Tax filing can be a costly and complicated process for families and small businesses. The reason the system is so complicated is because for years, paid tax preparation corporations have profited by charging families to fulfill their legal obligation to file taxes each year. These companies, including Intuit and H&R Block, have conducted massive lobbying efforts to protect their profits and keep the Internal Revenue Service (IRS) from offering a free, public tax filing option for families. A free and easy option without a profit motive would simplify the process, eliminate filing fees, and ensure families successfully receive tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) which they are entitled to by law (in contrast to the current system where paid tax preparers often make credits too confusing or costly to claim).
The good news is that this free and easy option is now available! For the first time in US history, the IRS has a free, simplified, public online tax filing tool: Direct File. In 2024, a Direct File pilot launched in 12 states and was so effective and popular that all US states have been invited to join the Direct File program. With more states announcing plans to opt in each month, West Virginia should follow suit. By adopting Direct File in West Virginia, state taxpayers—and by extension, the economy—will see over $100 million in annual benefits.
Under the current, for-profit system, it takes Americans an average of $150 and nine hours to file their taxes each year—a high cost for families to simply meet their legal obligation to file taxes and to claim credits to which they are entitled.
Paid tax preparation companies have spent years and tens of millions of dollars lobbying against a public tool for tax filing. To stall those efforts, they agreed to participate in a “Free File Alliance,” which requires them to offer free tax filing to low- and middle-income taxpayers. But while the free option is technically “offered,” these companies aggressively steer taxpayers away from the free option—so much so that less than three percent of households eligible actually receive free filing. What’s more, even the few taxpayers who can successfully file their federal taxes for free are often charged for filing state taxes. Just last year, Intuit was forced to pay $141 million, including over $700,000 in West Virginia, to taxpayers who were “tricked into paying for free tax services” according to state Attorney General Patrick Morrisey.
What has become clear is that paid tax preparation companies cannot be trusted to hold up their end of the bargain.
Adopting Direct File would make the tax preparation market in West Virginia more equitable, inclusive, and competitive. When Direct File is at scale, it will be able to deliver over $100 million in total annual value to West Virginia taxpayers in the form of saved filing fees ($42.6 million), saved time cost of filing ($16 million), and additional federal EITCs and CTCs claimed ($43.7 million). That’s $102 million in local West Virginia economies that would have otherwise been siphoned off by tax preparation companies or gone unclaimed.
West Virginia should join the growing number of states adopting and integrating their system with IRS Free File. Just this summer, Pennsylvania, New Mexico, Oregon, and New Jersey have all announced they will offer this service for the 2025 tax filing season. In fact, West Virginia can provide its taxpayers with the same benefit without much difficulty. Civic organizations like Code for America are currently offering states across the country pro-bono support to get set up and integrated. Additionally, the West Virginia Department of Tax and Revenue already has a contract with FAST Enterprises, a company that successfully integrated Massachusetts with Direct File during the 2024 pilot. That means there are multiple options readily available to provide a public tax filing option for West Virginia families state leaders choose to take advantage.
Like many states, West Virginia has an upside-down state tax system, wherein poorer families pay a larger share of their total income to taxes than wealthier families. Further, 2023’s personal income tax cuts and subsequent tax cut triggers skewed the tax code even more towards the wealthy. While the wealthiest 20 percent of households received almost two-thirds of the benefit of the 2023 income tax cuts, low- and middle-income families saw less than the $150 average cost they often must pay to file their yearly taxes with a paid tax preparer.
To exemplify, the triggered personal income tax cut that will go into effect in January is skewed toward the wealthy, giving the top one percent in West Virginia a $1,500 annual tax cut, while the average household in will see just $44 per year. Compare that with the benefit of adopting Free File, which will provide the average West Virginia household $150 in saved filing fees annually—and that’s before even accounting for the benefit of additional money in families’ pockets from Earned Income Tax Credits and Child Tax Credits that could otherwise go unclaimed. The federal CTC provides up to $2,000 per child and the average EITC benefit in West Virginia is $2,327. For a taxpayer who benefited from the ability to claim either of those credits via Free File, the benefits would be substantially greater than either the 2023 tax cut or the triggered tax cut they’ll see in January.
Despite these incredible potential benefits for West Virginia taxpayers, state leaders have thus far failed to start the process of adopting and integrating Free File for the 2025 tax season.
For West Virginians, this is just more of the same old story. Too often, West Virginians pay higher costs because policymakers choose to prop up corporate interests. This has happened for decades with coal and natural gas. Refusing to make tax filing easier for West Virginians can only be seen as bending to the pressure of the paid tax preparation industry lobbyists. West Virginia and the Justice Administration should do the right thing and opt into Direct File for the 2025 tax season. A small investment will make state and federal income tax filing free and easy, putting up to $102 million back into the pockets of low- and middle-income West Virginia taxpayers. Families across the Mountain State will see immediate benefits via saved time, less stress when filing, and greater refunds with which they can make investments on their own terms.
If you want to see West Virginia join the growing number of states participating in IRS Free File, contact Governor Justice at 304-558-2000 and tell him to join for the 2025 tax filing season. Experts urge that states must start the process right away to be on board for the next filing season.
