The IRS Finally Cracked the Code on Making Tax Season Suck Less

Ultimately, the goal is not only a filing system that is simple and free, but one where the IRS does most of the work. Economists have found that even with just the information the agency already has on its own it could successfully fully prepopulate about half of all Americans’ returns, and for the rest of taxpayers, the majority would need to make just one change to finish their return. “It’s very clear the IRS could do most people’s taxes,” said Vanessa Williamson, a senior fellow at the Urban-Brookings Tax Policy Center. Treasury Secretary Janet Yellen has already said she hopes future versions of Direct File will include information from W2s.

“In the long run, we want to see all states, all common tax situations, and really robust prepopulation,” Ruben said. That would include filling forms out not just with information the IRS already has but with information from other government agencies as well, such as the Social Security Administration. As in many other countries, that would mean most American taxpayers could simply check to make sure their return looked correct and sign off on it; anyone who wanted to add more information for credits or deductions would be free to do so. “There’s really no reason why we should put taxpayers through this annual exercise of, ‘Better make sure you do this right because we’ll check your math on the back end,’” said Igor Volsky, campaign director of Better IRS.

The Economic Security Project has estimated that Direct File could cover most tax situations in all states, integrate with state filing, and offer “significant” prepopulation within five years. At that point, the organization projects that it would save Americans $8 billion a year in filing fees and $3 billion worth of time saved. It could deliver billions of unclaimed tax credits, such as the Earned Income Tax Credit and Child Tax Credit, to families that are currently eligible but don’t claim them.