Pre-Filled IRS Forms Would Help Taxpayers as Much as Direct File

The IRS will pilot the Direct File program during the 2024 filing season, giving a select group of eligible taxpayers the option to file taxes for free directly with the agency. However, the Direct File pilot won’t include pre-filled information—and that’s what taxpayers really need.

Direct File is like existing tax preparation software, except it’s free and run by the IRS instead of a private company. Pre-filled tax returns are something altogether different. With pre-filling—sometimes called pre-population or auto-population—taxpayers could download information the IRS already has into their tax returns, including from W-2s, 1099s, and prior years’ returns.

If the IRS were to offer taxpayers a data-download option, it could (and should) offer it for both public and private tax software. In other words, pre-filled tax returns can exist without a public tax filing portal such as Direct File.

Pre-filled returns and Direct File are also both distinct from return-free tax systems, in which the tax agency prepares taxpayers’ returns for them. A traditional return-free system in the US would be challenging to enact because of certain features of our current tax laws.

Nearly everyone—perhaps even the tax preparation industry—would benefit if taxpayers could download existing information into their tax returns. Private software companies could offer seamless data download options alongside the customer support and wraparound financial services they already offer.

Pre-filling with IRS data may also reduce these companies’ costs of integrating with other financial services companies to import data from third-party tax forms like W-2s.

Accountants and tax advisers could use pre-filling to speed up the tax preparation process while still offering clients the trusted tax advice they value. Tax returns would be more accurate by eliminating mismatches between taxpayer-entered information and third-party information. Improved accuracy cuts enforcement costs for the IRS, and thus the American taxpayer.

Pre-filling tax returns also would make tax filing easier and faster for taxpayers. Tracking down tax forms is one of the most time-consuming parts of the tax filing process. Pre-filled returns would eliminate that annoying step. And taxpayers would worry less knowing that they included everything in their return.

In my research, I’ve found that anxiety over making a mistake is the most unpleasant part of the tax filing process for many. Pre-filling would also give taxpayers more ownership and control over their reported financial information.

Although most taxpayers would still need to fill in some additional things, for many, little else would be required. Because employers, banks, and others send W-2s, 1099s, and other tax forms to the IRS each year, the agency has a lot of information about people’s taxable income.

Historically, it’s taken the IRS many months to process these forms, but they’re becoming available increasingly earlier in the filing season as more taxpayers file electronically. The IRS also has information from prior years’ returns, such as address, marital status, and number of children—although of course taxpayers should be prompted to update this information each year.

While the IRS has never offered pre-filled tax returns, most of our peer nations do it. Tax agencies at least partially pre-fill tax returns in France, Austria, the UK, Australia, Norway, and Mexico, to name just a few.

Direct File is really a parallel effort to pre-filling. It can cut the private middleman out of tax filing, which some might prefer for data privacy or security reasons. It also can allow IRS designers to pilot pre-filling and work out kinks with a small group of filers before offering it to the broader public.

But even if the IRS decides not to pursue Direct File in the long run, it can still create a system that allows taxpayers to download their information into private tax preparation software. Of course, eligible software companies would need to adhere to heightened privacy and security standards to prevent bad actors from accessing the information.

The IRS need not, and shouldn’t, predicate pre-filling on the existence of a permanent Direct File system. Giving taxpayers ownership of their financial data is something that everyone can get behind.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Ariel Jurow Kleiman is a professor of law at Loyola Law School in Los Angeles.

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