As the tax season commences next week, Americans will have access to various free filing options, and some taxpayers will soon be eligible for a new service introduced by the IRS.
Referred to as Direct File, this free filing software pilot will initially be offered on an invitation-only basis to a group of government workers before expanding to specific taxpayers in 12 states by mid-March.
Described as “simple, secure, and free” by Laurel Blatchford, the US Department of the Treasury’s Chief Implementation Officer for the Inflation Reduction Act, the Direct File software is a response to a feasibility report authorized by the Inflation Reduction Act.
The report revealed that nearly three-quarters of taxpayers expressed interest in a free filing system provided by the IRS.
Eligibility for IRS Direct File
Residents residing in eligible states with uncomplicated and straightforward tax returns may be eligible to participate in the pilot program.
The initial phase of the program will be limited to specific types of income, credits, and deductions, as outlined by IRS officials.
While Direct File is exclusively available to certain taxpayers, the bilingual software incorporates a built-in live chat support feature with IRS assistors.
The pilot program will exclusively accommodate Form W-2 wages, Social Security retirement income, unemployment earnings, and interest amounts up to $1,500.
This implies that individuals engaged in gig economy work or those with business income are not included in the pilot program.
To qualify for the Direct File pilot, individuals must claim the standard deduction, and the system only accepts a select few credits, including the earned income tax credit, child tax credit, and credit for other dependents.
Additionally, the software facilitates the inclusion of tax breaks for student loan interest and educator expenses.
Limited Start: IRS Direct File Pilot Targets Simple Filings
The IRS Direct File pilot is deliberately commencing with a restricted group of taxpayers who have relatively uncomplicated filings, as stated by IRS officials.
“We are taking a gradual approach: at the commencement of the filing season, the pilot is undergoing continuous testing with taxpayers, enabling us to identify and address any issues,” remarked IRS Commissioner Danny Werfel in a statement released on Thursday.
The eligible states for this pilot include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.
While Direct File does not encompass state returns, residents of Arizona, Massachusetts, and New York can seamlessly proceed to state filing by importing Direct File data.
California residents will utilize CalFile, incorporating certain pre-populated information.