IRS announces Direct File program will be available in twice as many states in 2025

The U.S. Department of the Treasury and the IRS announced that the number of states offering Direct File will double in the 2025 filing season to 24. During the 2025 filing season, Direct File will be available in Alaska, Arizona , California, Connecticut, Florida and Idaho. , Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming. This means that 62% of Americans will live in states offering Direct File.

In addition to expanding the number of participating states, Direct File will now cover additional types of income, credits and deductions. It is estimated that more than 30 million taxpayers will be able to use Direct File during the 2025 filing season.

Background

Direct File is driven by the Inflation Reduction Act (IRA), through which Congress directed the IRS to provide a report on the cost of developing and operating a free direct e-mail tax filing system. The IRS released the report to Congress in May 2023.

According to the 2023 report, the IRS studied how a free, direct electronic tax filing system administered by the IRS could work. Most taxpayers surveyed by the agency said they were interested in using a tool provided by the IRS to prepare and file their taxes.

Under a pilot program in 2024, eligible taxpayers in 12 states could file their federal tax returns directly with the IRS for free using Direct File. The pilot was announced in October 2023 and closed after the filing season ended in April 2024. The IRS called it a success, saying several hundred thousand taxpayers in 12 states have signed up for accounts Direct File and that 140,803 taxpayers filed their federal tax returns using the new service. Eligibility was limited to taxpayers with single returns in those states.

(You can read what some taxpayers had to say for Forbes about their experiences here.)

In May 2024, U.S. Treasury Secretary Janet L. Yellen and IRS Commissioner Danny Werfel announced that the program would be permanent and available in all 50 states and the District of Columbia for the 2025 filing season. not all taxpayers will benefit immediately. Yellen acknowledged the challenges of rolling out the program to all taxpayers, saying, “Over the coming years, we will expand Direct File to support all of the most common tax situations.” »

The program

Direct File provides a free and secure option for taxpayers facing simple tax situations in participating states.

Taxpayer eligibility to participate in the pilot was limited to taxpayers with certain types of income, credits and deductions – taxpayers whose returns were relatively straightforward. For the 2025 filing season, Direct File will support additional income types and credits for individuals who meet other eligibility requirements, including the Other Dependents Credit, Child Care Credit children and dependents, the premium tax credit, the credit for contributions to retirement savings, as well as the deduction for Health Savings Accounts.

Bilingual support

As part of the Direct File pilot, customer service representatives handled 38,600 chats with an average wait time of less than one minute and resolved taxpayer questions in an average of nine minutes.

During the 2025 filing season, Direct File will offer a new chatbot to provide Eligibility Checker guidance. Live chat will once again be available in English and Spanish and will have enhanced authentication and verification features to allow customer service representatives to provide more information. Taxpayers will also be able to request a callback, during which IRS customer service representatives can provide technical assistance and answer basic tax questions in English and Spanish.

State Filing Options

During the pilot, four states created complementary tax filing tools that allowed Direct File users to file their tax returns. Code for America previously partnered with two of these states, Arizona and New York, during the 2024 tax filing season and recently announced that Maryland and North Carolina have signed on for the season 2025 tax return.

Code for America has now announced collaborations in New Jersey and Idaho to make FileYourStateTaxes – Code for America’s integrated tax filing tool – available to Direct File taxpayers in those states, as is the case with the Code for America partnerships. Maryland and North Carolina announced earlier.

“Today’s announcements show that Direct File is on the rise,” said Amanda Renteria, CEO of Code for America. “Direct File’s functionality continues to grow by leaps and bounds, and states across the country are joining the effort to revolutionize and democratize access to the tax system. Code for America is proud to play a central role in helping to evolve this transformative program. »

Code for America will also continue its partnership with the Arizona Department of Revenue, with Arizona continuing to use FileYourStateTaxes in the 2025 filing season. “In Arizona, we’re putting money back in people’s pockets by making declaration of their taxes free and easy.” said Arizona Governor Katie Hobbs. “I look forward to expanding this resource to even more Arizonans next tax season.”

In New York, the Department of Taxation and Finance will take over operations of the state’s tax filing tool beginning with the 2025 tax filing season, which is consistent with Code’s approach for America of working with the government to develop a service, then empowering the government to iterate as you go. necessary to maintain this service in the long term. New York’s pilot-year partnership with Code for America allowed the state to act quickly and deliver on its promise of simple, free electronic state tax filing integrated with Direct File. This move is the next step in the two organizations’ shared vision for state tax filing.

“Code for America has been a wonderful partner in helping develop Direct File in New York State,” said Amanda Hiller, Acting New York State Tax Commissioner. “Their technological experience has been invaluable, as has their advice on improving the interface with the consumer. We are now moving from the start-up phase to the development phase and our close collaboration continues.”

Potential savings

The IRS reports that the average American spends $270 and 13 hours filing taxes. With Direct File, eligible Americans can file their taxes online for free, directly with the IRS, potentially saving hundreds of dollars.

“Thanks to the Biden-Harris Administration’s Inflation Reduction Act, the IRS is able to offer more than 30 million Americans the ability to file their taxes free and easily,” the secretary said. at Treasury Janet L. Yellen.

“By doubling the number of participating states and expanding eligibility, Direct File has the potential to save Americans tens of millions of dollars in filing fees during the upcoming filing season, thereby advancing the Biden-Harris administration’s goal of lowering costs for American families. As the season approaches, taxpayers in the 24 participating states should check their eligibility for this simple, free tool to see if it’s the right option for them.

Many other countries have offered their taxpayers the ability to file their taxes online for free, but the United States did not do so until last year.

Next steps

The Treasury and the IRS are already considering what happens next.following deposit season. According to a recent announcement, they have secured commitments from other states to join Direct File in the 2026 filing season.

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