Biden admin steamrolled internal study in pursuit of key tax priority

'IRS Direct File is the least favored tax preparation software,' internal IRS study obtained by Fox News Digital concludes

 The Biden administration is continuing its aggressive push to develop a direct e-file system for Americans to submit taxes despite an internal study showing it is unpopular.

The Internal Revenue Service (IRS)-commissioned study obtained by Fox News Digital — which was required under the Inflation Reduction Act (IRA) and conducted earlier this year by the nonpartisan Mitre Corporation — found that Americans overwhelmingly prefer commercial tax preparation software over a hypothetical government-managed system under a series of scenarios.

For example, the study found just 15% of Americans would use an IRS direct e-file system even if it was able to prepare state returns and provided the same functionality as a free commercial software. In that scenario, 48% preferred the current software they use and 37% would use a system in which the IRS automatically filed individuals' taxes for them.

In another scenario where state returns aren't included, just 12% of taxpayers would use the IRS direct e-file option while 60% would opt for a commercial software.

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Just 15% of Americans filing simple tax returns prefer a government filing software over commercial alternatives, internal IRS study shows. (AP Photo/J. David Ake)

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"IRS Direct File is the least favored tax preparation software, indicating filers want familiarity by staying with current software, or IRS Return-Free offering effortless filing," the study stated. "Lack of trust in the government is a key reason for those selecting current software, regardless of what the IRS can offer."

It also noted that the IRS would need to include a feature allowing taxpayers to file state returns along with federal returns to make its e-file more attractive. The study further stated that "established filers" would be hard-pressed to leave current software since it contains historical information.

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"Tax filers want fast, easy and free. However, they will exchange cost over convenience showing willingness to pay for commercial service when it comes to filing federal and state returns at the same time," the Mitre Corporation study concluded.

The only scenario where a direct e-file system would be preferred, according to the study, is for the minority of Americans who file complex returns. The main reason for the disparity between the two options is the cost of commercial software for complex returns.

The study still found that some complex filing taxpayers would prefer to pay a high cost for their federal return "if it means better data security, audit protection, and solid customer service."

Internal Revenue Service Commissioner Daniel Werfel is slated to testify before the House Ways and Means Committee on Thursday afternoon. (AP Photo/Mariam Zuhaib)

The IRA mandated that the IRS hire an independent third-party to analyze "the overall feasibility, approach, schedule, cost, organization design, and Internal Revenue Service capacity to deliver" a government-run direct e-file tax return system. 

The IRS announced in February that it would contract New America Foundation — a left-wing think tank funded by nonprofits founded by liberal billionaires Bill Gates, George Soros, Mike Bloomberg and Eric Schmidt — to study the hypothetical system. House Ways and Means Committee Republicans blasted the IRS at the time for hiring a partisan group.

Around the same time, however, Mitre Corporation produced the study showing a direct e-file system's unpopularity. Though the IRS received the study, it chose not to release it. The study only came to light after it was shared with House Ways and Means Committee leadership this week.

The revelation that the IRS didn't release the study comes ahead of a House hearing during which IRS Commissioner Danny Werfel is slated to testify about his agency's "accountability and transparency." The House Ways and Means Committee hearing is scheduled for 1 p.m. on Thursday.