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Taxpayers in 24 states will be able to file their returns directly with the IRS in 2025

WASHINGTON (AP) — The IRS is expanding its program that allows people to file their taxes directly with the agency for free.

The federal tax collector’s Direct File program, which allows taxpayers to calculate and submit their returns to the government directly 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 during the 2024 tax season in 12 states.

Now IRS Commissioner Daniel Werfel says the program will be permanent and the IRS will expand eligibility opportunities for taxpayers.

“We're announcing significant expansions of Direct File that will make the service available to millions more taxpayers in 2025,” Werfel said on a call Thursday with reporters. He said it is possible that additional states could still choose to join the program in 2025.

The pilot program in 2024 allowed people in certain states with very simple W-2s to calculate and submit their returns directly to the IRS. Those using the program claimed 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 eligibility standards will allow participation by taxpayers with 1099 income and credits including the Child and Dependent Care Credit, Retirement Savings Contributions Credit, and the deduction for Health Savings Accounts, among others.

"Other countries have been providing their citizens with the ability to do this type of thing for years," Treasury Deputy Secretary Wally Adeyemo said on the call with reporters. Several nations in the Organization for Economic Cooperation and Development, including Germany and Japan, have similar systems with prepopulated tax forms.

The direct file idea is not viewed favorably by the commercial tax prep software firms that have made billions of dollars from charging people to use their software.

Additionally, an IRS inspector general report released this week notes that the IRS has not maintained sufficient safeguards over data protection related to the IRS Free File Alliance. The alliance is a longstanding agreement between the IRS and some commercial tax preparation companies to provide free tax prep services to low and middle-income taxpayers.

The Free File Alliance is separate from the Direct File program.

The IRS was tasked with looking into how to create a “direct file” system as part of the money it received from the Inflation Reduction Act signed into law by President Joe Biden in 2022. It gave the IRS nine months and $15 million to report on how such a program would work.

Source: finance.yahoo.com

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