IRS Direct File will be available to certain taxpayers for the 2024 tax filing season. But what is Direct File, and who can use it? Let’s walk through the essential facts you need to know about IRS Direct File.
What is IRS Direct File?
The Inflation Reduction Act of 2022 instructed the Internal Revenue Service to explore a new filing method that would let taxpayers file online directly without having to use a third-party platform. IRS Direct File, which is currently in its pilot stages, is the IRS electronic filing platform they introduced.
How does the Direct File program work?
Direct File is an online tax preparation platform, somewhat like H&R Block, TaxAct, or TurboTax. However, unlike these third-party platforms — which compile your tax return information and file it for you — Direct File lets taxpayers submit their returns directly to the IRS online. It’s also a little different from IRS Free File, which is a partnership between the IRS and tax filing software industry companies to help facilitate the filing process for taxpayers with adjusted gross incomes of $73,000 or less.
In short, Direct File lets eligible taxpayers file their own taxes and cut out the middleman at tax time.
Who is eligible for the Direct File pilot?
Currently, the Direct File pilot isn’t available to all individual taxpayers. To be eligible to use IRS electronic filing for their 2023 returns, taxpayers must live in a participating state and have relatively simple tax returns.
Here are the 13 states that are participating in the Direct File program:
- New Hampshire
- New York
- South Dakota
Currently, the IRS projects that the Direct File pilot platform will cover the following categories:
- Taxable Income: W-2 wages, railroad retirement and Social Security benefits, unemployment, and interest that doesn’t exceed $1,500
- Tax Deductions: educator expenses, the standard deduction, and interest from student loans
- Tax Credits: the Child Tax Credit, credits for other dependents, and the Earned Income Tax Credit
Taxpayers who don’t meet these criteria will have to use other tax filing methods until the IRS rolls out Direct File for more users.
What does this mean for tax season 2024?
If you don’t meet the criteria listed above, then your 2024 tax season will likely look similar to last year. Simply use the tax filing method that you’ve used in the past. In future years, the IRS anticipates rolling out the program to more users, so you might be able to use it then.
However, if you’re an eligible taxpayer, you can participate in the pilot program and use Direct File for your individual federal tax returns. Please note that Direct File will only cover your federal return. After you finish using Direct File, the IRS will direct you to a state-supported tool to file your state return, if applicable.
For example, taxpayers in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming may only have a federal tax return to file since these states don’t have a state income tax. Meanwhile, taxpayers in Arizona, California, Massachusetts, and New York will need to prepare and file their state taxes directly with the state, with their tax professional, or using commercial tax software.
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Disclaimer: The content on this page is for informational purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.