IRS Direct File pilot: US' new free online tax filing program explained

Tax filing just got easier! IRS has introduced a new system for taxpayers in twelve selected states that will ease them into filing federal income taxes this season, which began on January 29 with an April 15 deadline. The Treasury Department has estimated that about 19 million people may be eligible to use the online tool. A Spanish version of the program will also go live on Tuesday at 1 pm ET.

IRS Commissioner Daniel Werfel declared the new expansion as a "milestone" during the Tuesday press conference. He emphasised how Direct File marks the first time taxpayers can electronically file their returns directly with the Internal Revenue Service instead of availing commercial tax preparation software package TurboTax for income tax returns. And the whole thing being free of charge just can't be beaten. Here's everything you should know about the Direct File pilot program:

All About the IRS Direct File Pilot Program:

With its easy-to-follow approach, the free online tool will provide you with a step-by-step checklist, guiding you through the filing process and helping you keep track of the progress made. Once finished, Direct File will show a detailed summary of your 2023 federal taxes. Customer service representatives can also clear your doubts through live chat from Monday to Friday, 7 am to 10 pm ET. Technical support is offered in both English and Spanish.

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Which states are implementing the Direct File Pilot?

Taxpayers who didn't live in the following 12 states in 2023 can't access Direct File.

Arizona

California

Florida

Massachusetts

Nevada

New Hampshire

New York

South Dakota

Tennessee

Texas

Washington State

Wyoming

For taxpayers from Arizona, California, Massachusetts or New York: Direct File takes you to the state-supported tool, which will help you prepare and file state tax returns.

As for Washington state taxpayers, the pilot will guide you to a state site. There, you can apply for the Working Families Credit while filing your federal return with the pilot.

Direct File Eligibility:

Other than the pilot state criteria, taxpayers reporting the following types of income/credits/deductions on their 2023 tax return will be eligible for the program:

Types of income:

• W-2 wage
• SSA 1099 Social Security
• 1099-G unemployment compensation
• 1099-INT interest income of $1,500 or less

Types of credits:

• Earned Income Tax Credit
• Child Tax Credit
• Credit for other dependents

Type of deductions:

• Standard deduction
• Student loan interest
• Educator expenses

(Taxpayers itemising deductions can't use the pilot program)

IRS employee Dixie Warden had also referred to the US government's electronic tax return filing method as "taxes for dummies" earlier this month. Direct File is still in its mere pilot phases and has been launched on a limited basis. Werfel hasn't "prematurely" reached a conclusion about its availability in the 2025 season yet. The new project's success will significantly determine its role and growth in the future. An AP News report revealed that Warden, a Texan employee of the IRS, saved nearly $400 by filing her returns directly to the government instead of relying on other tax preparation services.