Survey: Time, cost and complexity prevent some from filing taxes altogether
ipuwadol via Getty Image
The findings come as U.S. lawmakers are poised to end the Direct File program, which offers Americans a free, online tax filing service directly with the government.
Under U.S. House Republicans' budget reconciliation package, the federal Direct File program — which has offered hundreds of thousands of Americans in certain states a free, online tax filing service since 2023 — would be eliminated, if the bill passed. New survey findings suggest that cutting the federal program would further harm families who already struggle to file their taxes due to cost and time barriers.
Millions of families miss out on key benefits like the child tax credit or the earned income tax credit, in part due to filers’ lack of understanding of such programs and the tax system, according to a survey, released Tuesday by New America’s New Practice Lab, a research and design lab dedicated to increasing access to social services in the nation.
But government-backed services like Direct File could help address such concerns and enable more people to finish their returns efficiently and accurately, said report author Devyani Singh, data and strategic impact lead for the New Practice Lab at New America.
“Free filing options aren’t just a tech tool or a tech innovation,” she said. “It’s a trust-building tool for government [because] it addresses some of the biggest barriers that people are facing, which is cost, complexity and confidence.”
The nationwide survey included 5,012 respondents, 64% of whom reported that they did not file taxes within the last three years. Nearly 90% of respondents also reported an annual income of less than $65,000.
One major barrier keeping people from filing their taxes was the fear of making an error along the way. An honest mistake in someone’s tax information, for instance, could result in a fine or legal trouble, Singh said.
Indeed, more than half of respondents said the fear of making a mistake during the process deterred them. Of those who cited fear as an obstacle, 61% of respondents also had not filed taxes in the past three years, according to the report.
Tax filing software could leverage error detection capabilities to alert users of when information needs to be corrected, the report found. Plus, services like Direct File and its state-level tool, FileYourStateTaxes, can automatically prepopulate someone’s tax-related information in online forms, further reducing the chance for errors from manual data entry.
The complexity of the tax system, such as the rules for required documents and technical eligibility, was another challenge for many respondents, particularly those with nontraditional income streams, according to the report. For instance, 27% of respondents said having multiple income sources or jobs made filing taxes difficult, and 34% of participants said they struggled to understand tax instructions or language.
Federal and state tax services can be programmed to include plain language to help demystify tax jargon and simplify the process for users, Courtney O’Reilly, an associate program director for Tax Benefits at Code for America, told Route Fifty in a previous interview.
Another obstacle respondents faced to filing taxes was the cost to hire expertise or access software to submit their returns themselves, according to the report. Nearly 40% of respondents said tax-related expenses complicated the process, and one survey respondent reported that they skipped paying an electric bill to be able to afford tax filing software, Signh said.
“For people in that position, access to free, trustworthy filing support isn’t just a nice-to-have, it’s essential,” she said. That’s why tools like FileYourStateTaxes, which can process a person’s tax returns within 15 minutes for free, are crucial for helping people access critical benefits like tax credits.
Eliminating programs like Direct File — which was reported to have a 95% satisfaction rate among users in the 2024 and 2025 tax seasons — would be “a setback in innovation,” Singh said. It’d also be a “step backward” in governments’ “ability to reach people who need support the most, but who also have the fewest options available to them.”