Direct File Program Shakes up Tax Season, Promises Big Savings: What Does This Mean For You?

Filing tax documentsPhoto by Nataliya Vaitkevich on Pexels.com

WASHINGTON, D.C. — More than 130 legislators, including U.S. Senator Bob Casey (D-PA), have massed behind a letter applauding the Internal Revenue Service (IRS) and U.S. Secretary of the Treasury, Janet Yellen, for the successful trial run of the Direct File program. They are now pushing to make this program a permanent fixture and expand its reach and functionality to states such as Pennsylvania.

The Direct File program, introduced in the 2024 tax season, is a groundbreaking initiative. Under this program, taxpayers in 12 pilot states could file their taxes directly with the IRS, without any charge.

And the program certainly made waves, with taxpayers using Direct File to claim a staggering $90 million in tax refunds while saving an estimated $5.6 million in filing fees. The lawmakers voiced their delight at the program’s success, urging officials to solidify the program’s status and continue its development and expansion in upcoming years.

The Biden administration had previously announced the launch of a Direct File pilot in 2024. Although the IRS had offered Americans an option to file their taxes free using paper forms, this was the first instance where a modern, online tax filing portal was available to them. And this new addition was met with roaring approval. Approximately 90 percent of 11,000 surveyed users rated their experience with Direct File as “Excellent” or “Above Average”. The same percentage of survey participants echoed this sentiment when it came to their customer service experience.

Senator Casey has been a strong advocate for tax filing to be seamlessly simple and secure for all taxpayers in Pennsylvania. A staunch supporter of the Direct File program, Casey voted for the implementation of this program. He also backed the Inflation Reduction Act in 2022. This Act supplied the IRS with the necessary funds to elevate their customer service game and conduct studies to implement this Direct File pilot program.

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The Direct File program doesn’t just aim at tax returns, it’s pushing for a complete overhaul of current tax systems. A system that according to reports, sees the average American fork out $150 and devote nine hours to file their taxes each year. Existing systems like the IRS’s partnership with private tax companies to provide free online filing have only reached 2% of taxpayers, despite 70% qualifying.

Moreover, allegations of companies misleading taxpayers into paying for services they are supposed to receive for free have only further fuelled the need for a free and efficient system. The Direct File program may just be the solution to these problems, effectively unlocking critical benefits such as Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) for millions of families.

The Direct File Program has already proven to be a massive success and the lawmakers are urging for it to become a permanent fixture. They hope it will accommodate additional sources of income, work with more states, allow for more flexible identity verification procedures and consider additional tax benefits.

With these improvements, the Economic Security Project predicts Direct File could save taxpayers up to $11 billion per year, and deliver an unclaimed $12 billion of value in benefits. This indicates a return on investment of $100 for every dollar spent – a major win for taxpayers.

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