New IRS Program, “Direct File,” to Offer Free Electronic Filing of Taxes in 13 States for 2024 Tax Season
The Internal Revenue Service (IRS) has recently announced plans to launch a pilot program called “Direct File,” which will allow eligible taxpayers in 13 states to electronically file their taxes with the agency for free during the 2024 tax season.
This move is aimed at providing a cost-free and straightforward option for filing taxes, a concept that has long been resisted by paid tax preparation companies like TurboTax and H&R Block, who have profited from charging individuals to use their software.
IRS Commissioner Danny Werfel expressed his enthusiasm for this initiative, emphasizing the potential of Direct File to offer taxpayers a new avenue for filing their returns directly with the IRS.
The launch of Direct File has been made possible by the funding allocated in the 2022 Inflation Reduction Act, which set aside $15 million for the exploration and implementation of a user-friendly government-provided tax filing service.
Direct File is part of a broader transformation initiative by the IRS. The pilot program for the 2024 filing season will be conducted on a limited scale in order to assess customer support and technological requirements.
Several states, including Arizona, California, Massachusetts, and New York, have committed to collaborating with the IRS’ Direct File program for the 2024 filing season. Additionally, taxpayers in nine states without an income tax – Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington, and Wyoming – will also be eligible to participate.
While all states were invited to join the pilot, not all were able to do so at this time. Taxpayers’ eligibility to participate in the pilot will be determined by the state in which they reside, with a focus on individuals with relatively simple returns involving specific types of income, credits, and deductions.
The Direct File program is expected to cover key income types, such as wages reported on a Form W-2, as well as significant tax credits like the Earned Income Tax Credit and the Child Tax Credit.
The 2022 Inflation Reduction Act represents a significant step in providing long-term funding for the IRS to modernize its operations and enhance taxpayer service. It also mandated the study of a free, direct e-file program, which the IRS submitted in a report to Congress in May 2023.
Direct File will be a mobile-friendly, interview-based service available in both English and Spanish. It will be introduced to a select group of eligible taxpayers during the 2024 filing season and will gradually expand access as the season progresses.
The program will complement existing filing options, including tax professionals, Free File, free return preparation services, commercial software, authorized e-file providers, and traditional paper tax returns. Participants in the pilot program will be able to receive assistance from IRS personnel overseeing the Direct File customer support service.
IRS customer service representatives will provide technical support and explanations pertaining to tax laws associated with Direct File.
The Direct File pilot program is an important step towards providing taxpayers with more options for interacting with the IRS and filing their taxes. It represents a significant departure from the dominant model of paid tax preparation software and aims to simplify the process for individuals with relatively simple tax returns.
Overall, the initiative is expected to improve taxpayer service and provide a cost-free alternative for filing taxes, paving the way for a more streamlined and accessible tax filing system.