April 22, 2024

Opinion: Free tax filing: A crucial step toward unrigging our economy

By Susan Harley

Each year many Americans pay a steep cost when doing their taxes. It’s not just the money people shell out to use software to file taxes online, but also the time spent and the stress that comes with worrying an honest mistake will be held against them.

Luckily, change is in the air this spring. Eligible filers in a dozen states will finally have a true public option this tax season: a new free, online, mobile-friendly software from the IRS called Direct File.

Over the next several weeks the Direct File pilot will be ramping up in the states where it’s being offered: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Available in both English and Spanish, the new software pilot is starting small and will only be available to people with simple taxes who file with only limited types of incomes, credits, and deductions. While the Direct File tool won’t be available to everyone right away, it’s a crucial step toward unrigging our economy and protecting people’s pocketbooks.

Buoyed by funding the IRS received though the Inflation Reduction Act, the Direct File pilot is another example of the Biden administration’s commitment to tackle junk fees that chip away at people’s economic wellbeing and to foster a government that better serves the American people.

Direct File is also a recognition that struggling families shouldn’t have to pay money they can’t afford just to do their civic duty. The tool aims to make it easier for folks to get the refund they’re owed and to address the problem of one in five eligible recipients of the Earned Income Tax Credit not claiming it.

While there has technically been a Free File program at the IRS for decades, it has not lived up to its promise. Only a tiny percentage of eligible filers — about 2 percent — use it. And there was a high-profile data breach where corporate partners in the program shared sensitive tax information with Meta (formerly called Facebook) and Google.

Unsurprisingly, Intuit, the parent company of TurboTax, has not been taking this budding threat to its behemoth earnings laying down. It’s poured a record amount into its lobbying, almost a million dollars in just the past three months.

But it’s going to take more than lobbying and a Super Bowl ad to revive Intuit’s tarnished image.

Intuit entered into a $141 million settlement last year to resolve claims that it steered low-income customers to paid products when they were eligible to use free services. And the Federal Trade Commission ruled in January that the company’s advertising about free tax prep was deceptive.

The Direct File tool is expected to be live to the public in those 12 states in early to mid-March. That means that this St. Patrick’s Day, some lucky filers will find a pot of gold under the rainbow — around $150 or more on average back in their pockets that they didn’t have to give to a greedy corporation just to use software to help them file their taxes online.

Direct File is the first brick in the road to return-free filing that many of our international peers enjoy, where they simply approve their pre-calculated return prepared by the government.

Like a garden, though, Direct File will only flourish with care and attention. Let’s make sure it doesn’t die on the vine! Help spread the word, check your eligibility at directfile.irs.gov, and visit act.citizen.org/page/62332/petition/ to get reminded when it’s go time for Direct File in your state.

Susan Harley is the managing director for Public Citizen’s Congress Watch division.