Kimberlee Josephson: The hidden costs of IRS Direct File for Pennsylvanians

Tax season just came and went, but one Pennsylvania congressman appears worried that thousands of commonwealth residents may have overpaid.

Republican Pennsylvania Congressman Mike Kelly, chairman of the House of Representatives’ tax subcommittee, has been sounding the alarm about the IRS’s new Direct File program, a government-run tax filing tool.

This year, the IRS encouraged residents of Pennsylvania and 24 other states to use this new, free tax-filing software in place of their usual accountants and tax preparation software; however, concerns have abounded about transparency, taxpayer rights and federal overreach.

Kelly is not alone in being concerned. Twenty-seven of Kelly’s colleagues co-signed a letter to President Trump asserting that the Direct File program is both “unauthorized and wasteful” and “its shaky rollout and structural flaws have already come at a steep price.”

The IRS pitched Direct File as a free and simple way to file taxes. However, like with many government programs, Direct File isn’t really free nor is it simple. The service is subsidized by tens of millions of taxpayers’ dollars and, according to a March 2025 Inspector General report, only one-third of those who signed up for Direct File in 2024 even submitted a completed return, citing complexity as a primary reason for lack of completion.

More critically, the Inspector General report also revealed widespread issues related to missing deductions, technical failures and user confusion. Some Pennsylvanians couldn’t claim the critical deductions they were legally entitled to, such as education tax credits. So, even if a taxpayer meets the eligibility criteria necessary for using Direct File, they would likely be better off opting for a legitimate tax preparation service that can safeguard their return and assist with itemized deductions.

Tax professionals and tax preparation software programs are equipped to analyze the IRS’s calculations, catch reporting errors, make recommendations for maximizing returns and ensure that every credit and claim is accounted for. And for those who are unable to hire a tax professional, there are low- to no-cost options already available throughout the commonwealth.

If a taxpayer has a bad experience with the tax service they are receiving, steps to remedy the matter can be made in the private sector. The same cannot be said if the IRS is the preparer. Pennsylvanians using Direct File will likely find it difficult to challenge their tax bills or claim legitimate deductions if the IRS is both the judge and jury of their finances.

Last year, Newsweek reported that “a group of GOP attorneys general demanded the IRS halt the launch of Direct File because it was not approved by Congress.” The claimants called Direct File “unnecessary and unconstitutional,” with one of them asserting that “Congress has never granted the Department of the Treasury authority to create a Direct File program. And for good reason: the American taxpayers do not want to invite the proverbial fox into the hen house.”

The Direct File program infringes upon the checks and balances that have long defined our tax system. Independent representation, whether through accountants, preparers or trusted software, is essential to keep the IRS in check and government overreach at bay. We should all be wary of any program that expands the government’s power to not only collect taxes but also to calculate them.

Kelly’s efforts to block the IRS from continuing to roll out Direct File is something Pennsylvanians should support.

Pennsylvania shouldn’t serve as a testing ground for a flawed IRS initiative, nor should all Americans subsidize poorly managed programs that create a serious conflict of interest for taxpayer rights.

Dr. Kimberlee Josephson is an associate professor of business at Lebanon Valley College and a research fellow with the Consumer Choice Center.