Is The IRS Pilot On Free Online Tax Filing A Game Changer for Taxpayers? Here's How Much You Can Save

The Internal Revenue Service said on Tuesday it has submitted a report to Congress evaluating a Direct File option for taxpayers. The federal agency said, in a statement, that many taxpayers are interested in using a free IRS-provided tool to prepare and file taxes.

The IRS is taking steps to begin a pilot project for the 2024 filing season following a directive from the Treasury Department. Reuters had earlier reported the story.

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According to the report submitted by the IRS, 72% of taxpayers surveyed responded they would be either "very interested" or "somewhat interested" in using a free IRS-provided online tool to prepare and file their taxes.

Among taxpayers who currently self-prepare their taxes using commercial software, 68% of taxpayers reported that they would be either "very likely" or "somewhat likely" to switch to a free IRS-provided online tool.

“Direct File – used by numerous tax jurisdictions around the world – has long been discussed as an option for improving the customer experience for taxpayers in the U.S.,” said IRS Commissioner Danny Werfel.

Cost: Depending on the complexity of the tax filing, the IRS estimated that the system would cost anywhere between $64.3 million to $248.9 million.

The report highlighted how an individual taxpayer is estimated to spend 8 hours and $140 out-of-pocket costs just to prepare and file their annual tax return, including all forms and schedules for non-business income. However, developing the software, funding for customer support and the question of facilitating the filing of state income taxes are some of the challenges that the IRS anticipates.

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