Early reviews of the IRS Direct File free tax-prep tool are in. Here's what taxpayers say so far.

By Andrew Keshner

'It was the fastest I've ever done my taxes,' says one user. An estimated 19 million people could be eligible to use Direct File, the IRS says.

Taxpayer reviews are starting to surface on Direct File, the Internal Revenue Service's free online tax-prep program, and they're sounding good so far.

It's speedy and straightforward, according to people who've used the service. It's not completely perfect, but the IRS Direct File tool, which is now available in 12 states, is a great first swipe at a free filing platform to rival commercial software such as TurboTax (INTU) or H&R Block (HRB), they told MarketWatch.

"It was the fastest I've ever done my taxes," said W. Drew Bertrand, who needed less than an hour to start and finish his tax return using Direct File. He's used a range of free tax-prep software for years, including TurboTax and H&R Block.

"I thought it was very easy to use. I wish everyone could do their taxes that easily," said the 60-year-old tech-sector contract worker from Menlo Park, Calif.

It will be a while before everyone can use Direct File. It's currently available only in 12 states: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.

And at the moment, Direct File can only handle fairly simple tax returns. For example, it can support returns reporting W-2 wages, but not those with stock profits or income from gig jobs. (In that way, Direct File is similar to the free versions from TurboTax, H&R Block and elsewhere, which can only handle relatively simple returns.)

Monica Shope, an Oakland, Calif., teacher, said she scheduled a full day to do her federal income taxes, but only needed 15 minutes with Direct File. After filing, she felt confident that her taxes were totally correct - more confident than she has after previous times she's filed taxes, she said.

After several years of filing her returns through TurboTax, and paying around $60 each time, Shope, 26, said she "was just so excited about this prospect to not have to pay."

Doing her federal return on Direct File was easy, but she ran into some problems after Direct File sent her to California's state-run free tax-prep platform for her state return. At one point she thought she would have to end up using TurboTax, but after some failed attempts and a helpful Zoom call with her brother, she successfully filed the state return, too.

Critics say Direct File isn't needed and will cost the government too much

The IRS's free tax-filing platform has been criticized by tax-software makers that question how much money the government will spend on building Direct File and whether it's even needed, in light of other free ways to file taxes - including, potentially, with these same companies.

"IRS Direct File is not free tax preparation, rather it will cost billions of dollars of taxpayer money for something already available free of charge today," said a spokeswoman for Intuit, the maker of TurboTax.

H&R Block provides one of over 30 free filing options already, according to Teri Daley, the company's vice president of corporate communications. The IRS should focus instead on "improving its existing services for taxpayers, like enhancing the taxpayer experience and modernizing tax administration," Daley said.

Regulators at the Federal Trade Commission alleged TurboTax and H&R Block have tricked some customers into paying for tax returns they thought were being done for free. Both companies rejected the allegations.

Direct File has also been pilloried by Republican critics who see it as government overreach. "This pilot program is simply a way to expand the power of the IRS that no one asked for," Rep. Jason Smith, the Missouri Republican who chairs the Ways and Means Committee, said in a statement.

An estimated 19 million people could be eligible to use Direct File

Up to 19 million people could conceivably be eligible to use Direct File this year, according to Treasury Department and IRS estimates. So far, the number of users appears to be modest. Since the IRS unveiled it this year, 51,000 taxpayers have either started or filed their income-tax returns through Direct File, according to Deputy Treasury Secretary Wally Adeyemo.

The hope is to get at least 100,000 tax returns filed via Direct File by April 15, IRS and Treasury officials have said. For context, the IRS is expecting nearly 130 million returns by then.

The IRS estimates that individual taxpayers spent an average of $150 and nine hours doing their taxes last year. In February, the cost of tax-return preparation had increased nearly 10% from a year ago, according to Bureau of Labor Statistics.

"With Direct File, you have a direct pipeline to the IRS for your tax return. With Direct File, there are no extra fees," IRS Commissioner Danny Werfel said at a recent press conference. "You can't beat the price. It's free."

'I didn't have to worry about someone upselling me'

Even though Bertrand, the tech-sector worker, successfully filed his taxes for free through TurboTax, H&R Block and other companies, he said he always keeps a sharp eye out to make sure he doesn't get charged more than he intended when filing his taxes.

This year he used the Direct File platform because it was definitely free. "I didn't have to worry about someone upselling me," Bertrand told MarketWatch.

He had small complaints about Direct File. Bertrand liked the way TurboTax quickly populated the fields from his W-2 forms in previous years. He always liked the customer service at TurboTax, he added.

This year, he had to manually enter the numbers into Direct File even when the IRS already had Bertand's tax forms. "That would be my only complaint," he said. He didn't need to call customer service with Direct File, so he couldn't compare it with TurboTax.

In Austin, Texas, Marina Garcia said she hit a minor trouble spot in the initial registration process with Direct File. That was solved with a quick call to customer service. From there, filing her taxes took no more than 40 minutes.

"There were no random ads, like, 'What am I clicking on?'" said Garcia, who estimated she usually spends about $80 each year on her taxes.

Garcia considers herself a proponent of Direct File, in part because she believes it will help people who need free tax prep. She's a project manager for RAISE Texas, a statewide nonprofit coalition focused on financial wellness for low- and moderate-income households. It's not hard to find low-income taxpayers paying far more than they can afford for someone to do their taxes, she noted.

"This is finally something that was designed directly for the community," Garcia told MarketWatch. "This is definitely a step forward in the work we do. I can only hope it's successful."

On Thursday, Sen. Elizabeth Warren, a Massachusetts Democrat and strong backer of an IRS-run tax-prep system, asked Treasury Secretary Janet Yellen if Direct File will return next year after its "rave reviews," referring to initial media coverage and early user feedback the IRS got about the program.

"We're going to evaluate the feedback we get. But if they like it, it would be very natural to continue to build on it," Yellen said.

That sounds good to Alex Davidson, a 23-year-old political consultant in Seattle who wrapped up his taxes in about 20 minutes using Direct File. "If my tax situation isn't complicated next year, absolutely I'm going to use it again."

See also: Is TurboTax really free? Here are 5 free tax-prep options, including H&R Block and IRS Direct File.

Related: Free IRS online tax prep is coming. Here's what it can - and can't - do for taxpayers.

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-Andrew Keshner

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03-27-24 1259ET

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