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Hack WatchNewsletter | April 12, 2024

Let's Be Direct (File)

Hack WatchTaxes

This article first appeared in our weekly Hack Watch newsletter on media accountability. Subscribe here to get it delivered straight to your inbox every week, and check out our Hack Watch website.

Yesterday, I filed my taxes using the Internal Revenue Service’s (IRS) direct file tool. As seems to be generally the case, it worked well for me and I was mostly happy with the experience, despite some frustrating little quibbles. For instance, in the “review” stage of filing at the bottom of each section you review, there’s a button that says “return to checklist.” It’s the biggest button and the only one at the bottom of the section you look over, so you’d think it would direct you back to the list of sections you’re reviewing. However, it actually takes you back to the home screen where you put all of the information in in the first place and you have to go and reopen the review section again. To avoid that, I simply clicked a smaller link hidden in the top left (which you can see at the start of reviewing any given part, but not at the end unless you scroll back up) that said “go back.” It really annoyed me for maybe five minutes until I figured it out, but it turns out you also can skip the entire review step, so the frustration was a little self-inflicted. Other than that, it was smooth sailing. And, unlike with TurboTax Free (what I’ve previously used), there were never random pop-ups that tried to dupe me into paying for add-on services I didn’t need.

All in all, it’s a pretty good tool, and I imagine both the Biden White House and IRS Commissioner Danny Werfel will be quite pleased when Tax Day (this coming Monday, April 15) comes to an end. And yet, it has faced no shortage of criticism. Those critiques have been amplified by mainstream reporting with little pushback on the veracity of that carping. Worse, some major news outlets are spreading half truths on their own initiative. There’s even been some friendly fire from inside the administration.

While the erroneous charges vary, there’s a few key ones: the site is confusing to taxpayers and will mess up the collection of state income taxes, the site has no customer service or user support, and the pilot program can’t handle very many people. 

Much of this backlash comes from unsurprising quarters. For instance, The Wall Street Journal editorial board is, shockingly, not a fan. The editorial board’s piece is largely a medley of some of the most common, though largely untrue, complaints. To start, they say that “So far it’s a bust” because only around 50,000-60,000 people had filed using the direct file tool. That’s simply misleading because the IRS designed the program to be narrow and, according to the WSJ’s own reporting, the administration is aiming for 100,000 users. Given how many people tend to do their taxes in the few days before the deadline, it seems likely that the IRS will handily clear that target. The board continues, arguing that direct file gives the government the “power to present taxpayers with nonnegotiable tax bills,” which conflates availability with compelled use. 

Intuit (the developer of TurboTax) also has a ridiculous blog where they disputed well documented facts, including  outrageous claims such as they never tried to undermine free filing, which… of course they did.

But the list of opponents to direct filing doesn’t end there. In February, 13 Republican state Attorneys General sent a letter to Treasury Secretary Yellen demanding she shut down the pilot program, largely citing concerns over cost, legality, and the threat to small businesses (local tax preparers and certified public accountants). On the cost front, critics love to point to a GAO report that found the IRS’ estimates were incomplete, while ignoring two inconvenient pieces of context: 1) commissioner Werfel had a pretty decent explanation for this— given a lack of comparable programs, the estimates can be refined down the line using data from the pilot program— and 2) the GAO report also explicitly called for the use of data from the pilot program to improve its accounting. 

The state AGs also challenged the legality of the program, but that claim doesn’t even pass the sniff test. Given how litigious conservatives have been and how permissive courts (like the 5th Circuit) have been to a deregulatory agenda, what are the odds that, if this truly were an overstep, the state AGs chose to send a letter rather than seek an injunction? Basically nil. This Treasury Inspector General report (another that conservatives like to cite about cost estimates) also investigated the matter and found that the IRS was complying with its mandate from Congress in the Inflation Reduction Act. 

But wait, there’s more. There’s two other letters, one from the House Ways and Means Committee Republicans and one from 21 state financial officers across 18 states. The W&M letter is basically a less well argued version of the state AGs’ earlier complaint, but the state financial officers raise a whole new concern about how people will think they’ll have done their state taxes too and then the states simply won’t be able to collect their income taxes. This is wild for a few reasons. To start, several of the signatories are from states that do not have income taxes in the first place: Alaska, Florida, South Dakota, and Wyoming. But also, the IRS has been working with states in the pilot program to hand filers off to state tax websites. 

More concerning than this partisan pushback is how unchallenged it has gone in the public discourse, including generally reputable outlets disseminating a lot of these talking points with no scruples. Axios ran this piece in their Dallas reporting implying that there’s no support for filing state taxes with the direct file tool. (Why that’s relevant to reporting in Texas, which has no state income tax, is beyond me.) And Forbes has promulgated some terrible reporting as well. There’s this piece that makes it seem like the direct file website is running suspicious data-collection apps that conveniently shuffles around the fact that the two examples being discussed are basically just features of having a functional modern website. The article points out that the website has Google Analytics (which can be opted out of) and canvas fingerprinting (basically every computer has a slightly different way of loading online images and therefore a hash representing the instructions each computer follows can be a unique indicator) to imply that there are data security concerns surrounding direct file. Nevermind that pretty much any private tax prep company’s website would raise the exact same concerns, or that those companies have outright sold users’ data to companies like Facebook. Such facts are, evidently, not worth bringing up. 

Forbes also accepted reporting — no, this is not labeled as an opinion piece— from Patrick Gleason, a vice president at Grover Norquist’s Americans for Tax Reform. While the piece largely regurgitates quotes from the state AGs’ letter, Forbes lets Gleason sneak in some thinly veiled talking points into this “reporting,” including, “Many believe that the tax collector should not also be the tax preparer for the same reason that the prosecutor should not also serve as the judge,” a claim supported only by going back to rehashing the state AGs’ letter. Many of whom? It seems to imply many Americans, but without absolutely no support for that claim. 

Most egregious is that the outlet ran the story with a thinly veiled threat, saying, “If the Secretary Yellen ignores the request of these 13 state attorneys general, that won’t be the end of the matter. The next step, should the IRS proceed with the Direct File program not authorized by Congress, will be the filing of a lawsuit.” To be clear, the AGs themselves do not indicate this in the letter, nor is there any source cited or any justification given for this assertion. Gleason is transparently smuggling an ultimatum into an article masquerading as journalism. It makes a lot of sense given that Gleason works for the organization spearheading opposition among conservative organizations to direct file. How Forbes decided to file this under its business section without labeling it as an opinion piece is beyond me.

Even good coverage, like this story from States Newsroom that ran in a number of outlets, offers only minimal pushback to these talking points. When the piece discusses the state financial officers’ letter, it does not mention which states. It seems relevant that a number of signatories are representing states without an income tax. Furthermore, only three of the five red states in the pilot program signed on (Tennessee and Texas did not), meaning that the vast majority of signatories were calling to put the kibosh on a pilot program that doesn’t even involve them.

At the end of the day, the direct file pilot program is a starting point, but it’s a pretty good one. It will provide valuable data that can hopefully help pave the way for more work to make taxes less miserable. The goal for many proponents is for the IRS to collect data it already has and pre-populate returns from the W-2s and such employers will have already sent—which is similar to how many other countries do it. What this current discourse proves is that there is a lot of energy in slandering these efforts and not a whole lot of investment in media outlets to police the truthfulness of critical talking points being hurled at the IRS. There’s a lot of work to do, but the abuses of tax prep companies are well documented and, despite claims to the contrary, many Americans are annually pissed when they have to do their taxes. A better system is worth the work.

For now, if you qualify, consider using direct file this year. Happy Tax Day!

Hack WatchTaxes

More articles by Dylan Gyauch-Lewis

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