IRS Launches Direct File Program for Free Online Tax Filing in 12 States
The Internal Revenue Service (IRS) has officially launched its long anticipated Direct File program, marking a significant step in the modernization of the US tax filing system by allowing taxpayers to file their federal tax returns to the IRS online for free.
Initially tested with a limited number of users during a controlled test period, the Direct File program is now available to all eligible taxpayers in 12 selected pilot states, targeting those with simple tax solutions and excluding those with gig work income.
Funded by the Inflation Reduction Act of 2022, the program was built as a part of a larger effort to improve customer service and enforcement capabilities of the IRS, and as an effort to save taxpayers billions in fees charged by third-party tax preparation services.
Current estimates say that one-third of all tax returns could be prepared through the Direct File program, potentially saving the average filer $160 annually, which drew a significant pushback from the tax prep industry and some political figures, but the IRS maintains that by providing a variety of filing options is within its authority and responsibility.
“Dozens of countries have provided free tax options to their citizens for years,” Deputy Secretary of the Treasury Wally Adeyemo said on Monday. “American taxpayers who want to file their taxes for free directly with the IRS should have that option.”
The IRS Direct File is currently available to users in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.
The eligibility requirements include having Form W-2 wages, unemployment earnings, Social Security retirement income and interest of $1,500 or less, with a claim on the standard deduction.
The program supports earned income tax credit and the child tax credit, along with deductions for student loan interest and educator expenses, but it does not support state returns.
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