IRS Direct File system would cost Missouri taxpayers. It should go | Opinion

Prices on everything from eggs to cars are still high. Luckily, here in Missouri, we have relatively low taxes and a competitive tax structure that allows business to thrive. A proposal to abolish the state income tax that recently advanced out of a legislative committee and tax cuts on everything from capital gains to diapers approved by the state Senate would make things even better. But this light tax burden is now under threat thanks to meddling from Washington, D.C.

There’s the danger that Congress will allow President Donald Trump’s first-term Tax Cuts and Jobs Act to expire. That law cut taxes across the board, and ending it would hike taxes on everything from businesses to family incomes.

But there’s another potential hazard on the horizon that may affect many Missouri tax filers before next year’s April 15 tax deadline. It involves a new tax preparation service created by the Internal Revenue Service.

Last year, the service launched a pilot program called Direct File that allows taxpayers to file their taxes directly through the IRS, cutting out the need for an accountant or a subscription to a system such as TurboTax. Although it wasn’t available in Missouri this year, the IRS declared itself pleased with the results of the pilot and plans to expand it.

However, a Treasury Department inspector general report released in March suggests a less than rosy picture. The report found that while more than 423,000 users created a profile during the pilot program, only about a third actually ended up submitting a completed tax return through Direct File. Many of those surveyed by the inspector general stated they found Direct File too onerous or ineffective, and a separate 2023 inspector general study found that 60% of taxpayers would choose to keep their current tax software if given the choice rather than switch to IRS-provided software.

One problem is that Direct File covers only federal taxes. Missouri’s Department of Revenue already partners with tax software providers to offer free or low-cost electronic filing options that handle both state and federal returns in one place. By introducing a federal-only tool that doesn’t integrate with state filing, the IRS isn’t simplifying tax season — it’s adding another layer of complexity. For many Missourians, especially older adults or lower-income families, this creates more confusion, not less. And it’s not free: The IRS expects this duplicative program to cost taxpayers more than $60 million this year.

Tax credits missed

It gets worse. According to that same inspector general report, the IRS in 2024 failed to list certain tax credits that filers could claim. For example, many of the returns that had been submitted through Direct File would have been eligible for education tax credits, but Direct File did not allow for claiming them. These education credits, called Form 8863, provide a total credit of $2,500 per year. This error was estimated to have cost each eligible taxpayer an average of close to $1,000.

With more than 60 colleges and universities across the state—from Mizzou and Missouri State to Truman State and community colleges such as St. Louis and Ozarks Tech—tens of thousands of students could lose out. For families budgeting carefully to afford tuition, housing and books, missing a $2,500 credit could mean choosing between courses and groceries. Given that the average student loan debt in our state is $35,675, that’s money Missourians sorely need. In the end, Missouri Rep. Jason Smith, the chair of the tax-writing House Ways and Means Committee in Congress, labeled the Direct File program one that “the American people neither want nor asked for.”

Despite all these criticisms, the IRS has plowed ahead looking to make Direct File a permanent program.

But there is still time. Trump’s Treasury Department has labeled Direct File a failure. Elon Musk’s Department of Government Efficiency has indicated it may eliminate the program. Billy Long, Trump’s nominee to head the IRS and a former congressman from Missouri, sponsored a bill that would have blocked the IRS from developing its own tax preparation and filing software.

Handing the IRS the keys to the entire tax system isn’t reform — it’s a power grab Missouri taxpayers can’t afford. Hopefully, political decision-makers cut the cord on this program while they still can. We’re all counting on it.

This story was originally published April 30, 2025 at 5:06 AM.