The Internal Revenue Service (IRS) has announced plans to initiate a pilot program called "Direct File" that would allow taxpayers in 13 states to electronically file their taxes with the agency for free during the 2024 tax season.
This is a significant move towards providing a cost-free and straightforward option for filing taxes, which paid tax preparation companies like TurboTax and H&R Block have long resisted as they have made billions from charging people to use their software.
CHICAGO - NOVEMBER 1: Current federal tax forms are distributed at the offices of the Internal Revenue Service November 1, 2005 in Chicago, Illinois. A presidential panel today recommended a complete overhaul of virtually every tax law for individuals and businesses.
IRS: New Avenue for Filing Taxes
IRS Commissioner Danny Werfel on Tuesday expressed enthusiasm for this effort, emphasizing its potential to offer taxpayers a new avenue for filing their returns directly with the IRS.
The launch of Direct File is made possible by the funding allocated in the 2022 Inflation Reduction Act, which earmarked $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, allowing the agency to assess customer support and technological requirements.
Arizona, California, Massachusetts, and New York are among the states that 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.
Although all states were invited to join the pilot, not all were able to do so now. Taxpayers' eligibility to participate in the pilot will be determined by the state where they reside, focusing 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, and significant tax credits like the Earned Income Tax Credit and the Child Tax Credit.
The 2022 Inflation Reduction Act represents a pivotal step in providing long-term funding for the IRS to modernize its operations and enhance taxpayer service. It mandated the study of a free, direct e-file program, which the IRS submitted in a report to Congress in May 2023.
Projects like Direct File align with the IRS Strategic Operating Plan aim to offer taxpayers various options for interacting with the agency.
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IRS Direct File Pilot Program
The Direct File pilot program 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 in filing season 2024, gradually expanding access as the season progresses.
Direct File 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. Those engaged 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 offer technical support and fundamental explanations pertaining to tax laws associated with Direct File. Check this link to learn more about the service's eligibility.
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