Inspector General: “Direct File cost estimates remain unsupported.”
The official IRS watchdog published an audit report today finding the IRS understated the cost of the never-congressionally-authorized “Direct File” program.
“Direct File cost estimates remain unsupported,” stated the Treasury Inspector General for Tax Administration report titled Inflation Reduction Act: Results of the Direct File Pilot.
The report stated: “The IRS’s total reported obligations of $24.6 million to develop and operate the Direct File Pilot did not include all costs incurred by the government. Specifically, the IRS’s reported totals did not include an estimated $8.8 million for costs incurred by the Office of Management and Budget for employees detailed to the IRS to help develop and pilot Direct File and costs incurred to create or leverage existing accounts through the IRS’s Credential Service Provider.”
TIGTA also stated: “We remain concerned that the IRS’s estimates may not capture all the costs necessary to fully develop and deliver Direct File for the 2025 Filing Season.”
President Trump and DOGE should eliminate “Direct File” for several reasons:
-The tax collector should never be the tax preparer. This is a fundamental conflict of interest.
-“Direct File” was NEVER authorized by congress. A study was authorized, and that’s it. A Direct File pilot program was NOT congressionally authorized and a Direct File permanent program was NOT congressionally authorized.
-To put it charitably, Biden-era IRS chief Danny Werfel was less-than-forthcoming with Congress and the American people when asked about the status of “Direct File.” While Werfel publicly pretended the IRS was just doing the study, the IRS was secretly working the entire time on building a prototype software system with plans for a 2024 launch, as revealed in a Washington Post scoop on May 15, 2023. A sizzle reel of Werfel being less-than-forthcoming can be found here. The IRS has never explained this dishonesty, and the beltway media does not seem particularly interested in pressing the agency for an answer.
-IRS continues its long-documented dishonesty about “Direct File” costs. In 2024 The Government Accountability Office called out the IRS for their shoddy and dishonest cost estimates: “IRS had no documentation to support the underlying data, analysis, or assumptions used for Direct File estimates.” Today’s TIGTA report shows the IRS’s continued disregard for taxpayer dollars.
-“Direct File” is duplicitous of existing IRS programs such as Free File. The IRS itself has acknowledged that the “Free File program has no short or long-term costs incurred by the IRS.”
-The IRS itself described Direct File as “unnecessary spending.” A 2023 IRS report discouraged the IRS from creating Direct File for the purpose of “avoiding unnecessary spending.” The IRS report repeatedly ripped the IRS itself for underestimating the taxpayer cost of Direct File.
-The IRS itself had recommended against starting a “Direct File” program. In the 2023 IRS report, an official IRS advisory committee told the IRS not to start Direct File but rather to promote existing free options.
-State Attorneys General have notified Treasury that “Direct File” is unauthorized. They wrote: “Congress has never granted the Department of the Treasury authority to create a Direct File program. And for good reason: the American taxpayers do not want to invite the proverbial fox into the hen house.“
-Today’s TIGTA report found that the supposedly “free” Direct File program cost the American taxpayer $237 per completed Direct File tax return filing. The report stated: “The IRS spent at least $33.4 million to develop the Direct File Pilot” but only 140,803 taxpayers actually completed their tax return with it. That cost the U.S. taxpayer at least $237 per completed tax return. Had these filers used the existing Free File service, it would have saved the U.S. taxpaying public tens of millions of dollars.
-Today’s TIGTA report warned of continued cost problems of Direct File: “We remain concerned that the IRS’s estimates may not capture all the costs necessary to fully develop and deliver Direct File for the 2025 Filing Season.”
-Today’s TIGTA report proves you cannot trust the IRS as tax preparer: “Taxpayers may have unknowingly given up the ability to claim certain credits by using Direct File.” Oh, what a shocker that the IRS does not make sure you are getting your full refund. The TIGTA report states: “Taxpayers who were potentially eligible to claim education credits, may have unknowingly given up the ability to claim the credits because they chose to file for free using Direct File.”
It is time to end the unauthorized, wasteful, conflict-of-interest riddled and unnecessary “Direct File” boondoggle imposed by the Biden-era IRS.
