Direct File Deserved to Die
Letter to the editor at the New York Times.
A recent Tax Notes headline reads, “On Tax Day, Democrats Eulogize the IRS Direct File Program.” They shouldn’t have bothered. A celebration would have been more fitting.
Direct File was conceived with grand ambitions. It was going to simplify tax filing, save taxpayers money, and finally prove that the agency that collects your taxes should also be in charge of preparing them for you. The Trump Administration shut the program down last year, and for good reason. As I argue in my April 15 letter to the editor of the New York Times (republished below), it did none of the things it promised.
To the Editor:
Re “Just What We Needed, a More Annoying Tax Season,” by Binyamin Appelbaum (Opinion, April 5):
Mr. Appelbaum is right that the tax code is absurdly complicated. But the I.R.S.’s Direct File program wasn’t a meaningful solution.
The much-hyped experiment in government-run tax preparation proved that bad ideas can be both expensive and unpopular. The I.R.S. estimated that 32 million taxpayers were eligible to use Direct File during the 2025 filing season. Only 751,000 logged into the system. Fewer than 300,000 completed a return — less than half of 1 percent of individual income tax returns. Barely a rounding error.
It was also an expensive rounding error. Estimates put the processing cost — paid by the government using taxpayer money — at roughly $140 per filed return. That’s more per return than most taxpayers spend on the private-sector alternatives it was supposed to replace.
More important, Direct File posed a deep conflict of interest. It asked taxpayers to trust the I.R.S. to be their tax preparer, collector and enforcer. Taxpayers minimize their legal tax liability; the I.R.S. maximizes revenue collection, which it does through aggressive enforcement. In 2024, the I.R.S. lost 57 percent of the dollars it disputed in cases it brought against taxpayers. It is wrong more often than it’s right.
Software cannot solve a problem Congress created through dozens of deductions, credits, phaseouts and special eligibility rules. A government-run portal cannot be a substitute for simplifying the tax code.
Adam N. Michel
Washington
The writer is the director of tax policy studies at the Cato Institute.
Because letters must be short, I left out the also not-so-small matter of legality. Congress didn’t authorize a government tax-prep service. The Inflation Reduction Act included $15 million for a task force to study the feasibility of a direct e-file system and to deliver a report to Congress. Under the Biden Administration’s direction, the IRS took that study as license to build a permanent program out of whole cloth, spending more than $41 million. A classic example of bureaucratic mission creep.
Direct File expired under the weight of its own contradictions: costly, duplicative, conflicted, ineffective, and illegal. Good riddance.