IRS Launches Free Direct File Tax Program

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The Internal Revenue Service and the US Department of the Treasury officially launched their Direct File tax program on March 12.

Direct File — now available in both English and Spanish — has been piloted in several states and offers Americans a free way to file their taxes. Residents of 12 states are eligible for the program, but there is not yet a clear timeline for expansion.

Taxpayers who could see benefits from Direct File include a parent who claims income tax and child tax credits, a recent graduate who pays student loan interest, and a retired older person with Social Security income, according to The Treasury Department.

With Direct File, taxpayers can file their taxes directly from their smartphone, laptop, or desktop computer. The program can’t process complex tax information, such as gig work-based incomes, but the Treasury Department estimates that one-third of all federal income tax returns could be filed through Direct File, benefiting about 19 million taxpayers this spring.

Direct File was developed by the IRS following President Joe Biden’s 2022 Inflation Reduction Act. A press release from the Treasury Department said the program aims to “save taxpayers time and money.”

Millions of taxpayers in 12 states could benefit from Direct File

Residents of California, Arizona, Florida, Massachusetts, New Hampshire, Nevada, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming are currently eligible.

The Direct File program will show taxpayers clear math on the taxes they owe and their expected tax refund. A senior administration official said about 15,000 taxes have been filed with Direct File in eligible states so far.

Americans whose primary 2023 paycheck came from gig work or business income, or those who claim the Saver’s Credit or the Premium Tax Credit do not qualify.

As the program expands, the senior administration official said they hope the program can continue to broaden to include more taxpayers and more types of tax returns. Pilot programs — which began February 28have provided valuable feedback, he said.

“Direct File ensures taxpayers get their full refund by showing them the numbers and explaining credits they are eligible for,” Deputy Secretary of the Treasury Wally Adeyemo said in a press statement. “Our priority in launching this new service is to save taxpayers time and money they can spend on themselves and their families.”

IRS investment aligns with Biden’s economic plan

The average taxpayer will save $160 in filing fees by using Direct File, Deputy Chief of Staff to the President Natalie Quillian said, and many pilot users saved as much as $400. As eligibility is expanded to other states, Americans could save $11 billion annually.

“It’s an example of how our administration is working to make government work better and smarter for the American people and create tools that make working families’ lives easier,” Quillian said.

With increased funding from the Inflation Reduction Act, a senior administration official said the IRS answered 3 million more calls last year and significantly lowered call wait times.

Biden’s latest budget was also announced this week, proposing a minimum income tax on billionaires and hiking the corporate tax rate to 28%, and seeks to raise the corporate minimum tax rate. But any proposals to raise taxes on the ultrawealthy are most likely to be opposed by most Republican lawmakers.