Granite Geek: Free government software for taxes – what could go wrong? (Not much, as it turns out)


Monitor staff

Published: 05-06-2024 9:17 AM

This year’s tax season was like all the others, a real pain in the neck to get through especially if, like me, you had to file for an extension because one stupid piece of paper was late. Argh!!!

Which made me wonder how things went with the intriguing federal experiment run in New Hampshire and 11 other states, a pilot project with the goal of making it less of a pain for some people.

I refer to Direct File, a free online tax-preparation service rolled out by the Biden administration this year. If your taxes were simple – no itemized deductions, no income from dividends or income, no claiming of certain tax credits – you could plug a few numbers into a website that would walk you through the process without having to pay somebody or buy a piece of software.

That’s the theory, anyway, but as this year’s fiasco with the FAFSA college-application system shows, you should be dubious when the federal government creates a huge customer-facing software project.

Mind you, it has long been possible to get free help in taxes. The biggest and best-known push is My Free Taxes, promoted by United Way. According to Carey Gladstone, regional director of the United Way, 145 state residents used that self-filing platform to prepare their own returns this year while 4,085 people showed up at Volunteer Income Tax Assistance sites operated and supported by Granite United Way and got in-person assistance for free.

“Based on average filing fees of $273 at commercial tax preparers,” Gladstone wrote in response to a Monitor query, “that saved filers an estimated $1,115,205.”

The IRS also has a system called Free File, which directs you to free software from private companies. I didn’t know it existed and you probably didn’t either; it is badly advertised and has been hamstrung by opponents, a mix of private firms who don’t want competition and anti-tax folks who fear it might increase government revenues.

Despite those efforts, almost everybody pays for tax help or wastes multiple weekends wading through their paperwork so they can tell the government what it mostly already knows. (In dozens of countries the government just bills you for your income taxes; you can object if you wish but otherwise it’s all done for you.)

Enter Direct File, created as part of the Inflation Reduction Act, which despite the name was mostly an excellent piece of climate legislation that included some other intriguing aspects.

More than 140,000 people used Direct File this year, says the IRS, although they didn’t have a breakdown by state so I don’t know how many used it in New Hampshire. One person who did was Monitor reporter Catherine McLaughlin. She graded it as “a solid A-minus.”

“On the whole, this was a solid tool, especially for being in beta. It didn’t differ all that much in process from using TurboTax,” she wrote after I asked for her experience. The big advantage over the private software, she said, was that it didn’t try to upsell you on other services or “charge you extra after the fact for services you thought were free, such as taking its fee from your refund.”

Her one objection: Paying with a credit card sent her to a different site, which is weird in a world where buying things online is the norm.

“I’d gone through this whole process in Direct File but couldn’t complete the objective of the task, paying my taxes, within Direct File’s software. It also ... made me slightly wary — it was pretty easy to verify that the site they directed me to was an official partner or subsidiary of the IRS …  but getting thrown to this other site, trustworthy or not, put my guard up,” she wrote.

The future of Direct File is uncertain. The IRS is “reviewing the results of the pilot and gathering feedback to help us determine our future course involving Direct File. We anticipate making an announcement about future plans later this spring,” IRS Commissioner Danny Werfel said in a statement. Some critics say it’s too expensive and there’s also the usual concern about government competition against private enterprise.

I hope it sticks around, even though it probably won’t be expanded to the point that I can use it. After all, one of the basic functions of government is to make it easier for us to accomplish things that are required to keep society functioning. Paying taxes, alas, is one of those things.