IRS Tax Move Will Save Money For Millions of Americans — Check if You're Eligible

The Internal Revenue Service (IRS) is launching a new pilot service that will allow Americans to file their tax returns for free and without the need for a third-party service.

The Direct File pilot program is a new free-to-use service that will help taxpayers file without the need to use popular tax return services like TurboTax and H&R Block and others, many of which require payment to use. The details were first published in November 2023, with those able to participate being able to file their taxes for 2023 this year. Users will be able to submit their tax returns directly to the IRS.

Because the pilot program has no fee attached to it, it could save workers hundreds of dollars a year. According to a National Society of Accountants study conducted in 2021, the average cost for preparing Form 1040 with Schedule A to itemize personal deductions, and a state income tax return, was $323.

Fueled by financial support from the Inflation Reduction Act of 2022, which opened up $80 billion to help overhaul the IRS, the pilot service will be available in English and Spanish and can be accessed on desktop and smart devices.

"This is a critical step forward for this innovative effort that will test the feasibility of providing taxpayers a new option to file their returns for free directly with the IRS," said IRS Commissioner Danny Werfel. "In this limited pilot for 2024, we'll be working closely with the states that have agreed to participate in an important test run of the state integration. This will help us gather important information about the future direction of the Direct File program."

Although the initial launch will be restricted to straightforward tax returns in specific states, the IRS anticipates that insights gained from the trial will contribute to making the service available nationwide.

Who is Eligible for Direct File?

The pilot program will not be open to all taxpayers as it is not yet rolled out across all 50 states. However, Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington State, and Wyoming are currently participating in the program. The majority of these states do not impose state-level income taxes.

However, for the four states that do—Arizona, California, Massachusetts, and New York—participants will be directed to a state-endorsed tool for submitting their state tax returns, the IRS has explained.

What types of tax does Direct File support?

According to the IRS, the Direct File program will cover the following:

Income

• W-2 income
• Social Security and railroad retirement
• Unemployment benefit income
• Interest of up to $1,500

Credits

• Earned income tax credit
• Child tax credit
• Credit for other dependents

Deductions

• Standard deduction
• Student loan interest deduction
• Educator expenses

At this stage, the IRS says the pilot program is not suitable for those with "gig economy" or business income.

Newsweek has contacted the Internal Revenue Service for comment via email.