IRS Expanding Program That Lets Taxpayers File Directly For Free

The IRS said Thursday it will ramp up a program that allows taxpayers to electronically file their taxes directly with the agency, but the extent of the expansion will depend on how many states partner with it.

The Direct File pilot saw 140,803 returns filed this spring from users in a dozen states out of the 144 million filed nationally , but the overwhelmingly positive response was enough to convince officials to invite all 50 states and the District of Columbia to join it.

Treasury Secretary Janet Yellen told reporters on a conference call that 90% of the pilot program’s users gave it a positive rating.

“Direct File saved users $5.6 million in filing fees and helped them receive $90 million in refunds,” she said.

The move will likely be hailed by progressive groups, which have long complained that for-profit preparers benefit from the complex tax code and use their sites offering free tax preparation to upsell paid-for services.

For-profit companies have countered there’s no need for Direct File, that the IRS’s estimates of how much the program will cost are too low and that users of the system got lower refunds than other taxpayers.

IRS Commissioner Danny Werfel said it was unclear how many more taxpayers would be eligible to use the program next year and thus how much the expansion would cost.

“Later this year we’ll be able to report out the final number of states that have signed on for next year,” he said.

For a placeholder, Werfel said, the agency included an estimate of $75 million for the program in its budget submission to Congress. The pilot program with 12 states cost the government $31.8 million, with almost $25 million of that coming from the IRS.

Werfel and Yellen said they expect the existing