Democrats, civic tech orgs back IRS plans to pilot e-filing service

Democrats and civic tech organizations are backing plans for the IRS to pilot a direct, e-file tax return system in the 2024 tax season.

An IRS report on the feasibility of such a tool, released in May, “presents a compelling case for the continued development of a user research-informed, iteratively deployed, direct file service to help address well-documented challenges in our tax filing system,” a Wednesday letter led by Georgetown University’s Beeck Center reads.

The letter — also signed by former government officials, including former Chief Technology Officer Aneesh Chopra and former USDS Administrator Matt Cutts, as well as civic tech organizations and academic experts — notes that the tax agency has a “nearly unprecedented reach and impact on the American public.”

The tax filing process is burdensome, and taxpayers lose tax benefits because of it, they write.

The coalition applauded the IRS’ plans, which the letter characterizes as “based on digital best practices.”

“The way that they went about tackling it, I think, is somewhat unique from a large federal agency,” said Beeck Center director and U.S. Digital Service alum Lynn Overmann, referencing an internal prototype built with USDS for usability testing. “They put an actual tool in front of people.”

The ask now is for the IRS to “stay with the process,” she said. “The outcome should be determined by the usability and user research, and by the data.”

Nearly 100 Democrats on Capitol Hill, meanwhile, urged the IRS this week “to make this pilot of the direct file tool available to as many taxpayers as is feasible.”

The IRS needs to “deliver real value quickly to American taxpayers and demonstrate the value of modernizing the IRS, while also gathering data to make improvements and to better serve American taxpayers,” they wrote.

Still, support for the IRS’ plans does not guarantee success, or even that the tax agency makes the tool a long-term option for tax filers. 

The pilot is meant to “gather data to further assess issues… before deciding whether to deploy a full-scale direct file solution,” IRS Commissioner Danny Werfel wrote in a letter to Treasury Secretary Janet Yellen when the IRS released the report in May. 

Some Republicans, meanwhile, have denounced the IRS’ plans, arguing that there’s a conflict of interest given the IRS’ role as a tax enforcer.

The IRS noted in the report that “the IRS does not, and would not, give preferential treatment to taxpayers who use any particular tax filing method.”

In a Thursday op-ed for Fox News, ranking member of the Senate Finance Committee Sen. Mike Crapo, R-Idaho, wrote that “the IRS should stay out of the tax preparation business.

“The real problem is more people need to know about these existing free programs” for tax filing, he wrote. One existing option is the IRS partnership with the tax prep industry, known as Free File, which offers free services to eligible taxpayers. Currently, it’s used only by a minority of those eligible for the program. 

Crapo also pointed to the potential cost of a direct e-file system, concerns about cybersecurity and data protection and the looming challenge of how such a system will tackle state tax filing. 

The latter is a question complicated by laws governing how the IRS can or can’t disclose return information. How the IRS navigates the state taxes question would likely impact how many people would use any pilot or potential long-term tool, if they have to file their state taxes separately.

Long-term, stable funding would also be critical if the IRS were to decide to go with the direct e-file tool long-term, experts say, so that the agency can update the tool over time.