The Internal Revenue Service is rolling out a free option for residents of some 12 states this year to file their federal tax returns.
last monthThe agency released details of its plans to test an internal filing system that allows taxpayers to submit their federal tax returns online and directly to the agency for free. Residents of 12 states are eligible to participate if they meet certain criteria.
“This is an important step forward in this innovative initiative, potentially providing taxpayers with a new option to file their returns directly with the IRS for free,” said Danny Wuerffel, the agency’s administrator, in a recent statement. I’ll try it.”
Although direct filing has begun on a limited basis, it has already faced resistance, particularly from commercial tax preparers.
Intuit spokeswoman Tania Mercado criticized the Direct File project as a “half-baked solution” and a waste of taxpayer money. “The direct file method is a solution to a problem,” she said. Intuit makes her TurboTax tax preparation software.
While Democrats in Congress generally support the idea of free direct filing, Republicans say the idea is part of President Biden’s plan to overhaul the Internal Revenue Service and that the agency will They claim that it will give even more power to the people.
The Direct File pilot is aimed at low- and moderate-income taxpayers filing simple returns. For example, to qualify, a claimant must take the standard deduction, have income limited to wages, Social Security, or unemployment reported on Form W-2, and have less than or equal to her $1,500 in interest income. . Gig workers are not eligible. The IRS said in November that it expected “at least several hundred thousand taxpayers.” This is to participate in a so-called “limited” pilot.
Many filers already have the option to prepare and file a free electronic return based on their income through IRS Free File, partnering with a DIY tax software company, or directly through some commercial providers. The IRS also provides an online form that allows filers, regardless of income, to file their returns for free.
However, the IRS Free File program has had mixed results.nonprofit newsroom propublica For example, we reported that Intuit’s TurboTax program was driving users away from its free version. (Intuit does not participate in IRS Free File, but does offer software free of charge to certain users.)
The IRS says all of these free options will continue to be available, and the test version will be just one option. But with its new Direct File service, the IRS aims to further streamline the filing process. One possible scenario included in the agency’s report to Congress is that the IRS could include information it already has, such as W-2 wage statement data, on tax returns. However, the pilot will require participants to enter their financial information, the IRS said.
The Inflation Control Act of 2022 ordered the IRS to consider direct filing. The agency filed the proposal in May. report It was determined that the majority of taxpayers were interested in using the Direct File tool and preparations for a pilot test were begun. The IRS estimates in its report that the annual cost of Direct File Systems could range from $64 million to $249 million, depending on the scope of the service. (A Separate report However, the Treasury Department’s Inspector General for Tax Administration said the design of the study conducted in the previous report may have “overstated” the benefits to taxpayers, and that the Treasury Department’s cost estimates were not “reasonable”. ”).
The pilot system was built at the IRS by a team of tax professionals, product managers, software engineers, designers, and data scientists, the IRS said. IRS said it is cooperating special teams An organization that helps government agencies develop digital services.
According to the IRS, Direct File guides users through the process of preparing their return, similar to commercial software. The service is “mobile friendly” and available in English and Spanish. Users can receive support from agents through a live online chat feature and can also speak to a customer service representative over the phone if needed.
The agency said in an online summary that the pilot will initially be rolled out to a “small group of taxpayers” during the 2024 filing season to ensure it works well. As the season progresses, “an increasing number” of eligible taxpayers will be able to take advantage of the service.
“We are starting small to get it right,” the agency said in a statement. update.
The IRS said it will facilitate the filing option in part through a network of grassroots and community partners, including the Volunteer Income Tax Assistance Program, which provides free tax assistance to low- and moderate-income filers and people with disabilities.
The agency said it plans to issue a public report on the pilot before deciding whether to open the direct filing system to more taxpayers.
Here are some questions and answers regarding the upcoming tax filing season.
Which states are included in the pilot?
Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington State, Wyoming is participating. Most of these states do not impose income taxes at the state level, but the four that do (Arizona, California, Massachusetts, and New York) offer state assistance that can be used to file state returns. The tool will be introduced to participants.
“It’s interesting that something like this is happening,” said Gabriel Zucker, associate director of tax incentives and policy. code for americais a nonprofit organization that builds digital tools to help taxpayers access government services. The group builds the state’s electronic filing software. arizona and new york IRS Pilot participants can use it to file their state returns. “We hope this will eliminate some of the headaches associated with filing,” Zucker said.
Direct File users in New York state will now be able to share information about their federal returns through the Code for America filing tool, according to an announcement from Governor Kathy Hochul’s office. This tool uses the data you provide to create most of your state returns. Most taxpayers only need to answer a few simple questions to complete their New York state return.
By when can I file my income tax return this year?
The IRS has not announced a filing start date for the 2023 tax year, but it typically occurs in late January. (Last year, filing season started on January 23rd.)
When is this year’s tax filing deadline?
The federal filing deadlines for your 2023 tax return are: April 15th, applies to most filers. State filing deadlines may vary.