The IRS has announced that its free online tax filing tool, Direct File, will become a permanent feature starting with the 2025 tax season, simplifying tax filing and reducing costs for more Americans.
This decision follows a successful pilot program during the 2024 tax season, which saved taxpayers millions in filing costs and received overwhelmingly positive feedback.
What is Direct File?
Direct File is a digital tool introduced by the IRS in late 2023, designed to allow taxpayers to file their taxes for free directly through the IRS website.
At first, the program was designed for people with simple tax returns, like those who only had income from a job (W-2 income) or who took the standard deduction. The goal was to offer an affordable option compared to commercial tax filing services that typically charge high fees.
IRS Direct File Success, Expansion Plans
The pilot program, conducted during the 2024 tax season, demonstrated the tool's potential benefits. According to the US Department of the Treasury, more than 140,000 individuals used the tool, collectively saving an estimated $5.6 million in filing costs and claiming more than $90 million in refunds.
Additionally, user feedback has been overwhelmingly positive. A survey of over 11,000 Direct File users revealed that 90% rated their experience as "excellent" or "above average." Many appreciated the straightforward, no-cost approach of the tool, compared to commercial services that often involve hidden fees and upselling.
Currently, Direct File is available to taxpayers in 12 states. However, starting in 2025, the tool will be accessible in all 50 states and Washington, DC.
The IRS plans to expand the tool's capabilities over the coming years to accommodate more complex tax situations, making it a valuable resource for a broader range of taxpayers.
WASHINGTON, DC - APRIL 05: People use IRS Direct File at the Internal Revenue Service Building on April 05, 2024 in Washington, DC. Photo by Tasos Katopodis/Getty Images for Economic Security Project
Strong Government Support
The initiative has strong backing from the current administration. Treasury Secretary Janet Yellen stressed the Biden administration's focus on saving time and money for Americans and ensuring families receive the tax benefits they are entitled to. She noted that providing a free tool for all Americans to file directly with the IRS is key to achieving these goals.
Despite its success, NBC News reports that Direct File faces opposition from some states and commercial tax preparation companies like TurboTax. Twelve states have expressed reluctance to participate, arguing that Direct File represents a misallocation of taxpayer resources.
However, the federal government is encouraging all states to adopt the tool, aiming to ensure that taxpayers nationwide can benefit from the service.
Supported by resources from President Biden's Inflation Reduction Act, the IRS aims to continually improve and expand Direct File. The long-term goal is to include more complex tax situations and ensure the tool remains free, secure, and easy to use.
