Taxpayers in 24 states will be able to file their returns directly with the IRS in 2025
WASHINGTON — The IRS is expanding its program that allows people to file their taxes directly with the agency for free.
The federal tax collector Direct File programwhich allows taxpayers to calculate and file their returns directly with the government without using commercial tax preparation software, will be open to more than 30 million people in 24 states in the 2025 filing season.
The program was rolled out as a pilot in 12 states during the 2024 tax season.
Now IRS Commissioner Daniel Werfel says so program will be permanent and the IRS will expand participation options for taxpayers.
“We are announcing significant expansions of Direct File, bringing the service to millions more taxpayers in 2025,” Werfel said on a call with reporters Thursday. He said it is possible that even more states could choose to join the program in 2025.
The pilot program in 2024 allowed people in certain states to calculate and file their returns directly with the IRS with very simple W-2s. Those who used the program demanded more than $90 million in refunds, the IRS said.
It was originally available to certain taxpayers in California, New York, Arizona, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming and Massachusetts.
States to be added in 2025 include: Alaska, Connecticut, Idaho, Kansas, Maine, Maryland, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania and Wisconsin.
In addition, new participation standards will allow participation of taxpayers with 1099 incomes and credits, including the Child and Dependent Care Credit, the Retirement Savings Contribution Credit, and the Health Savings Account Deduction, among others.
“Other countries have been offering their citizens the ability to do these kinds of things for years,” Deputy Treasury Secretary Wally Adeyemo said on a call with reporters. Several Organization for Economic Co-operation and Development countries, including Germany and Japan, have similar systems of pre-filled tax forms.
The idea of an instant file is not viewed favorably by the commercial tax preparation software companies who have made billions of dollars by charging people to use their software.
Additionally, an IRS Inspector General report released this week notes that the IRS has not maintained sufficient data protection safeguards related to the IRS Free File Alliance. The alliance is a long-standing agreement between the IRS and a number of commercial tax preparation companies to provide free tax preparation services to low- and middle-income taxpayers.
The Free File Alliance is separate from the Direct File program.
The IRS was ordered to investigate how to create a “direct file” system as part of the money it received from the Inflation Reduction Act signed by President Joe Biden in 2022. It gave the IRS nine months and $15 million to report on. how such a program would work.