(The Center Square) – Colorado Gov. Jared Polis sent a letter this week to the U.S. Treasury Department calling on it to undo its suspension of the IRS Direct File tool, which he argues saves money for taxpayers.
The free, online tool was launched in 2024.
“I want to make it as simple as possible for people to file taxes and access the tax credits and deductions they’ve already earned but often miss out on,” Polis said in his letter. “I was disappointed to see the result of the Treasury’s report on Direct File, which announces the suspension of the tool and ignores how effective and accurate it was.”
The U.S. Treasury Department cited high costs and the many filing alternatives available to taxpayers as reasons for the program’s suspension.
“Direct File had low overall participation and relatively high costs and burdens on the federal government, compared to other free filing options,” it said in its October report on the service. “For tax year 2024, returns submitted using Direct File constituted less than 0.5 percent of the approximately 146 million returns filed. Direct File had a cost to the federal budget of at least $41 million for tax year 2024 returns, or a cost of at least $138 per return accepted through Direct File.”
Polis argued in his letter that the nearly $140 per tax return is still cheaper than the $290 the average American spends to file their return.
“Direct File offered a free, efficient alternative that saved taxpayers both time and money, making government more efficient and reducing taxpayer errors,” he said.
In 2024, 423,450 taxpayers across eight states logged on to Direct File. Of those, 140,803 submitted accepted federal returns.
This year, despite the service receiving no funding for marketing, that number increased to 751,235 taxpayers in 25 states, with 296,531 accepted returns. Already, four million taxpayers nationally used Direct File’s eligibility checker.
Polis said in his letter that the tool helped improve the taxpayers’ experience by addressing the “high cost and complexity of filing.”
“That’s why last year we were proud to partner with the IRS so starting next year, taxpayers in Colorado could use Direct File as a one-stop shop to fully file and get their money back,” he said.
Ultimately, Direct File cost the government annually $41 million, but saved the taxpayers an estimated $7.8 million in tax preparation fees this year.
While the department is considering alternatives to Direct File, it said the IRS’s efforts should be refocused to higher priorities.
“American taxpayers have access to a range of free income tax preparation and filing options delivered by the private sector, the IRS, and longstanding public-private partnerships,” it said. “This path forward aims to increase awareness of and access to free filing services in a cost-effective way that better serves taxpayers’ interests without imposing unsustainable burdens on the government.”