The US Internal Revenue Service (IRS), which is responsible for handling federal taxes, has put forward its plan to offer US citizens free tax filing. This could threaten an entire industry built around tax reporting.
Theirs announced that the pilot scheme would open for tax year 2024, and that eligible taxpayers from 13 US states would be able to participate.
The scheme, which is part of the Inflation Reduction Act 2022, is intended to improve taxpayer service, enforcement and technology and could eliminate the need for taxpayers to use paid services such as TurboTax.
Free filing service for US taxpayers
Residents of Arizona, California, Massachusetts and New York are eligible to participate in the pilot. The IRS also added that taxpayers with no income taxes in Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming are also eligible.
IRS Commissioner Danny Werfel said, “In this limited 2024 pilot, we will work closely with the states that have agreed to participate in an important test run of state integration. This will help us gather important information about the future direction of state integration. the Direct File program.”
The pilot scheme will consider income, credits, and deductions to determine exactly which residents may qualify in this round of testing.
The IRS has not explicitly committed to making free tax filing available to all, instead stating that it would “evaluate the costs, benefits, and operational challenges associated with offering a voluntary Direct File option to taxpayers.”
However, the IRS has promised to publicly share the results of its analysis in due course, which could spell the end for companies that offer such services for a fee.