IRS Publication 5788 – IRS Publication 5788, officially titled IRS Report to Congress: Inflation Reduction Act §10301(1)(B) IRS-run Direct e-File Tax Return System, is a landmark 36-page document released on May 16, 2023. It fulfills a specific congressional mandate in the Inflation Reduction Act of 2022 (Public Law 117-169) requiring the IRS to study the feasibility, costs, taxpayer opinions, and independent assessment of a free, IRS-operated direct e-file tax filing system—commonly known as Direct File.
This report remains the foundational reference for understanding the IRS’s analysis of providing taxpayers a no-cost, government-run option to prepare and file federal returns directly on IRS.gov. It directly influenced the 2024 pilot and 2025 expansion of Direct File before the program’s suspension for the 2026 filing season.
Download the full PDF here: IRS Publication 5788 (May 2023)
Image: IRS Direct File pilot landing page (2024–2025)
Why IRS Publication 5788 Matters: Background and Legal Mandate?
Congress included $15 million in the Inflation Reduction Act for the IRS to study and report on a potential IRS-run free direct e-file system. The mandate (IRA §10301(1)(B)) specifically required coverage of:
- Taxpayer opinions, expectations, and trust levels (via surveys)
- Development and operating costs, including options based on adjusted gross income (AGI) and return complexity
- Multi-lingual and mobile-friendly features with strong data safeguards
- An independent third-party opinion on feasibility, approach, schedule, cost, organizational design, and IRS capacity
The IRS Direct File Task Force—supported by the U.S. Digital Service—conducted the study between late 2022 and early 2023. Research included the 2022 Taxpayer Experience Survey (4,219 respondents), a MITRE Corporation opt-in survey (2,000 respondents), qualitative usability testing of an internal prototype with 14 diverse taxpayers, and extensive stakeholder input.
The report aligns with the IRS Strategic Operating Plan’s goal of reducing taxpayer burden (average 8 hours and $140 per return) and shifting more filings to low-cost electronic methods (e-file error rate ~1% vs. 20% for paper).
Key Findings: Taxpayer Opinions and Interest in IRS Direct File
Publication 5788 revealed strong potential demand for a free IRS tool:
- 72% of 2022 Taxpayer Experience Survey respondents said they were “very interested” or “somewhat interested” in using a free IRS-provided tool.
- Self-preparers showed 83% interest (vs. 57% for those using paid preparers).
- Younger taxpayers, limited English proficiency (LEP) filers (81% interested), and lower-income groups expressed higher interest.
- MITRE survey: 52% preferred an IRS option over commercial software when cost and functionality were equal; 70% chose the free IRS tool over an $80 commercial option.
Trust levels: 72% trusted the IRS to protect their data. Many cited credibility (“It’s directly from the IRS”) as a top reason, though some expressed concerns about enforcement roles or privacy.
Barriers to adoption:
- Preference for current methods (44%)
- Brand loyalty to commercial software (38%)
- Concerns about IRS customer service (34%)
User experience expectations: 55% expected the IRS tool to perform “about the same” as commercial software; 31% thought it would be easier. Prototype testing showed the tool “exceeded expectations” for simplicity.
State return support emerged as critical—60% said they would choose commercial software if the IRS tool lacked integrated state filing.
Costs, Benefits, and Operational Challenges Detailed in the Report
Publication 5788 provided detailed cost modeling for 5–25 million users and narrow vs. broad tax scopes (e.g., VITA-like simple returns vs. expanded credits/deductions):
| Users | Narrow Scope Total | Broad Scope Total | Cost per Return (Narrow) | Cost per Return (Broad) |
|---|---|---|---|---|
| 5 million | $64.3 million | $77.9 million | $12.86 | $15.58 |
| 10 million | $103.6 million | $120.6 million | $10.36 | $12.06 |
| 25 million | $221.3 million | $248.9 million | $8.85 | $9.96 |
Customer support dominated costs (50–84% of total), scaling with user volume. Technology/product development ranged $23.7M–$40.8M annually. Estimates assumed ongoing updates for tax law changes and excluded long-term IRS processing savings from fewer paper returns.
Potential benefits:
- Reduced taxpayer time and out-of-pocket costs
- Higher uptake of credits like EITC (millions currently miss out)
- IRS savings: Paper returns cost $7.33 to process vs. $0.28 for e-file
- Broader access for underserved groups (younger, LEP, self-preparers)
Operational challenges highlighted:
- Building and maintaining configuration-driven software
- Scaling customer service (vendor-managed, ~1 agent per 10,000 users)
- State coordination for seamless federal/state filing
- Security/privacy compliance (no pre-submission IRS data access)
- Securing stable funding beyond initial IRA allocation
Independent Third-Party Opinions (Appendix B)
New America and tax law professor Ariel Jurow Kleiman provided the required independent assessment. Key conclusions:
- Feasible if started with limited scope, iterative rollout, strong product leadership, and stable funding.
- Emphasized modern practices: agile development, design thinking, user-centered iteration.
- Customer support as the largest ongoing cost driver.
- Need for state tax integration and clear communication to manage expectations.
- IRS capacity exists for integration with Modernized e-File (MeF) system, which already handles 150+ million returns annually.
- Recommended gradual expansion (similar to the 1986 e-file pilot that scaled nationwide in four years).
The third party stressed that the IRA did not require a decision on whether to build Direct File—only the feasibility analysis.
How IRS Publication 5788 Shaped Real-World Implementation?
The report directly led to action. In October 2023, the Treasury Department directed a limited pilot for the 2024 filing season in 12 states for simple returns (wages, Social Security, limited interest). The pilot expanded significantly in 2025 to 25 states and broader tax situations.
Pilot results (referenced in later IRS and Treasury documents) showed high user satisfaction (excellent/good ratings) and accuracy, but low overall volume relative to projections and high per-return costs once full overhead was considered.
As of November 2025, the IRS notified states that Direct File will not be available for the 2026 filing season (tax year 2025 returns). A October 2, 2025, Treasury report on replacement options cited Publication 5788’s cost ranges while noting actual pilot costs exceeded initial estimates and advocated enhancing public-private Free File partnerships instead.
Who Should Read IRS Publication 5788?
- Taxpayers interested in free filing options
- Tax professionals tracking IRS digital initiatives
- Policymakers and researchers studying tax administration modernization
- Anyone following the evolution of government vs. private-sector tax preparation
The report remains publicly available and serves as the definitive primary source on the original analysis of an IRS Direct File system.
Related IRS Resources:
- IRS Direct File historical information (archived pilot pages)
- Free File program (public-private partnership)
- Publication 5916 & 5917 (2025 Direct File guidance, now historical)
Bottom line: IRS Publication 5788 provided a thorough, data-driven foundation for evaluating a free IRS-run direct e-file system. It documented significant taxpayer interest, realistic cost ranges, and clear implementation challenges—insights that continue to inform national tax filing policy discussions even after the program’s 2026 suspension.
For the complete details, download Publication 5788 directly from IRS.gov and review the full surveys, cost tables, and third-party analysis. Tax filing options evolve quickly—always check IRS.gov for the latest free filing programs available in your state.