Many taxpayers across a dozen U.S. states can now electronically file their federal tax returns directly to the Internal Revenue Service (IRS) at no cost, marking a significant change. This new option, known as Direct File, has already been embraced by over 50,000 individuals during this tax season in states like Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming, as reported by the IRS.
The Direct File program, which was launched in March for the 2023 tax filing season, is specifically tailored for individuals with W-2 income or those with straightforward credits and deductions, such as the child tax credit or student loan interest deduction. Approximately 19 million taxpayers are deemed eligible to utilize this program before the tax filing deadline of April 15.
Free Tax Filing Test by IRS Met with Mixed Emotions Among Users
While the IRS views this initiative as a step towards streamlining and making tax filing more accessible, it has faced criticism from some quarters. Opponents argue that the Direct File program is redundant and potentially detrimental, raising concerns about its impact on professional tax preparers and the potential confusion for taxpayers accustomed to using private software for combined federal and state filings.
Furthermore, certain states are apprehensive about the potential revenue loss and increased collection expenses associated with this federal initiative. However, the IRS has emphasized that the program’s rollout is gradual and primarily caters to taxpayers with uncomplicated tax situations, particularly students and young individuals.
Despite the skepticism, the White House has thrown its support behind the Direct File program, citing it as part of broader efforts to combat inflation and enhance tax filing efficiency. There are predictions that an expanded program could yield significant cost savings for taxpayers and boost overall tax compliance, especially among lower-income households.
Who’s Eligible to Use IRS Free File?
For the 2024 tax filing season, eligibility to file a federal tax return for free through the IRS Free File program is based on the prior year’s adjusted gross income (AGI). Specifically, people who earned $79,000 or less in 2023 are eligible for this service.
This income threshold applies to all tax filing filings, which means that it does not matter if you file your return as single, married, head of household, etc. The AGI refers to your adjusted gross income, which is your total income minus certain deductions allowed by law.
While the IRS Free File program offers the opportunity to file a federal tax return for free, some providers may have additional requirements. For example, they might require the taxpayer to be a certain age or set income thresholds more restrictive than the overall limit of $79,000.
It is important to note that the state filing is not always included in the federal free offer. However, the IRS mentions that more than 20 states became available for free state filing last year through the Free File program.
In case you qualify to file a free federal return but can’t get a free state return through this program, your state may also offer its own free filing programs. For specific information about the availability of the free state filing in your state, it is advisable to check the website of the relevant department of taxation and revenue.