Today, I’m excited to share some fantastic news about the IRS’s new Direct File system. This program, now a permanent fixture, is a game-changer for taxpayers with an adjusted gross income (AGI) under $200,000. It allows you to file your taxes directly with the IRS, and guess what? It’s completely free!
Last year, the pilot program, which involved 12 states, was a huge success. Over 140,000 people used Direct File, and more than 90% gave it rave reviews. Refunds totalled in the millions, proving just how effective and popular it was.
Now, the IRS is expanding the program to include all 50 states and the District of Columbia for the 2025 tax season. However, not everyone is jumping on board just yet.
Curious to know which states are holding out? Stick around as we dive into the details and uncover everything you need to know.
Which States Have Joined IRS Direct File? Here’s the Latest Update
As of now, seven new states have jumped on board: New Jersey, New Mexico, Oregon, Pennsylvania, Connecticut, Maine, and North Carolina. The governors of these states are excited about the benefits of Direct File and have been sharing their enthusiasm.
For instance, Oregon was the first state to join the program, and Gov. Tina Kotek took to social media to announce it. She highlighted how Direct File will save Oregonians both time and money next year.
Similarly, Pennsylvania’s Gov. Josh Shapiro and New Mexico’s Gov. Michelle Lujan Grisham have praised the program, calling it “free and easy.”
Last tax season, the pilot program included states like Arizona, California, and New York. These states are expected to participate again for the 2025 tax season.
However, keep in mind that while Maine has signed up, it will only support certain federal returns for the 2025 season. Residents should expect to use Direct File for state returns in the 2026 tax season.
Which States Are Opting Out of IRS Direct File? Here’s the Breakdown
Not all states are jumping on the IRS Direct File bandwagon, and there are a few reasons why. To join the program, states need up-to-date IT systems that can handle the new online filing requirements. States that haven’t upgraded their tech recently might not be able to participate.
For instance, Virginia, under Governor Glenn Youngkin, has decided not to join the program. According to a local news report, Virginia’s outdated revenue management system and budget constraints are major factors. Plus, Youngkin highlighted a legal issue, stating that current laws don’t support this new filing approach. Therefore, a change in legislation would be required before Virginia could participate.
Similarly, Alabama’s Governor Kay Ivey has cited legal concerns as the reason for her state’s decision to opt out.
Montana and Nebraska are still on the fence. In Montana, twelve attorneys general have argued that Direct File could be unconstitutional, claiming Congress hasn’t given the Treasury Department the authority to set up this system.
In Nebraska, along with North Carolina, there’s a proposed bill called the “IRS Overreach Prevention Act.” This bill argues that the IRS has not been transparent, is overstepping its bounds, and might use Direct File data to increase tax audits.
What to Do If Your State Doesn’t Offer IRS Direct File: Smart Alternatives for Tax Prep
If you’re living in one of the 31 states or territories not included in the Direct File program, you might be wondering what your options are. While we wait to see if your state will jump on board, there are several ways you can save on tax preparation and filing this season.
First, explore other free tax filing options. Many states offer programs through their Department of Revenue websites that could help you file without cost. Additionally, you might qualify for the IRS Free File program.
This program works with partner tax preparation providers, so you don’t file directly with the IRS. For the 2023 tax year, Free File was available to those with an adjusted gross income (AGI) of $79,000 or less, and its popularity is on the rise.
Is IRS Direct File Goes Permanent?
The IRS has recently announced that Direct File will become a permanent option for taxpayers. The pilot program, which cost around $2.4 million in operational expenses, including customer service and technology, has shown promising results.
The IRS will continue to analyze the data and feedback collected to improve and expand the service, with plans to include all 50 states and the District of Columbia in the future.
Lawmakers, including Sen. Elizabeth Warren (D-Mass.), have strongly supported the Direct File program. In a letter to Treasury Secretary Yellen and IRS Commissioner Werfel, they praised the pilot’s success and highlighted its potential to offer a free and user-friendly alternative to commercial tax filing services. This support comes as Intuit TurboTax faces a decline in users and a drop in stock value due to the rise of Direct File.
The Coalition for Free and Fair Filing, representing nearly 260 organizations, also applauded the program. They emphasized that Americans spend $31 billion and 1.7 billion hours annually on tax filing and argue that Direct File could simplify this process significantly.
However, some members of the U.S. House of Representatives have raised concerns about the IRS taking on multiple roles as tax preparer, filer, and auditor.
IRS Direct File Program: What’s Next for Taxpayers
In a recent update, IRS Commissioner Werfel highlighted the agency’s dedication to simplifying the tax filing process. He said, “Adding Direct File to our options aligns perfectly with our goal to make tax filing easier for Americans, helping them save both time and money.”
During the 2024 tax season, the IRS Direct File pilot program was tested in 12 states. As the season progressed, more taxpayers showed interest, leading to significant usage spikes as the deadline neared. Overall, taxpayers claimed over $90 million in refunds and reported $35 million in balances due. The Direct File website saw millions of visitors eager to learn more about this new option.
User feedback has been overwhelmingly positive, with 90% of survey respondents rating their experience as “Excellent” or “Above Average.” Additionally, 86% felt their trust in the IRS increased through their use of Direct File.
Notable states in the pilot included California, Texas, Florida, New York, and Washington, with California and Texas leading in usage. Although all states and the District of Columbia are invited to join for the 2025 tax season, some states are still deciding whether to participate.
The IRS also noted a rise in the use of other free filing options, such as Free File and services at VITA and TCE sites. Free File, which helps those with incomes under $79,000, has been extended through 2029.
Final Thoughts: What the Future Holds for IRS Direct File
The IRS Direct File program represents a significant step forward in simplifying tax filing for millions of Americans. With its expansion to include all 50 states and the District of Columbia in the 2025 tax season, it has the potential to make tax filing more accessible and cost-effective. The overwhelmingly positive feedback from the pilot program underscores the value of this new option, with many praising its ease of use and efficiency.
However, not all states are on board just yet. While some have enthusiastically joined, others face technical or legal hurdles that prevent their participation. For those living in states not yet included, exploring alternative free filing options, such as state-specific programs or IRS Free File, can help reduce the cost of tax preparation.
As the IRS continues to refine and expand Direct File, keeping an eye on updates and understanding available options will be crucial. This program aims to reduce the burden of tax filing and provide a more straightforward path for taxpayers. Stay informed and prepared as changes unfold, and take advantage of the resources available to make your tax season as smooth as possible.
Frequently Asked Questions
Ques. 1. What is the IRS Direct File program?
Ans. The IRS Direct File program allows eligible taxpayers to file their taxes directly with the IRS for free. It is designed for individuals with an adjusted gross income (AGI) under $200,000. This service aims to simplify the tax filing process and eliminate the need for commercial tax preparation services.
Ques. 2. Which states are currently participating in IRS Direct File?
Ans. As of now, the IRS Direct File program includes several states such as New Jersey, New Mexico, Oregon, Pennsylvania, Connecticut, Maine, and North Carolina. States like California, Texas, Florida, and New York, which participated in the pilot program, are expected to join again for the 2025 tax season.
Ques. 3. How can I file my taxes if my state is not included in Direct File?
Ans. If your state is not participating in the IRS Direct File program, you can explore other free tax filing options. Many states offer free filing services through their Department of Revenue websites. Additionally, the IRS Free File program, available for those with an AGI of $79,000 or less, provides access to various free tax preparation services.
Ques. 4. What are the benefits of using IRS Direct File?
Ans. IRS Direct File offers several benefits, including a simplified filing process, no cost for users, and direct interaction with the IRS. The program has been praised for its ease of use, time savings, and efficiency, helping taxpayers avoid fees associated with commercial tax preparation services.
Ques 5. When will IRS Direct File be available in all states?
Ans. The IRS plans to expand Direct File to include all 50 states and the District of Columbia by the 2025 tax season. This expansion will provide more taxpayers with access to this free and simplified filing option.
Ques. 6. What were the results of the Direct File pilot program?
Ans. The pilot program, which involved 12 states, was highly successful. Over 140,000 taxpayers used the service, and more than 90% reported positive experiences. The program facilitated millions in refunds and demonstrated significant interest and effectiveness.
Ques. 7. How does IRS Direct File impact commercial tax preparation services?
Ans. The introduction of IRS Direct File has impacted commercial tax preparation services like Intuit TurboTax, leading to a decline in users and a drop in stock value. The program offers a free alternative, potentially reducing the demand for paid tax preparation services.
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