Jimmy Patronis joins letter urging IRS to shut down Direct File program

Chief Financial Officer Jimmy Patronis and the top financial officers of 20 other states wrote to federal officials asking them to shut down a pilot program allowing citizens to file their tax returns directly with the government.

The program, Direct File, lets citizens skip paying for a tax preparer or online aide, such as Turbo Tax, to file their federal taxes with the Internal Revenue Service. But the letter — addressed to Treasury Secretary Janet Yellen, Treasury Deputy Secretary Wally Adeyemo and IRS Commissioner Daniel Werfel — claims that the benefits are minimal, if any, and could hurt taxpayers.

“We urge you to terminate Direct File following the current pilot program, as Direct File will create challenges for taxpayers and state treasurers and the costs of Direct File far outweigh any potential benefits it may confer to taxpayers,” the letter states. “Regrettably, Direct File is a solution in search of a problem.”

Direct File is a pilot project available in 12 states, including Florida. Most of the officials signing the letter represent states not involved in the program. Patronis and his colleagues from South Dakota and Wyoming were the only officials to join the letter representing states where residents can participate in the program this year.

The letter notes that since the program only is available for federal taxes, users will falsely believe they’ve paid all of their taxes, when state taxes still have to be taken into account.

“Taxpayers who are unaware that they must separately file state returns will not receive anticipated state refunds this spring,” the letter states.

“This is significant because many taxpayers who use Direct File are likely to be lower-income and build budgets around anticipated tax refunds. Even worse, confused taxpayers who neglect to file their state returns will be at risk of incurring state penalties. Imagine the surprise to the taxpayer who becomes subject to audit by the IRS after having filed through Direct File and having felt assurances that the tax return was prepared properly through the IRS’s own system.”

Florida has no state income tax, so that aspect wouldn’t affect Sunshine State filers. The IRS’ Direct File website, though, tells potential users that it doesn’t accept state returns.

Another deficiency, according to the letter, is the lack of customer service to help people prepare and file their taxes.

But instead of addressing those issues by opening the program up to accept state taxes, give visible and constant reminders that it doesn’t cover state taxes and devoting more resources to help people prepare their taxes, the state officials recommend junking the program entirely. Other free tax preparation services exist, so a federal program isn’t needed, they argue.

“Surely a better use of taxpayer funds would be for the IRS to boost existing marketing efforts, or undertake new marketing efforts, for existing low- and no-cost tax preparation options rather than try to build a flawed service with the potential to harm those it seeks to help,” the letter states.