Free Tax Filing in 13 States Announced by IRS for 2024

Free Tax Filing in 13 States Announced by IRS for 2024. With the introduction of a groundbreaking Direct File pilot initiative, the Internal Revenue Service (IRS) is set to revolutionize the tax filing landscape. A program funded by the Inflation Reduction Act of 2022, the program simplifies and streamlines the process of filing federal taxes for taxpayers in 13 participating states. Let’s look at the key details and implications of this innovative development.

Boosting IRS Capabilities

A significant portion of the $80 billion Inflation Reduction Act (IRA) was earmarked for enhancing enforcement, operational support, and modernizing business systems for the IRS. The COVID-19 pandemic exacerbated challenges for taxpayers, resulting in an allocation of $3.2 billion to improve taxpayer services.

As a result, $15 million was dedicated to the creation of a complimentary e-filing program, marking a significant departure from the existing Free File program.

Direct File Pilot Initiative

Direct File pilot program allows eligible taxpayers in 13 states to electronically submit their federal tax returns to the IRS for free. The new filing technology has been invited to all states, but four of them have committed to adopting it by 2024 – Arizona, California, Massachusetts, and New York. The pilot program is also available to residents of nine states without state income taxes.

Eligibility and Limitations

With Direct File, tax returns will be straightforward, with easy income, credits, and deductions. Participants must use W-2 Forms and claim tax credits such as the child tax credit and earned income tax credit.

The pilot program will cover income sources such as W-2 wage income, Social Security and railroad retirement income, unemployment compensation, and interest totaling less than $1,500.

Tax credits include the earned income tax credit, child tax credit, and credit for other dependents. Deductions encompass the standard deduction, student loan interest, and educator expenses.

Language and Accessibility

Pilot programs will be offered in English and Spanish, emphasizing inclusivity. While state returns will continue to be processed through conventional channels and filing tools, Direct File will exclusively cover federal returns during the trial period.

IRS Commissioner Perspective

It marks a crucial step in the innovative initiative to assess whether taxpayers can file their returns directly with the IRS for free, according to IRS Commissioner Danny Werfel, who noted the significance of this initiative.

In this limited 2024 pilot, Werfel said, “We will work closely with the participating states in a pivotal trial of state integration, providing valuable insights into the future trajectory of the Direct File program.”

Conclusion

The IRS’s Direct File pilot program is a game-changer in the realm of tax filing, representing a significant step toward a more accessible and cost-effective system. As the IRS collaborates with participating states in this pivotal trial, taxpayers can anticipate a simplified and no-cost avenue for filing their federal tax returns, marking a noteworthy advancement in tax-filing technology.