The IRS is set to launch its Direct File program, a free tax-preparation platform, to a wider audience on March 12. This marks the debut of a government-run alternative to commercial providers like TurboTax and H&R Block. The Direct File program will initially be available in 12 states, including Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington state, and Wyoming.
The IRS Direct File program aims to offer a free and accessible option for taxpayers to prepare their tax returns. It is designed for relatively basic tax returns and has no income limits, similar to the free tax-prep programs offered by TurboTax and H&R Block. However, all three platforms can only be used for certain types of tax returns, primarily simple ones.
The IRS has been slowly rolling out the Direct File program, initially making it available for certain hours of the day. However, starting March 4, new users will have access to the platform 24/7. The IRS official advises users to look for a notice at the top of the site to check if it is open. While there may be temporary unavailability due to high demand, more slots will be added every day to accommodate all interested and eligible taxpayers.
Users in Arizona, California, Massachusetts, and New York can also utilize the Direct File program for free online preparation of their state returns. Additionally, eligible users in Washington state can benefit from certain tax credits through the platform. The program can handle returns with W-2 job wages and common credits like the child tax credit and student-loan interest deduction. However, it cannot support returns that involve reporting capital gains or independent-contractor income.
To ensure efficient usage of the service, users will need to answer eligibility questions upon logging into the program. This allows the IRS to quickly sort out individuals who are unable to use the service.
The IRS began accepting and processing tax returns for 2023 on January 29. As of late February, the agency has processed over 44 million returns, with taxpayers receiving an average refund of $3,213. This amount is over 4% higher than the average at the same point last year.
Overall, the launch of the Direct File program by the IRS provides taxpayers in the 12 eligible states with a free and government-run alternative to commercial tax-preparation services. With the ability to handle basic tax returns and offer additional state-specific support, this platform aims to simplify the tax-filing process for eligible individuals.
