The IRS makes the free tax filing program permanent and is asking all states to join in 2025

WASHINGTON – The IRS said Thursday it will make permanent the free electronic tax filing system it tried this year and is asking all 50 states and the District of Columbia to help taxpayers file their returns through the program in 2025.

The IRS tested the Direct File project for the 2024 tax season on a limited basis in 12 states for people with very simple W-2s, the employee’s salary and tax return.

The agency is also inviting all states with a state income tax to sign up and help people file their state returns for free. During the 2024 pilot, tax agencies in Arizona, Massachusetts, California and New York helped people directly file their state taxes.

IRS Commissioner Danny Werfel said the IRS will report later this year on how many states plan to participate in the program in 2025.

The IRS was tasked with investigating how to create a “direct file” system as part of the money it received from the Inflation Reduction Act signed into law by President Joe Biden in 2022. It gave the IRS nine months and $15 million to report on how to do so. program would work.

“The IRS has been underfunded for decades, so taxpayers have not received the support they deserve,” Treasury Secretary Janet Yellen told reporters on a conference call Thursday. “Thanks to the Inflation Reduction Act, we are changing that.” The IRS is part of the Treasury Department.

Since the Direct File trial began in March, more than 140,000 taxpayers have used it to file their tax returns, claiming more than $90 million in refunds, agency officials said.

Werfel said the program’s expansion will provide another filing option for taxpayers and “fits perfectly with the IRS’ effort to make taxes as easy as possible for Americans, including saving time and money.”

“We know there is more analysis to be done, but we feel we have enough information at this point to make the decision,” he said. “And an early decision on 2025 is critical for planning – both for the IRS and for other states to join the program.”

The IRS has faced intense pushback against Direct File from private tax preparation companies that have made billions charging people to use their software and spent millions lobbying Congress. The average American typically spends about $140 preparing their returns each year.

David Ransom, spokesman for the right-leaning American Taxpayer Rights Coalition, said the Direct File program was “unnecessary” because there are already free filing options available.

Taxpayers can file their taxes for free by mail, although the forms are complicated and there are other free online file programs available for people with certain income limits.

“Taxpayers would be better served if the IRS focused on promoting the existing IRS Free File Program,” he said.

Derrick Plummer, a spokesman for major tax preparation company Intuit, said the announcement “does not change the fact that this program is a solution in search of a problem and that every American can now file their taxes for free at no cost. to the government or taxpayers.”

Others celebrated the news.

Adam Ruben, vice president of the left-leaning Economic Security Project, said his organization “is already working with our partners in states across the country to support the expansion of Direct File next year so more taxpayers can take advantage the advantages of free and simplified tax declaration”. next tax season.”

For the Direct File program to continue to grow, it will need continued funding under the Inflation Reduction Act, which initially included $80 billion for the IRS. Since then, some of this has been diverted by lawmakers to other programs.

House Republicans included a $1.4 billion IRS reduction in the debt ceiling and budget cuts package passed by Congress last summer. A separate agreement will take an additional $20 billion from the IRS over the next two years to divert to other non-defense programs.

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