The IRS Finally Has an Answer to TurboTax

During the torture ritual that was doing my taxes this year, I was surprised to find myself giddy after reading these words: “You are now chatting with IRS Representative-1004671045.” I had gotten stuck trying to parse my W-2, which, under “Box 14: Other,” contained a mysterious $389.70 deduction from my overall pay last year. No explanation. No clues. Nothing. I tapped the chat button on my tax software for help, expecting to be sucked into customer-service hell. Instead, a real IRS employee answered my question in less than two minutes.

The program is not TurboTax, or any one of its many competitors that will give you the white-glove treatment only after you pony up. It is Direct File, a new pilot program made by the IRS. It walks you through each step in mostly simple language (in English or Spanish, on your phone or laptop), automatically saves your progress, shows you a checklist of what you have left to do, flags potential errors, and calculates your return. These features are already part of TurboTax, but Direct File will not push you to an AI chatbot that flubs basic questions. And most crucial, it’s completely free.

That Direct File exists at all is shocking. That it’s pretty good is borderline miraculous. This is the same agency that processes your tax return in a 60-something-year-old programming language and uses software that is up to 15 versions out of date. The only sure thing in life, after death and taxes, is that the government is bad at technology. Remember the healthcare.gov debacle? Nearly 3 million people visited the site on the day it launched in 2013; only six people were actually able to register for insurance. As of the end of last year, about half of .gov websites are still not mobile friendly.

Direct File isn’t perfect—the program is available in only 12 states, and it isn’t able to handle anything beyond the simplest tax situations—but it’s a glimpse of a world where government tech benefits millions of Americans. In turn, it is also an agonizing realization of how far we are from that reality.

Right now, Direct File is sort of akin to when Facebook (or rather TheFacebook) was a site for Harvard students run out of Mark Zuckerberg’s dorm room: Most people can’t use it, and the product is still a work in progress. The IRS has strategically taken things slowly with Direct File. In part to avoid the risk of glitches, it officially launched just last week, well into tax season, and with many restrictions. Only midway through my own Direct File journey did I realize that I owed some taxes on a retirement account, and thus couldn’t actually file on the site. I then sheepishly logged in to TurboTax like a teenager crawling back to their ex; for now, it offers a more seamless experience than Direct File. Unlike on the IRS program, I could upload a picture of my W-2, and TurboTax immediately did the rest for me.

For many years, taxpayer advocates have dreamed of a free government tax portal, similar to websites where you pay parking tickets and renew your driver’s license. Computers and taxes are made for each other: Even as far back as 1991, when most Americans didn’t own a computer, you could have found at least 15 different kinds of private tax software. Lots of other countries, such as Japan, Germany, and New Zealand, already have their own government-run tax sites. According to a distressing New York Times report, Estonians can file online in less than three minutes.

Sure, America’s tax code—unlike Estonia’s!—is an alphabet soup of regulations, but the multibillion-dollar tax-prep industry has also gone to great lengths to stop Americans from filing their taxes for free. After all, why would anyone pay TurboTax upwards of $200 to file if they didn’t have to? (Intuit, the parent company of TurboTax, has an answer: “Filing taxes without someone advocating for your highest refund could be a recipe for overpaying the Internal Revenue Service and [state] departments of revenue, organizations with titles that clearly state their focus, generating revenue for the government,” Rick Heineman, an Intuit spokesperson, told me.)

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In 2022, the Inflation Reduction Act shook loose $15 million for the IRS to study the feasibility of creating its own program—and so began Direct File. The program could have been contracted out, as much of the government’s technology is. (The original, disastrous healthcare.gov was the end result of 60 contracts involving 33 outside vendors.) Instead it was made almost entirely by the government’s own programmers, product managers, and designers, Bridget Roberts, the head of the Direct File team, told me. Engineers created a prototype by mapping out the tax code into a series of steps: The software has to know that a millionaire homeowner doesn’t need to see any of the questions that apply only to low-income renters, for example. Then designers tested language to make sure that taxpayers could easily understand it. “We were going through constant user research—putting pieces of Direct File in front of taxpayers and getting their feedback,” Roberts said. Early guinea pigs were asked to screen-share while they tested Direct File. “That way, if there were any bugs, we would fix them before we moved on,” she said. It all sounds more Sam Altman than Uncle Sam.

The government could not have made something like this even 10 years ago. Unlike in the pre-healthcare.gov days, “now there is a generation of civic-tech innovators who want to go into government or want to work with the government,” Donald Moynihan, a public-policy professor at Georgetown, told me. In the past decade, attention given to the government’s technological deficiencies has led to the creation of agencies such as the United States Digital Service and 18F—both of which hire tech workers for temporary stints in the public sector. Other agencies, such as Veterans Affairs, have hired more than 1,000 of their own tech workers. The salaries are nowhere near as good as in Silicon Valley, but surely a government gig can be more fulfilling than tinkering with the user experience for Instagram share buttons all day. Amid the tech layoffs in 2023, the government launched a tech-jobs board and endeavored to hire 22,000 tech workers. Last month, the federal government began pushing to hire AI talent by boosting salaries and introducing incentives such as student-loan repayment.    

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That is how you get something like Direct File. Both the USDS and 18F, Roberts said, were brought in to help create the product, working alongside IRS engineers. There have been other successes from these groups too. Consider COVIDtests.gov, where until recently you could order free tests in basically a minute. Or my personal favorite, analytics.usa.gov, where you can monitor how much traffic government sites are getting. (In the past week, it shows, Direct File has gotten nearly 450,000 clicks.) Many .gov websites, although not necessarily wonderful, no longer feel like they’re a time portal to 1999.

But the work has been halting, at best. The more I played around with Direct File, the more frustrated I grew that there isn’t more government technology like it. Certain websites have gotten a facelift, but most of the government’s digital services lag behind: Some state unemployment systems still run on outdated, buggy portals and mainframe computers that crashed during the pandemic, delaying much-needed checks. Last year, a glitch in the Federal Aviation Administration’s 30-year-old computer system grounded thousands of flights and caused the first nationwide stop on air travel since 9/11. “Another healthcare.gov could happen today,” Mikey Dickerson, a former administrator of the United States Digital Service, told me. In fact, a similar debacle is happening right now: The Department of Education’s attempt to revamp its financial-aid form led to dire glitches that have upended the entire college-admissions cycle.

Ultimately, the fundamental reasons the government is bad at tech haven’t changed much. Bureaucracy is bureaucracy, Dickerson told me: Too often, the government operates under a model of collecting a list of everything it wants in a tech product—a months-long endeavor in itself—enlisting a company that can check them all off, and then testing it only when basically all the code has been written. The government is “not capable of keeping up with the crushing wave of complex systems that are becoming more and more obsolete,” he said. Hiring processes remain a problem too. Because the government doesn’t have a good way to evaluate a candidate’s technical skills, it can take about nine months to wade through the applicant pool and make a hire, Jen Pahlka, the author of Recoding America, told me.

Everything had to go right to unleash Direct File. Congress set aside money. Programmers created something from scratch instead of revamping an online service built on outdated code. All to build the government’s own TurboTax—a long-heralded dream for some of the Leslie Knope types who work in civic tech. But even now, after all this work, the future of Direct File is in doubt. The IRS has not committed to anything beyond this year, and that Americans will clamor for Direct File next spring is not a given: By one measure, Direct File’s total employees are outnumbered by just the lobbyists working for Intuit.

And so, Direct File is the essence of government tech right now—a work in progress. “Increasingly, the face of government is digital,” Moynihan said. “We mostly see government on our phones and laptops, as opposed to going to an office somewhere or calling someone on a phone.” The dream of tapping a button on my iPhone and chatting with the DMV, or the VA, or Medicare, is just that: a dream. But hey, at least until April 15, I still have IRS Representative-1004671045.