Taxpayers in 24 states across the United States will have the opportunity to file their tax returns directly with the Internal Revenue Service (IRS) starting in 2025. The IRS is set to expand its program that enables individuals to submit their taxes directly to the agency for free.
The Direct File program, initiated by the federal tax collector, allows taxpayers to calculate and submit their returns directly to the government without the need for commercial tax preparation software. This program will be open to more than 30 million people in 24 states during the 2025 filing season, after being piloted in 12 states during the 2024 tax season.
The IRS Commissioner, Daniel Werfel, has announced that the Direct File program will become permanent, with eligibility being broadened to accommodate more taxpayers in the upcoming year. The IRS is looking to make significant expansions to the program in 2025, making it accessible to millions more taxpayers.
Taxpayers participating in the pilot program during 2024, with simplified W-2 forms, were able to directly submit their returns to the IRS. These individuals collectively claimed over $90 million in refunds through the program. Originally available in states like California, New York, and Texas, the Direct File program will now expand to states such as Alaska, Connecticut, and Pennsylvania in 2025.
Furthermore, the eligibility criteria for the program will be revised to include taxpayers with 1099 income and a range of tax credits, such as the Child and Dependent Care Credit and Retirement Savings Contributions Credit. Treasury Deputy Secretary, Wally Adeyemo, mentioned that other countries like Germany and Japan have similar systems in place for citizens to file taxes.
It is worth noting that commercial tax preparation software companies, which have profited from charging users for their services, may not view the expansion of the Direct File program favourably. Moreover, an IRS inspector general report has highlighted concerns regarding data protection related to the IRS Free File Alliance, a separate agreement providing free tax prep services.
The IRS was directed to explore the creation of a direct file system by the Inflation Reduction Act, signed into law by President Joe Biden in 2022. The agency received funds to develop this program, enabling taxpayers in 24 states to file their returns directly with the IRS in 2025, streamlining the tax filing process for millions of Americans.