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Capitol Hill Democrats and Independents want IRS Direct File to be permanent

US-Capitol_Senate-side-building

It seems the Internal Revenue Service, or at least its Direct File program, has a new public relations agency. It’s a group of Capitol Hill Democrats and Independents.

The U.S. Senators and Representatives signed a May 15 letter to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel lauding the IRS free online tax preparation and e-filing option.

The Direct File pilot program, created and run by the IRS, was rolled out this filing season in 12 states. When it wrapped on April 15, almost 141,000 taxpayers had used it.

Direct File users received more than $90 million in refunds. The IRS estimated they also collectively saved $5.6 million they otherwise would have paid to use commercial tax software products or other preparation services.

House, Senate Dems support Direct File...: Follow-up surveys showed that most of those Direct File taxpayers were happy with the results. Ninety percent of surveyed filers said, given the chance, they would use the no-cost IRS option again.

Treasury and the IRS still are evaluating the initial Direct File data, and expect to decide on the program’s future sometime this summer. But the preliminary numbers were good enough for the Democratic lawmakers and Independents who caucus with them.

Led by Democratic Sens. Elizabeth Warren of Massachusetts and Tom Carper of Delaware in the Upper Chamber, and Democratic Reps. Katie Porter and Brad Sherman, both of California, and Don Beyer of Virginia in the House, they shared their support with the Treasury and IRS chief execs.

“We applaud your leadership and Direct File’s incredible success this year, and we call on you to make Direct File a permanent program, expanding it and improving it further next year and in the years to come,” wrote the letter initiators and 133 of their Congressional colleagues.

Those 138 lawmakers account for almost half the Democratic Party’s total Congressional membership plus the Independents who caucus with them. And that’s enough to earn this weekend’s By the Numbers recognition.

And want it expanded…: The letter-signing lawmakers, as the first correspondence excerpt above noted, also went beyond mere congratulations.

“We now call on you to make Direct File a permanent program and to expand its functionality and scope, eventually making it available to most taxpayers, further increasing its impact,” added the lawmakers.

The call for added features is because the IRS intentionally limited Direct File eligibility in the pilot. To use it this year, taxpayers in the 12 participating states had to fall into the following categories.

  • They report income earned from jobs that generate a Form W-2; including taxpayers with more than one job with W-2 wages.
  • They claim Earned Income Tax Credit, Child Tax Credit, and the Credit for Other Dependents.
  • They claim the standard deduction and deductions for educator expenses and student loan interest.
  • The lived in the same state for the entire calendar year 2023.

Now it’s time to expand that, say the Direct File letter signers.

“Specifically, we hope Direct File will support additional sources of income, integrate with more states, offer more flexible identity verification procedures, and accommodate additional tax benefits, with a focus on refundable credits available to low- and middle-income families,” continued the letter.

But will they provide money? Yellen and Werfel no doubt will accept the program plaudits. They also will say, as they have for years (as have most of their predecessors), the IRS needs sufficient funding to keep Direct File operational.

Democratic leaders who signed the letter — including Senate Majority Leader Chuck Schumer of New York; Senate Finance Committee Chair Ron Wyden of Oregon; Senate Appropriations Committee Chair Patty Murray of Washington; Senate Financial Services and General Government Appropriations Subcommittee Chair Chris Van Hollen of Maryland; and House Appropriations Committee Ranking Member DeLauro of New York — could hold some sway here.

But the possibility of keeping Direct File going, if Treasury and IRS agree, relies on political as well as fiscal realities. The results of the upcoming November elections could be the ultimate deciding factor.

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Comments

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Colin Cooper

Oh please. Does anyone believe the government can do anything more efficiently that private enterprise. What is missing here is the government's cost per return. This is a figure that will eventually have to be pried out of the IRS with a crowbar.

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