Don't Mess With Taxes

The Internal Revenue Service this week officially announced Free File will open on Friday, Jan. 10, to eligible taxpayers (those with adjusted gross income of $84,000 or less). In that statement, the agency also indirectly told us the main tax filing season will begin on Monday, Jan. 27.

But taxpayers in 24 states are still waiting to hear when in 2025 Direct File, the IRS’ own online tax preparation and e-filing software will be available.

The tax agency was so pleased with Direct File’s pilot last year, it expanded not only the software offerings, but also doubled the number of participating states. One of the reason for the rapid, at least as far as government operations go, growth was the positive responses of filers who used Direct File.

Now, however, a Government Accountability Office (GAO) report warns that Direct File customer support staff may not be ready for tax time this filing season.

And, customer service, always a crucial area for all parts of the IRS, could suffer the most.

Customer support challenges: The report, “IRS Successfully Piloted Online Tax Filing but Opportunities Exist to Expand Access (GAO-25-106933)” released last month, found that the IRS is behind schedule in recruiting and training customer service representatives for the 2025 filing season due in part to insufficient coordination among IRS offices.

That could be a big blow to Direct File. Last year, taxpayers were most satisfied with the speed with which IRS customer service representatives (CSRs) responded. Taxpayers could chat electronically with representatives during the pilot and receive answers to questions with an average response time of 1 minute, the GAO said.

Demographics of Direct File Taxpayers during the 2024 Filing Season

        
Filers were less satisfied with the quality of those speedy answers, eventually leading to an overall customer support rating of C+, although IRS officials noted that feedback improved during the pilot

The IRS told GAO that it expects as many as 5 million taxpayers could use Direct File this year, compared to the 140,803 returns received during the 2024 pilot filing season. To meet the needs of that dramatic increase in users, the agency must similarly add to its customer support staff. The agency estimated last May it would need 180 customer service representatives to meet Direct File’s projected taxpayer service requests.

Slow, and problematic, hiring process: However, the IRS has struggled in meeting its Direct File help hiring needs.

Last July 30, Direct File officials posted job announcements on the federal government hiring website USAJOBS, believing that would give them time to hire and train CSRs before the 2025 filing season. But the job announcement was taken down by August 6 due to concerns that the description implied the possibility of advancement to other IRS jobs.

So in October, Direct File officials and signed a one-year agreement with IRS Taxpayer Services to use its customer service reps to help those with questions about the new filing program. However, noted the GAO, it may “take until mid-February” to train the representatives on Direct File and its electronic chat function, meaning taxpayers could wait longer to reach a representative and resolve issues.

“The absence of an agency-wide coordinated plan to hire CSRs to support Direct File delayed recruitment and training of these employees, which may make it harder for taxpayers to obtain prompt and high-quality assistance with Direct File in 2025 and future filing seasons,” according to the report.

Geographic inequity: The GAO also found that the IRS could face challenges in reaching agreements with all states, which raises equity concerns for taxpayers who won’t be able to use the no-cost Internal Revenue Service program because of where they live.

IRS officials, during Direct File’s 2024 pilot year, expressed hope that the program would eventually be available to filers in more than 40 states. However, the agency also acknowledged that not all state revenue agencies may have the capacity to participate in Direct File.

GAO interviewed officials from six state revenue agencies that will not be participating in Direct File in 2025. Multiple officials expressed openness to eventual participation but were concerned about the low number of users during the 2024 pilot, according to the report.

Other points of skepticism included —

• Officials from one state also noted that taxpayers have other filing options.
• Officials from another state said that usage of the state’s existing online filing tool for state returns was low.
• Some officials from non-participating states we interviewed also said that their agencies are balancing multiple priorities, such as implementing recently passed legislation.

GAO also found that even if state revenue agencies are willing to join, they may need approval from their governors or legislatures to participate in Direct File.

GAO Direct File recommendations: In connection with its report, GAO made four Direct File recommendations to the IRS.

First, the IRS commissioner should ensure relevant officials collaborate on recruiting and training customer service representatives for Direct File and document an annual process for recruiting and training employees.

Second, IRS should continue to coordinate with state revenue agencies to expand taxpayer access to Direct File and, as necessary, take steps to ensure the availability of the federal Direct File program to eligible taxpayers in all states.

Third, IRS should ensure its planned research on potential Direct File users includes research questions that will allow the agency to collect data that can be used to prioritize the development of new capabilities for Direct File.

Fourth, the IRS commissioner should identify additional data that could be prepopulated in Direct File returns, and develop a plan for testing the accuracy of prepopulating the data and its effect on the taxpayer experience.

You also might find these items of interest:

• GOP Reps urge Trump to use EO to end IRS Direct-File
• 24 states will participate in IRS’ enhanced 2025 Direct File
• IRS' no-cost Direct File will be a permanent tax filing option

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