Editor’s note: This is a developing story. We’ll update the article as new information is available.
In 2024, eligible taxpayers in 13 states may be able to file their federal tax returns for free directly through the IRS. The agency’s new pilot program, dubbed IRS Direct File, is set to launch in January, ahead of the 2024 filing season.
Supported by funding from the Inflation Reduction Act of 2022, Direct File represents the agency’s first attempt to provide a free tax filing service comparable to existing commercial software.
While the initial rollout will be limited to a small group of people with simple tax returns in select states, the IRS is hopeful that the learnings collected from the trial will help to inform the program’s future development.
“This is a critical step forward for this innovative effort that will test the feasibility of providing taxpayers a new option to file their returns for free directly with the IRS,” said IRS commissioner Danny Werfel in an Oct. 17, 2023 press release.
Here’s a breakdown of who qualifies and what types of returns are expected to be eligible.
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What is IRS Direct File?
IRS Direct File is an agency-run tax-prep program that will allow eligible users across 13 states to file their federal income tax returns for free directly through the agency in 2024. Access to the program will be staggered, starting with a small group of tax filers, followed by a wider rollout as the tax season gets underway.
Similar to commercial tax software, the agency says its Direct File service will utilize interview-style questions to help taxpayers complete and submit their tax returns. The service will be available in both English and Spanish, and filers will be able to work on their returns via mobile, tablet or computer.
The agency will also provide a staff of customer service agents to help filers with technical and basic tax questions as needed. Queries that fall outside of the scope of the program will be directed to other IRS customer support representatives.
Which states are eligible for IRS Direct File?
The pilot program is slated to be available in 13 states: Alaska, Arizona, California, Florida, Massachusetts, New Hampshire, New York, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.
Nine of these states — Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennesse, Texas, Washington and Wyoming — don’t have a state income tax. (New Hampshire does tax dividends and interest, and some high earners in Washington may face a capital gains tax on sizable profits.)
For the states that do have a state income tax — Arizona, California, Massachusetts and New York — the IRS has partnered with the state to route tax filers to a state-supported tool once their federal return has been filed.
What types of tax situations does Direct File support?
Living in a qualifying state isn’t necessarily enough to qualify for Direct File. The pilot program will limit the types of returns it can process to simple tax returns.
Taxpayers with multiple income streams, such as business owners and freelancers, are unlikely to qualify. The simple tax return requirement also excludes people who need to take certain types of tax credits and deductions. Itemizers, investors, those who are self-employed, and filers who were hoping to claim tax credits for things like EV purchases or education expenses, will likely get cut from the roster as well.
According to the IRS, the Direct File program will cover the following:
✓ Social Security and railroad retirement.
✓ Unemployment benefit income.
✓ Interest of up to $1,500.
✓ Credit for other dependents.
✓ Student loan interest deduction.
How much does Direct File cost?
The IRS Direct File service will be free of charge. After completing their federal returns, filers with state return obligations will be directed to their respective state’s filing service. Whether the state return services will be offered at no cost has not yet been confirmed.
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How can I access Direct File?
The IRS will announce additional details about the pilot program in 2024. We’ll update this article to reflect new information as it becomes available.
What’s the difference between IRS Free File and IRS Direct File?
The IRS Free File program is a partnership between the tax agency and several commercial tax software providers, such as TaxSlayer and Tax Act, to offer free filing services to taxpayers who make below a certain income. For the 2023 tax filing season, that income limit was $73,000. Free File providers may add their own additional restrictions to services offered, such as whether state returns or certain federal credits are supported.
Direct File, on the other hand, is an IRS-run tax-prep and filing service with no income limitations being piloted by the agency for the 2024 tax season. The program is sponsored by funding from the Inflation Reduction Act and will only be available to taxpayers in certain states who have simple tax return situations.