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POINT: IRS Direct File Simplifies Doing Taxes, Saves Money

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By Jean Ross, InsideSources.com (TNS)

If there’s one thing we should be able to agree upon, it’s that everyone should pay the taxes they owe without having to pay for the privilege of doing so. This year, for the first time, residents of 12 states who file simple tax returns can file online for free using the IRS’s new Direct File portal.

Thanks to funding from the Inflation Reduction Act and as part of an ambitious modernization effort, this new public tool makes tax filing faster, easier and cheaper for eligible filers. The IRS wisely started small, piloting Direct File in four states—Arizona, California, Massachusetts and New York—each agreed to implement an integrated option for filing their state tax return and eight states without a state income tax. Similarly, eligibility for Direct File is limited to filers with certain types of income who don’t itemize their deductions—people with wage and salary income from an employer, Social Security benefits, modest interest income and unemployment insurance.

Importantly, Direct File can be used to claim the child and earned income tax credits, providing valuable support to millions of working families. In fact, helping families claim these credits by eliminating the cost of tax filing may be one of Direct File’s most important contributions. In 2020—the most recent year for which data are available—nearly one out of every four individuals eligible for the EITC didn’t claim the credits they were owed.

Direct File was also designed to meet the needs of other segments of the public who aren’t served by existing private systems. Filers can prepare their returns on a smartphone, tablet or desktop, and real-time online support is available weekdays and evenings in Spanish and English from a live IRS professional—not an AI-powered chatbot.

Early reviews of Direct File show strong support, with users reporting it as “the fastest I’ve ever done my taxes” and “honestly the easiest tax experience I’ve ever had.” One reporter said that “the government has created an actually good piece of software.”

The enthusiastic response to a free online filing option shouldn’t be surprising. The typical taxpayer spends 13 hours and $270 each year preparing a federal tax return. Money saved by filing for free is money back in families’ pockets—money that can be used for rent, groceries and other necessities.

Direct File is arguably a long-overdue solution. The tax preparation software industry lobbied hard to block previous bipartisan public portal efforts dating back to the late 1990s. The industry deliberately suppressed participation in its privately managed alternative, resulting in just 3% of filers using the industry-backed program in 2020, in contrast to the estimated 70% of filers eligible to do so. Private firms also used hardball tactics to upsell consumers, leading state attorneys general to secure a record-breaking settlement with TurboTax’s owner for deceptive advertising.

As IRS Commissioner Danny Werfel has made clear, Direct File is a choice.

Individuals who prefer to buy private software or use an accountant are welcome to do so. However, the success of this year’s pilot suggests that Direct File is a choice a large share of the 91% of Americans with relatively simple tax situations will choose to make.

To scale the pilot to more tax filers in more states, the IRS must work quickly with state tax administrators to ensure filers who wish to use a public option can seamlessly file their federal and state tax returns. It will also require sustained support and the funding needed to reverse a decade of disinvestment and rebuild the IRS to improve customer service and ensure the nation’s tax laws are enforced effectively.

In the meantime, if you qualify for the Direct File pilot and have yet to complete your tax return, there’s still time to check it out. If you’ve finished your taxes, give yourself a well-deserved pat on the back. For all of us—filed or yet to file—the new Direct File tool represents government at its best: saving families time and money. That’s something to cheer about. Happy Tax Day!

ABOUT THE AUTHOR:

Jean Ross is a senior fellow for economic policy at the Center for American Progress. She wrote this for InsideSources.com.

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(This essay is available to Tribune News Service subscribers. TNS did not subsidize the writing of this column; the opinions are those of the writer and do not necessarily represent the views of TNS or its editors.)

©2024 Tribune Content Agency LLC

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Auditing & Assurance

RightTool Wins 2024 Accountant Bracket Challenge

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April 12, 2024

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QuickBooks automation tool RightTool is the champion of the 2024 Accountant Bracket Challenge, presented by Accounting High, as the 3 seed defeated 1 seed CPA Jason Staats, host of the Jason Daily podcast, by a score of 355 votes to 110 votes in the final.

“To everybody in the RightTool Facebook community and all the RightTool users, all of you came together and helped us get the most votes, so I wanted to thank you guys for being the best community in the industry, in my opinion,” said Hector Garcia, CPA, co-founder of RightTool, during the championship final show, which was streamed by Accounting High on YouTube and LinkedIn earlier this afternoon.

RightTool joins accounting and bookkeeping app Uncat as winners of the ABC Tournament. In the inaugural Accountant Bracket Challenge last year, Uncat defeated Staats 339-190 in the championship match.

“I think what we’ve learned is … machines win,” Staats said about his consecutive losses in the tournament final. “We thought that would be down the road, but it’s happening.”

A grand total of 36,831 votes were cast during the three-week tournament.

“This has been so much fun. It only works if other people participate and pay attention and have fun, so thank you to the 1,806 ‘students’ who participated,” said Scott Scarano, an accounting firm owner who founded Accounting High, a community for forward-thinking accountants.

He added that the tournament will return next year, with some tweaks to make it better.

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Auditing & Assurance

Tesla to Launch RoboTaxi on August 8

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1 month ago

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April 12, 2024

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Dana Hull
Bloomberg News
(TNS)

Tesla Inc. plans to unveil its long-promised robotaxi later this year as the electric carmaker struggles with weak sales and competition from cheap Chinese EVs.

Chief Executive Officer Elon Musk posted Friday on X, his social media site, that Tesla’s robotaxi will be unveiled on Aug. 8.

Shares gained as much as 5.1% in postmarket trading in New York. Tesla’s stock has fallen 34% this year through Friday’s close. Shortly before Musk posted the news about the robotaxi, he lost the title of third-richest person in the works to Mark Zuckerberg, CEO of Meta Platforms Inc.

A fully autonomous vehicle, pitched to investors in 2019, has long been key to Tesla’s lofty valuation. In recent weeks, Tesla has rolled out the latest version of the driver-assistance software that it markets as FSD, or Full Self-Driving, to consumers.

The company has said that its next-generation vehicle platform will include both a cheaper car and a dedicated robotaxi. Though the company has teased both, it has yet to unveil prototypes of either. Musk’s Friday tweet indicates that the robotaxi is taking priority over the cheaper car, though both will be designed on the same platform.

Reuters reported earlier Friday that the carmaker had called off plans for the less-expensive vehicle and was shifting more resources toward trying to bring a robotaxi to market. Musk responded by saying “Reuters is lying,” without offering specifics.

Tesla also produced 46,561 more vehicles than it delivered in the first quarter, which has forced it to slash prices. U.S. consumers have been turning away from more expensive EVs in favor of hybrid models, causing many manufacturers to rethink pushes to electrify their fleets.

Splashy product announcements by Musk have always been a key part of Tesla’s ability to gin up enthusiasm among customers and investors without spending on traditional advertising. They don’t always work: the company unveiled the Cybertruck to enormous fanfare in November 2019, but production was delayed for years and the ramp up of that vehicle has been slow.

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(With assistance from Catherine Larkin.)

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Auditing & Assurance

Retail Sales and Wages Grew in March

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April 12, 2024

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Retail sales grew at a steady pace in March, according to the CNBC/NRF Retail Monitor, powered by Affinity Solutions, released today by the National Retail Federation.

“As inflation for goods levels off, March’s data demonstrates steady spending by value-focused consumers who continue to benefit from a strong labor market and real wage gains,” NRF President and CEO Matthew Shay said. “In this highly competitive market, retailers are having to keep prices as low as possible to meet the demand of consumers looking to stretch their family budgets.”

Total retail sales, excluding automobiles and gasoline, were up 0.36% seasonally adjusted month over month and up 2.72% unadjusted year over year in March, according to the Retail Monitor. That compared with increases of 0.4% month over month and 2.7% year over year in February, based on the first 28 days in February.

The Retail Monitor calculation of core retail sales – excluding restaurants in addition to automobiles and gasoline – was up 0.23% month over month and up 2.92% year over year in March. That compared with increases of 0.27% month over month and 2.99% year over year in February, based on the first 28 days in February.

For the first quarter, total retail sales were up 2.65% year over year and core sales were up 3.12%.

This is the sixth month that the Retail Monitor, which was launched in November, has provided data on monthly retail sales. Unlike survey-based numbers collected by the Census Bureau, the Retail Monitor uses actual, anonymized credit and debit card purchase data compiled by Affinity Solutions and does not need to be revised monthly or annually.

March sales were up in six out of nine retail categories on a yearly basis, led by online sales, sporting goods stores and health and personal care stores, and up in five categories on a monthly basis. Specifics from key sectors include:

  • Online and other non-store sales were up 2.48% month over month seasonally adjusted and up 15.47% year over year unadjusted.
  • Sporting goods, hobby, music and book stores were up 0.86% month over month seasonally adjusted and up 8.33% year over year unadjusted.
  • Health and personal care stores were up 0.03% month over month seasonally adjusted and up 4.5% year over year unadjusted.
  • Grocery and beverage stores were up 1.17% month over month and up 4.22% year over year unadjusted.
  • General merchandise stores were up 0.13% month over month seasonally adjusted and up 3.38% year over year unadjusted.
  • Clothing and accessories stores were down 0.01% month over month and up 2.13% year over year unadjusted.
  • Building and garden supply stores were down 2.13% month over month and down 3.97% year over year unadjusted.
  • Furniture and home furnishings stores were down 1.46% month over month seasonally adjusted and down 5.28% year over year unadjusted.
  • Electronics and appliance stores were down 2.27% month over month seasonally adjusted and down 5.92% year over year unadjusted.

To learn more, visit nrf.com/nrf/cnbc-retail-monitor.

As the leading authority and voice for the retail industry, NRF provides data on retail sales each month and also forecasts annual retail sales and spending for key periods such as the holiday season each year.

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