IRS Pilots Direct File Program While Tax Prep Industry Flails In Response
from the about-time dept
We have long detailed through a series of posts, most of them based on fantastic reporting from Pro Publica, Intuit’s shady bullshit when it comes to its supposed “Free to File” program offered through a longstanding deal with the IRS. The summary is: massive tax prep companies cut a deal with the IRS so that the agency wouldn’t offer its own free filing program in exchange for those prep companies offering it themselves and potentially upselling customers into paid programs. In practice, those same companies, especially Intuit and its TurboTax platform, did everything possible to hide the free options from customers, including the poor and veterans. Because of all that, the IRS stated in 2020 that it was going to alter that deal and begin offering its own free file program. Here’s what Intuit had to say about that at the time.
In a blog post on the Intuit website, the company said, “Intuit strongly supports these changes to the Free File program and associated Free File offerings because they increase the focus on the taxpayer experience.”
Keep that statement in mind as we go through this post.
This year is the year, apparently, as the IRS has announced it is ready to pilot that program in a handful of states.
The IRS is starting small, limiting Direct File to taxpayers in Arizona, California, Massachusetts, and New York (its statement says their tax departments “decided to work with the IRS to integrate their state taxes into the Direct File pilot”). Although people in zero-income-tax Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming may also be able to try it out.
The Washington Post reported that the IRS will send invitations to selected, eligible taxpayers “around mid-February,” citing an IRS briefing. Later on, “more and more eligible taxpayers will be able to access the service to file their 2023 tax returns,” it says.
This 1.0 version of Direct File—which the IRS describes as ”a mobile-friendly, interview-based service” that will be available in English and Spanish—will also only cover simpler tax situations.
It’s about time. The percentage of taxpayers that will be able to file for free using this program, which I will point out is not going to be hidden by the IRS from the public, is huge. If it is even mildly successful, it will represent a massive departure of potential customers for the major tax prep firms. The focus, to borrow Intuit’s own phrase, will be on the taxpayer experience, as opposed to trying to figure out how to extract as much money as possible from them.
Which is what makes it so strange to see Intuit’s latest statement on this new program.
“The Direct File scheme is wholly redundant and will exclude the vast majority of taxpayers, all of whom can already file their taxes absolutely free of charge today – free for the taxpayer and free for the government. To the tens of millions of restaurant workers, gig economy workers, most retirees, parents who pay childcare expenses, students and more, if you file with Direct File you should be prepared to be audited since you are ineligible and your tax filing will likely be wrong. The Direct File scheme is a solution in search of a problem, and that half-baked solution now has the potential to become a financial nightmare for tens of millions of Americans while unnecessarily costing billions of dollars for something free of charge today.”
You will notice that this statement is quite different from Intuit’s previous statement when the plan for this was announced. Gone is the support for the program. Gone is any real focus on the taxpayer experience. Instead, this statement makes several claims, which each deserve attention:
- Direct File is redundant: no, it actually isn’t. It’s what should have been done in the first place, but instead of a free to file program that was widely accessible to the people who could benefit from it, Intuit and companies like it hid its offer and used its existance to try and make money from vulnerable people. If it were redundant, nobody would use it.
- Certain category workers can’t use the Direct File program: that is correct and the program lays it out that way. Nobody is going to get audited for this because the system won’t accept returns in those categories.
- The Direct File scheme is a solution in search of a problem: uh, no, Intuit, we know what the problem is, and it’s you.
- Direct File will result in unncessary payments from taxpayers: that is pure speculation and unlikley to be true. But if it was, well, then I would agree it’s redundant with Intuit’s free filing scheme, since it achieves the exact same end.
Ultimately, you know Intuit is lying about this for two reasons. One, Intuit is saying it, so it’s immediately suspect. Two, if this program were so bad and so certain to fail, why have Intuit and companies like it spent so much money lobbying against it?
Filed Under: direct file, free file, free tax file, irs, taxes, turbotax
Companies: intuit
Comments on “IRS Pilots Direct File Program While Tax Prep Industry Flails In Response”
Meh...there's no good option here...
I absolutely believe this will result in taxpayers paying more than they should — last year I got a bill from the IRS for a little over $2k. While I was in the process of disputing it I paid because they made pretty heavy threats about what would happen if I didn’t. Well, eventually I got it sorted out and determined the bill from the IRS was incorrect. Took a few months to get my money back from them, and many phone calls in which they repeatedly insisted the bill was correct. Here’s a tip if you ever find yourself in that situation: Don’t ask if the bill is correct, don’t ask if their records show that you paid more than you should. The magic word is “overpayment”. If you ask “is there any overpayment on my account” you’ll have a check in the mail within ten minutes. As far as I can tell, if you use literally any other words to describe that situation, they’ll insist your account is perfectly balanced. Also, in the phone tree if you use the options to dispute a bill, they’ll keep you on hold for an hour before hanging up on you. Every. Single. Time. The only way to get through is to choose the option to make a payment — you’ll be through to a human in seconds and they’ll transfer you to the right department.
Of course, I did my taxes with TurboTax, and when I took this up with them under their accuracy guarantee, they basically told me to go deal with it myself. They just said they determined that their calculations were correct (which, in the end, did seem to be true) and therefore I was on my own.
So I dunno if this is will be any worse than the current situation, but I do know that the IRS cannot be trusted to make accurate tax calculations on their own, nor can they be trusted to provide customer service that is not a Kafkaesque nightmare….and this new service is only going to be available for simple filing which generally means lower income individuals — ie, people who can’t afford to fight back when something goes wrong. Although again…is that worse than Intuit? I really don’t know…
Re:
I don’t believe you, because I’ve been audited and it was entirely painless. Also, the IRS doesn’t “bill” you the way you’re implying; rather, they send you an itemized assessment that’s trivial to read, and if you disagree, you just dispute it. It’s easy.
And if it’s not easy, then you seriously screwed up your taxes and don’t understand the relatively easy process.
Re: Re:
That’s the point. We’re specifically talking about people who don’t understand the process.
People who understand the process have been able to file their taxes directly with the IRS electronically for a over a decade, and on paper since the income tax was created.
This program is supposed to provide that same option to the people who don’t understand the process, and so are reliant on third parties like Intuit.
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NO — there is no method for normal taxpayers to file their taxes ELECTRONICALLY and DIRECTLY to the IRS
That is an outrage.
the IRS bungling bureaucrat have wasted decades and billions of dollars in failed attempts to modernize their obsolete computer systems
this new proram will also fail
Re: Re: Re:2
https://www.irs.gov/e-file-providers/free-file-fillable-forms
Re: Re: Re:3
… Nope, that IRS Free File program uses 3rd Party middle men — plus it has very significant user limitationw
Re: Re: Re:4
You are right, but he didn’t link free file. he linked free file fillable forms. It’s a digital equivalent to doing a paper return, is a direct file, but doesn’t do most of the math, or cross referencing.
It also requires a desktop computer with a specific browser, so it also has significant limitations that prevented a vaunted “anyone who understands the process” from using this system.
Re: Re: Re:5
it also requires a desktop computer with a specific browser
It does not.
It’s perfectly usable on major phone browsers (safari, chrome, firefox in both android and ios). I don’t have any personal experience with other mobile browsers, though I’d suspect it’d work on almost every ios browser since the underlying engine is substantially the same for all of them.
As for desktop, it works on most browsers using the major engines (webkit, gecko and blink). Though some cut-down or extremely privacy/security focused variants may run into issues, as they are in the habit of doing. You can usually get them working right if you put in the effort, but I’ve never personally tried for this particular site.
Pale moon (Goanna engine) worked several years ago, though I haven’t tried it recently.
I doubt anyone has tested Flow based browsers as of yet, though they’re not really focused on the desktop or mobile use-case, and I doubt it would be relevant.
IE probably won’t work anymore though lol.
I go through a lot of browsers because I apparently get bored with too much consistency. It’s a gift.
Re: Re: Re:6
Your browser connects to a private company computer server, not directly to IRS owned & managed computers for FREE FILE E-File.
IRS ‘partners’ with selected private sector ‘Affiliates’ to conduct FREE FILE.
This is inefficient and IRS also forces those taxpayer users to share their most important personal information with unknown strangers.
Note that just last week an IRS ‘Contractor’ was convicted of stealing and selling thousands of celebrity tax-returns, including Trump and Bezos.
Earlier this year, H&R Block and two other Tax Software companies were accused of secretly stealing and selling the personal data from millions of their customers.
Re: Re: Re:7
Yes, humans are not trustworthy.
It is a sad commentary about our system of taxation when tax payers are required to pay a fee in order to pay their taxes.
To make matters worse, those who horde all the resources are not contributing to that which they feed off of.
This does not sound sustainable to me. It will eventually crumble under its own weight.
Baby Steps
As a famous astronaut once said: One small step for man, one giant boot in the face for Intuit.
It was a long time coming, but I’m glad they’re finally ready to start rolling it out. Hey, eventually, it may even be available for gig workers.
Intuits delivery of this free service actually amounts to negative value
Healthcare.gov
Just remember what happened when the government rolled out the first version of Healthcare.gov. It was a complete and buggy mess that took months to fix while the site gave people the wrong information.
The question is whether the new IRS website will be fully tested or if they’ll push out a beta release just to meet a deadline. If they push out a beta release, then yes, most of what Intuit is saying will be true and most people will file wrong taxes and may get audited.
However, this is just the first step, and I bet it’ll wipe out most of Intuit’s business once the site is fully functional in every state.
Re:
The comparison is not exactly Apples to apples. Healthcare.gov was released very quickly and was untested in anything other than Massachusetts I believe as it was modeled after theirs. Wasn’t built to handle the whole country.
The IRS is limiting the use to people invited in certain states. This will allow them to load test and everything else.
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Plus, people talk about “the government” like it’s one guy and what one agency did a decade ago is a useful predictor of what a completely different agency is doing right now.
Re: Re: Re:
Right. Don’t hire the same jackasses from the private sector that built healthcare.gov.
There was a time, about 2.5 million years ago, when at least some federal agencies had the people and the talent to mostly build their own stuff, before they were streamlined out of existence.
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Healthcare.gov was a special caliber of incompetence and will (hopefully) not be representative of this new program. We should instead focus on how the IRS is only doing this to steal our money so that they can fund government sanctioned Drag Queen Story Hours and Univeral Communist Income.
February - too late
People who overpaid will generally want to get a filing in as soon as possible, to get started getting their money back. People who underpaid need to get started as soon as possible so they can get a good estimate of how much they underpaid, and ensure they have enough free cash come filing day. Thus, in my opinion, February is too late. The basic invite ought to go out before end-of-year, even if it is just a notice that a proper sign-up will be coming later.
Re:
Taxpayers aren’t even guaranteed to have all the needed documentation until January 31st. If there are a handful of people who don’t participate because they already did their taxes in those two weeks, no big deal.
Much like ISP’s and their mouthpieces in politics complaining about how ‘redundant’ community broadband efforts are they might have had a point if they’d been doing their jobs properly, however the entire reason the government is stepping in is because they haven’t been, making their arguments little more than dishonest and self-serving attempt to undercut the competition.
Re:
Meh. Technical ISP jobs are jobs that actually benefit regular people. The same is not really true of people making tax-calculation software. If the USA worked like some other countries, that’s a thing only the IRS would need (the “their jobs” you’re referencing would not exist). You’d send them a list of your deductions when you started a job or needed to change them (e.g.: had a child), your employer would deduct the correct amount, and if for some reason an adjustment was needed, the IRS and the taxpaper would communicate about it at the end of the year.
“Direct File is redundant: no, it actually isn’t. It’s what should have been done in the first place, but instead of a free to file program that was widely accessible to the people who could benefit from it, Intuit and companies like it hid its offer and used its existance to try and make money from vulnerable people. If it were redundant, nobody would want it.”
FTFY. YW.
Legalized Government Bribery in America
“Two, if this program were so bad and so certain to fail, why have Intuit and companies like it spent so much money lobbying against it?”
I am curious. Is there someplace that records and displays the amount of money spent lobbying Government officials by companies?
Is there a place or website that would show me exactly how much money was spent on lobbying by say… Bombadier, or Exxon, or any other corporation?
And show exactly WHO in the government received the money as well??
Just curious.
Most importantly - will the information be pre filled
The IRS already has a lot of information about you.
If you are taking the standard deduction like many, it likely has EVERYTHING you need to file.
Your bank, your employers, or any entity who sent you a reportable payment has filed it already with the IRS.
So filing your taxes for many (but all) could be as simple as logging in, reviewing your W2 and 1099s and other info they have, maybe request corrections is needed and click the file button.
This would be a MASSIVE advantage to private sector solutions. And I’m all for it!!
Intuit is dead to me
I used Intuit’s TurboTax Multimedia to file my 1993 tax return.
1) In 1994 it wouldn’t install so I called their “tech support” and they only had a toll phone number with no web support. After an hour toll call, I figured out the solution to their software error and provided it. Their tech was ecstatic and sent me the same CD I already had as thanks (not next year’s so it was useless to me.
2) Intuit kept sending emails with promised discounts if I ordered my next year CD from them so I did. Then I found it much cheaper at Walmart.
3) I used my state website to file my state taxes for several years and it was awesome. Then Intuit lobbied to get the state site shutdown and they eventually succeeded.
Intuit only allowed you to save your taxes as a proprietary dot tax file which required the previous year’s CD be reinstalled to open the file.
I now download the IRS fillable PDF and mail in a hard copy. I will not file electronically until I can send my taxes DIRECT to the IRS.
direct file
the tax preperation industry and irs can go screw themselves. irs should mail people a form with a flat tax rate in january. instead of making victims fill out 9 forms
and the tax prep industry is behind the tax code chsnging each year. why not mail everybody a 100 page book in plain english each year. the tax code dont need to be 25000 pages