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Federal Tax

Direct File Gets High Marks From Pilot Participants

Tim Shaw  

· 5 minute read

Tim Shaw  

· 5 minute read

An independent survey conducted during and immediately after the 2023 tax filing season to gauge public opinion on the IRS-run e-filing option and pilot program showed broad favorability from those who used IRS Direct File to complete their returns, aligning with the agency’s own findings.

“Overall, those using Direct File in the pilot states report very high satisfaction with the service and very high likelihood to recommend it to others,” concluded David Binder Research (DBR), a research service provider commissioned by the Economic Security Project for the survey released April 25. “Compared to those using alternatives, Direct Filers are much more likely to say tax filing this year was more straightforward than last year and that their costs and time spent filing were reduced.”

According to the Economic Security Project, the survey is the first independent evaluation of the pilot program, which launched mid-March to certain taxpayers in 12 states. Eligible taxpayers included those reporting Form W-2, Wage and Tax Statement, income and payments from Social Security or unemployment benefits. Other sources like retirement income or income from ‘gig economy’ work were excluded, while certain credits like the Earned Income Tax Credit were supported during the pilot.

DBR surveyed about 4,200 individuals who filed tax returns this tax season, including 440 Direct File users, to compare the return process experiences between those who did and did not use Direct File. Acknowledging the “relatively small” sample size, the survey used “a combination of nonprobability methods” to “extend the reach.” This involved roughly 4,000 online panel interviews and another 300 interviews sampled from nonprofit organizations.

“The full sample was weighted to adult population benchmarks from U.S. Census data to be demographically aligned with the U.S. adult population,” DBR said.

Its chief finding was that 82% of Direct File users responded with an 8 or higher (out of 10) in their likeliness to recommend the tool, while 91% gave at least a 7. Most users (74%) reported a preference for Direct File over alternative filing methods, such as using a paid preparer, commercial software, or filing manually.

“The preference for Direct File is strong across age, race, and partisanship, with at least 7 in 10 preferring Direct File among filers who are white, people of color, under or over age 45, and Biden or Trump voters,” according to the survey.

As directed by the Inflation Reduction Act (PL 117-169), the IRS conducted its own initial research assessing the public’s interest in an e-filing option operated by the agency itself. In a statutorily required report to Congress published May of last year, the IRS determined before announcing the Direct File pilot that there was enough support to proceed based on results from its Taxpayer Experience Survey and two other surveys from the MITRE Corporation.

A common point of pushback the IRS heard at the time was some filers “demonstrated a strong inclination to stick with ways of filing that have worked successfully for them before.” Conveniences like having certain data fields pre-populate from prior year returns is an argument to be made in favor of using the same filing method and not Direct File, the report said.

The Economic Security Project told Checkpoint that “nothing” in its survey indicated any “reticence to try Direct File.”

“Not only did people who tried it love it, but it also showed that folks who didn’t use Direct File this year saw an increase in tax prep costs,” the organization commented. “Direct File users found it to be simpler, faster, and cheaper than last year, but people who filed by other means generally didn’t experience those benefits.”

On April 26, the IRS in a press release said it spent $24.6 million on the pilot, which included costs attributable to the report to Congress. The pilot’s operational costs totaled $2.4 million. By the end of the pilot, Direct File processed 140,000 returns, according to the release.

The IRS said more than 11,000 Direct File users participated in a survey conducted via Touchpoints by the General Services Administration, a web application used by government agencies to collect feedback. A vast majority (90%) responded their experience with Direct File was “Excellent” or “Above Average,” particularly with the tool’s ease of use and lack of cost.

Direct File’s future beyond the pilot is unclear, however. The idea of the IRS becoming a tax preparer — as opposed to its Free File initiative where the agency partners with third-party e-filing platforms — was met with fierce opposition from both the commercial tax preparation industry and some lawmakers unconvinced that such an investment is necessary or worth the price tag.

“We will be reviewing the results of the pilot and gathering feedback to help us determine our future course involving Direct File,” said IRS Commissioner Danny Werfel. “We anticipate making an announcement about future plans later this spring.”


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