Tax season can be a stressful time, but for many low- and middle-income Americans, the burden goes beyond just gathering paperwork. The cost of tax preparation software can add a significant financial hurdle.
The good news? For the 2025 filing season, the IRS will work with all states that want to partner with Direct File, and there will be no limit to the number of states that can participate in the coming year. The agency expects several new states will choose to participate! This is a major step towards making tax filing more accessible and saving taxpayers money.
Here’s What You Need to Know:
- Pilot Program Success: The IRS launched a pilot program in 2024 for Direct File in 12 states. The program proved successful, with over 140,000 taxpayers filing their federal returns for free. These filers claimed a combined $90 million in refunds and saved an estimated $5.6 million in filing fees according to the U.S. Department of the Treasury (1).
- Nationwide Availability: Based on the pilot program’s positive results, the IRS announced Direct File will be a permanent option for all taxpayers across the country starting in the 2025 filing season (2).
- Focus on Simplicity: Direct File is designed for taxpayers with straightforward tax situations, such as those who primarily receive income from W-2s and have minimal deductions or credits. The program offers a user-friendly interface to guide filers through the process electronically and directly submit their returns to the IRS.
Who Benefits? This expansion is expected to benefit millions of Americans, particularly those who struggle to afford commercial tax preparation software. Studies by the National Consumer Law Center show tax prep fees can range from $30 to hundreds of dollars, depending on the complexity of the return (3).
More Options on the Horizon: The IRS is exploring ways to expand Direct File’s capabilities in the future. This could include making it suitable for more complex tax situations and potentially integrating state tax filing within the program.
The Bottom Line:
The IRS’s Direct File program expansion is a positive step towards simplifying and reducing the cost of tax filing for millions of Americans. Keep an eye out for more information from the IRS as we approach the 2025 tax season!
Sources:
(1) IRS Direct File Service. U.S. Department of the Treasury. (2024, March 12). https://home.treasury.gov/policy-issues/inflation-reduction-act/irs-direct-file-service
(2) Direct file | Internal Revenue Service. (n.d.-b). https://directfile.irs.gov/
(3) Homepage. NCLC. (2024, June 4). https://www.nclc.org/
This information is being provided only as a general source of information and is not intended to be the primary basis for financial decisions. It should not be construed as advice designed to meet the particular needs of an individual situation. Please seek the guidance of a financial professional regarding your particular financial concerns. Consult with your tax advisor or attorney regarding specific tax issues.
