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Monday July 15, 2024

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IRS States Direct File Is Permanent

On May 30, 2024, the Internal Revenue Service (IRS) announced the Direct File program will be a permanent option. The IRS plans to expand Direct File and offer the option for all states to participate for the 2025 filing season.

During the 2024 filing season, the Direct File program was available in 12 states. More than 140,000 taxpayers used Direct File to complete their return. Following the tax filing season, the IRS conducted extensive inquiries with Direct File users, state officials and other tax professionals. Over 100 members of Congress offered their observations and many organizations also provided opinions on the program.

The IRS emphasized that it needs to decide early in 2025 if it is going to enable additional states to join Direct File. IRS Commissioner Danny Werfel stated, "The clear message is that many taxpayers across the nation want the IRS to provide more than one no-cost option for filing electronically. So, starting with the 2025 filing season, the IRS will make Direct File a permanent option for filing federal tax returns. Giving taxpayers additional options strengthens the tax filing system. And adding Direct File to the menu of filing options fits squarely into our effort to make taxes as easy as possible for Americans, including saving time and money."

With the expanded Direct File program, the IRS plans to work with states who are willing to partner with the program. It also hopes to expand the options and tax situations available to the users.

Werfel continued, "User experience — both within the product and integration with state tax systems — will continue to be the foundation for Direct File moving forward.”

The taxpayers who responded to the IRS surveys indicated they desired no-cost filing options. The IRS emphasized that it will still maintain the existing Free File software that has been provided by eight different commercial tax-preparation companies.

There were several specific observations from taxpayers during the survey.

  1. Direct File is Highly Rated — 90% of users have rated Direct File as Excellent or Above Average. 86% of respondents felt it increased trust in the IRS.
  2. Easy Tax Filing — Taxpayers indicated the system was easy-to-use. Most users completed their return in less than an hour. Half of these users had paid for tax preparation the previous year. The Treasury Department estimates these Direct File users saved $5.6 million in tax preparation fees.
  3. Direct File Promotes a Digital IRS — The IRS was able to combine a team of tax experts, software engineers and data scientists to build the Direct File program. It also used the Live Chat system to provide primary customer support. This automated system will enhance other areas of IRS customer support in future years.

Published May 31, 2024

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