will be a major factor in the cost to operate the program. 

The report found that 5 million users would cost the IRS $64 million, while 25 million users would come with $249 million in costs. The costs, however, do not account for potential savings from having filers convert from paper forms. 

Most of the costs associated with the program would go toward customer service, the IRS said.

The IRS currently has private-public partnerships that allow low-income tax filers free e-file. 


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