U.S. Sen. Ron Wyden has lauded Oregon for joining the states allowing free electronic filing of federal tax returns with the Internal Revenue Service.
Wyden is a Democrat from Oregon who leads the Senate Finance Committee, which writes tax measures in that chamber. He joined Treasury Secretary Janet Yellen, whose department includes the IRS, during a conference call Tuesday, June 18.
IRS began free e-filing as a pilot project in 12 states this past year. The agency received 140,000 returns, more than the 100,000 projected, in five weeks. Yellen said users of the free e-filing saved $5.6 million in filing fees charged by private vendors and received $90 million in refunds — and 90% sampled in a subsequent survey indicated satisfaction with the service.
No deadline is set yet, but participation by states and individuals in the program is voluntary.
Wyden said the federal program will provide a link to the Oregon agency that processes state tax returns. Four of the 12 states in the IRS pilot project had something similar this past year: Arizona, California, Massachusetts and New York.
“My analysis is that it has worked very well,” Wyden said.
Oregon began its own free e-filing program, Direct File Oregon, with 2023 returns due this past April 15.
A spokesman for the Oregon Department of Revenue, Robin Maxey, said e-filings from all sources (including paid commercial vendors) accounted for 1.95 million of the 2 million returns filed so far. He said e-filings are expected to end up at 2 million of a total of 2.2 million once those who sought six-month extensions complete their filings in October. Filers who seek extensions often have more complex returns.
According to Treasury Department estimates, as many as 580,000 Oregonians will be eligible to use the IRS program.
Wyden has pressed for free federal e-filing for years. Provisions in the catchall Inflation Reduction Act of 2022 increased the amount of money available for the IRS to modernize its systems and to add staff.
“We are tired of getting ripped off by the big tax software companies every year,” he said. He recounted a recent instance in which the use of Turbo Tax resulted in some Oregon filers paying more than they should have in state taxes.
The IRS pilot project limited users of free e-filing to three types of income: W-2 (employment), Social Security and unemployment insurance benefits. Treasury Department officials said they have yet to determine the scope of income types accepted for the expanded program — but eventually the types will cover income sources normally encountered by working families. These include the earned-income tax credit and the child tax credit. Federal and Oregon tax codes have both kinds of credits, which are subtracted directly from taxes owed.
“Direct filing is long overdue,” Wyden said. “It is the kind of service that government should be providing.”
Republicans in Congress have resisted additional federal money for IRS operations that was included in the Inflation Reduction Act. They managed to obtain some small cuts in the congressional negotiations over federal spending levels, but the Democratic-led Senate turned back a bid by House Republicans for deeper cuts.
Some argue that the 19% decline in inflation-adjusted funding for the IRS between 2010 and 2019 led to greater tax evasion.
“The IRS has been underfunded for decades,” Yellen said. “So taxpayers have not gotten the service they deserve.”
She praised Wyden as “one of our most important allies” in securing money for IRS staff additions and system improvements.
“If Republicans have the opportunity, they are going to put an end to it,” Wyden said.
pwong@pamplinmedia.com
Note: This story has been updated with information from a Treasury Department release.
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