Section V: Cost

One of the biggest questions surrounding Direct File is regarding the costs of operating such a

program. In the Report to Congress, the IRS estimated that the annual cost for Direct File

could range from between $64.3 to $248.9 million for a service that reached between 5 to 25

million taxpayers depending on the tax scope and the taxpayers reached. We noted that these

estimates were subject to uncertainty due to the nature of launching a new product like Direct

File. The pilot provides an opportunity to collect concrete data on the cost of Direct File.

Table 4. Direct File spending through April 20, 2024 ²⁴

$ in Millions FY 2023 FY 2024 YTD FY 2024 YTD

FY 2023 Direct File Feasibility Study and Report to Congress 11.6 - 11.6 Technology & Product 11.6 - 11.6 Labor 0.8 - 0.8 Non-Labor 10.8 - 10.8 Advisory and assistance services 8.6 - 8.6 Equipment 0.3 - 0.3 Other goods and services from Federal sources 1.9 - 1.9 Direct File Pilot Development and Implementation 1.5 11.5 13.0 Customer Service 0.1 1.8 1.9 Labor 0.1 1.8 1.9 Technology & Product 1.4 9.7 11.1 Labor 0.2 2.9 3.1 Non-Labor 1.2 6.8 8.0 Advisory and assistance services 1.2 3.2 4.4 Ongoing cloud services - 0.5 0.5 Equipment - 0.2 0.2 Other goods and services from Federal sources - 2.8 2.8 Travel and transportation of persons - 0.1 0.1 Grand Total 13.1 11.5 24.6

$ in Millions FY 2023 FY 2024 YTD

Total through

Through April 20, 2024, the IRS spent $24.6 million on Direct File, which includes $11.6 million

in costs for the development of last year’s report to Congress. Of the $13.0 million spent on

pilot development and implementation, $10.6 million is technology and product development

costs and $2.4 million is operational costs (customer service, cloud computing, user

authentication, etc.). The limited design of the pilot means that the IRS was not able to benefit

24 FY2024 labor includes actuals through 04/06/2024 and an accrual through 04/20/2024. Costs do not include other shared corporate costs.

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from economies of scale. If the number of Direct File users were to increase, the cost per

return would decrease.

These totals include costs associated with vendor support and an interagency agreement with

GSA’s 18F. To build and run the pilot, the IRS also engaged 29 employees from the U.S.

Digital Service (USDS) to supplement the IRS employees and other team members. The

USDS costs are not included in the $24.6 million spent on Direct File. The IRS estimates that

the annualized cost for the USDS team is $7.2 million.

While the costs outlined above all center on the actual costs involved in delivering the pilot, the

team is using this data to develop a more robust cost estimate for potential future costs for

delivering Direct File. We anticipate having that estimate available in the next few weeks.

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