Sources: the IRS quietly built a prototype system to let Americans file tax returns digitally and free of charge, with a pilot slated to launch in January 2024
Washington PostJacob Bogage
Context & Ripple Effects
This Washington Post report is the origin point of a story that has since run its course: a quiet IRS prototype for free digital filing, disclosed by sources, became the 13-state interview-based e-filing plan announced that October and then Direct File itself, launched in 12 states in March 2024. At the time of this story, Americans could file electronically only through commercial software, and the agency's own build effort was unconfirmed.
Taxpayers in the pilot states gain a genuinely free federal filing channel for simple returns, ending their dependence on commercial software for basic filings.
Commercial tax-preparation providers lose exclusivity over digital filing for the low- and moderate-income segment the pilot targets, right at the start of filing season.
Second-order effects
The IRS' parallel modernization push — online forms and paper digitization by 2025 — gives the pilot a second front: even taxpayers who don't use the new tool see the agency absorbing work previously outsourced.
Reported development costs ($10.5M to build, $2.4M to run) become the benchmark both sides will fight over: supporters cite per-user economics against commercial filing fees, while opponents weigh that spend against the private industry's lobbying position.
Third-order effects
If the pattern holds — prototype, pilot, permanence, state expansion — the US government shifts from procuring citizen-facing services to operating them in-house, a 'public operating system' model other agencies would copy.
A durable free government filing layer pressures the commercial tax-prep market to compete on value-added services rather than charging for basic returns, reshaping an industry whose pricing has long rested on mandatory annual transactions.
The trend: Government services are moving from outsourced intermediaries to in-house public software builds, with the IRS' Direct File arc as the clearest test case.
Together Intuit and H&R Block have spent over $1.5 million already this year fighting the development of the new IRS tax filing system. Via @jacobbogage https://www.washingtonpost.com/ ...
tired: IRS builds free tax filing software wired: IRS becomes the national payroll processor so most people never have to file anything https://prospect.org/... https://twitter.com/...
If the @WhiteHouse can get this in place, it would be game changing for millions of American workers. Expect a huge push of scare tactics from the big tax prep companies as this rolls out. https://www.washingtonpost.com/ ...
Hell yeah! The IRS has developed a free e-filing system. Let's try it, and move forward based on what is best for the public than rent-seeking tax prep firms seeking to kill the public option. https://www.washingtonpost.com/ ...
Oooooh, WaPo scoop: The IRS has built an e-filing prototype that could compete with tax-prep software giants with a pilot program coming in January (via @jacobbogage) https://www.washingtonpost.com/ ...
I actually think direct file is even more straightforward than this, and “government run alternative to TurboTax” is not the right way to describe it. When you pay your property taxes or utility bill, you don't think of the site as a “government run” tool. It's too obvious. https…
The IRS is considering making tax filing much easier by offering pre-filled out tax returns, which is how it works in many other countries. Of course, Intuit and the Republicans are hostile. https://www.wsj.com/...
Administrative burden is highly profitable for the tax prep industry. While there are ways they've helped with ensuring access to the EITC, they're a roadblock to fully maximize access to these benefits (as well as just easing broader burden from the tax system). https://twitter.…
IRS aims to create its own software so many Americans can prepare/file taxes for free. Intuit and HR Block are responding with ballooning lobbying dollars. This is a clear admission that their “free file” offering is more of a hollow bait-and-switch. https://www.wsj.com/...
New from me this am: Will the IRS build its own alternative to TurboTax and H&R Block for simple returns? A key study is due out soon. https://www.wsj.com/...