Is Your State Offering Free IRS Tax Filing? Find Out If You're Among the Lucky 13!

individuals irs taxes

Today, we've got some exciting news that could make tax season a little less stressful for many Americans. The IRS is planning to test a free online tax system in 13 states this upcoming tax season. It’s called the Direct File program. Let's dive into the details!

What is the Direct File Pilot Program?

It’s a free online tax system run by the IRS. This program aims to simplify the tax filing process for eligible taxpayers. Four states with their own income taxes—Arizona, California, Massachusetts, and New York—have already jumped on board. Nine other states without an income tax are also part of the program. And those are; Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.

Why is this free filing program happening now?

Because of the Inflation Reduction Act, the IRS is taking steps to improve the taxpayer experience. They've been working on this pilot program since May, and it's set to roll out for the upcoming tax season.

Who Can Participate in this New Direct File IRS Program?

The pilot program will start with a small group and expand as the tax season progresses. Eligibility will depend on the state you live in and the complexity of your tax situation. For example, if you have wages reported on a Form W-2 or qualify for tax credits like the Earned Income Credit or the Child Tax Credit, you're more likely to be eligible. 

How Does It Work?

Unlike the existing Free File Fillable Forms system, where you have to manually enter all of your information, the Direct File program will use an interview-style format to guide you through the process. It will ask you questions to determine your filing status, gather your dependent information. It’s unclear if your current tax information will be pre-populated or not. 

The Direct File program will cover only individual federal tax returns. A state tax return is not included. But once a federal return is filed, taxpayers will be guided to a state-supported tool that they can use to file their state tax return.

Are There Opposition and Concerns for This New Program?

Companies like Intuit, the folks behind TurboTax, have voiced their concerns, saying that Direct File is redundant, and could lead to incorrect tax filings and potential audits.

Their negative opinion of the program is not surprising since they offer their own “free filing” program, which often times is not actually free. 

TurboTax was sued by the FTC for its deceptive “free” tax filing campaign. Eventually, the IRS tax filing system could serve as an alternative to private tax preparation companies like H&R Block and Intuit’s TurboTax.

Just know, the IRS is still fine-tuning the details. They're also conducting regular testing to identify and resolve issues, aiming to offer the most user-friendly experience possible.

So, there you have it! The IRS is taking steps to make tax filing easier and more accessible for Americans. It's still a pilot program, so there are limitations, but it's a step in the right direction, in my opinion.

Thanks for reading and see you in the next blog post!

About The Author

Noel Lorenzana is an Illinois-licensed, Registered Certified Public Accountant with over 20 plus years of experience.

Through his online educational content, YouTube videos, easy-to-understand courses and 1-on-1 consulting, he gives you the tools to become tax savvy for yourself. 

Disclaimer: Any accounting, business or tax advice contained in this article, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.