IRS 1040 by 401(K) 2012 is licensed under CC BY-SA 2.0

“IRS had no documentation to support the underlying data, analysis, or assumptions used for Direct File estimates.”

A Government Accountability Office report today ripped the IRS for its baseless and dishonest cost estimates of the much-touted “Direct File” program.

IRS Had No Documentation to Support the Underlying Data

The GAO wrote:

IRS’s cost estimates did not address other recommended practices, such as ensuring all costs were included and documented. A review by the Treasury Inspector General for Tax Administration found that IRS had no documentation to support the underlying data, analysis, or assumptions used for Direct File estimates. We found this as well.”

IRS Estimates Did Not Include Start-up Costs

The IRS Direct File cost estimates did not include start-up costs, such as technology for a novel system, which could be substantial. A best practice for cost estimation is to include development costs.”

IRS Failed to Detail Costs Associated with Supporting Additional Tax Situations

IRS pilot evaluation plans do not describe how the agency can use data collection opportunities provided by the pilot to estimate the incremental cost of gradually expanding the Direct File system’s capabilities.

The IRS has failed to give complete cost information even when, “Complete cost information informs decisions about whether the pilot should be made more permanent and decisions about program design tradeoffs such as what additional tax situations to support

IRS Boasts of Benefits without Specific Evaluation Metrics

“IRS’s pilot evaluation plans do not identify metrics to evaluate the extent to which additional taxpayers claim benefits to which they are entitled.

Further: “IRS’s pilot evaluation plans have also not identified metrics for evaluating potential benefits related to reducing paper returns and errors.

Despite being breathlessly promoted by IRS brass, President Biden, Sen. Elizabeth Warren and other progressives, as of last week only 50,000 people had used “Direct File.”

To boost numbers, IRS has been urging IRS employees and other federal employees to use it.

There are other significant problems with “Direct File.”

First, the IRS does not even have congressional authority for “Direct File” in the first place. Congress simply authorized a study, and that study is complete. (IRS of course was found to have exaggerated support for such a system.)

Second, Biden-appointed IRS chief Daniel Werfel had several opportunities to level with congress and the public as to what his agency was up to regarding IRS “Direct File” — where government would become tax preparer, tax collector, and tax auditor.

Werfel repeatedly asserted that the IRS was simply doing a feasibility study as authorized by the Inflation Reduction Act. Werfel assured everyone he’d wait for the report and “reflect” before making any decisions.

In reality, the IRS was secretly working the entire time on building a prototype software system with plans for a 2024 launch, as revealed in a Washington Post scoop on May 15, 2023.

As noted in a Jan. 30, 2024 letter from 13 attorneys general to Treasury Secretary Yellen:

We write to you in opposition to the unnecessary and unconstitutional efforts to empower the Internal Revenue Service (IRS) with the expansive authority to prepare and file tax returns for all taxpayers. Congress has never granted the Department of the Treasury authority to create a Direct File program. And for good reason: the American taxpayers do not want to invite the proverbial fox into the hen house. A Direct File program will also have negative consequences for low-income filers and devastate small businesses.

The program is also a waste of taxpayer money as 70 percent of taxpayers are already eligible for free filing via “Free File” which has been in continuous operation since 2003.

Oddly enough, Werfel, Yellen, Biden and Warren rarely mention Free File, because it is run by the private sector.

They and other progressives want the IRS to be tax collector, tax preparer, and tax auditor, a fundamental conflict of interest.

And the “Direct File” program is anything but “free” for taxpayers. Taxpayers are stuck paying for it, and not many want to use it.