The IRS’ new free online tax filing program is now moving beyond the initial phase of no-income-tax pilot states.
The IRS announced Friday that it has begun implementing the test phase of the program in Arizona, New York, and Massachusetts, all states that impose income taxes. The test pilot will be conducted in a total of 12 states.
Arizona has a flat 2.5 percent income tax, Massachusetts has a 5 percent income tax, and New York has a progressive income tax, where taxpayers who earn more money pay higher taxes.
Bridget Roberts, director of IRS Direct File, said in a statement Friday that “internal testing continues and additional testing is underway to ensure Direct File is integrated into state systems. It’s in progress.”
The IRS announced in a statement last week that more than a dozen taxpayers from an initial testing group of 1,200 participated in the testing program.
“Early users report being satisfied with Direct File and the customer service representatives they interact with via live chat. Initial filers say Direct File is simple and easy to use, with many over 30 and successfully filed their taxes within minutes,” the IRS said in a statement.
A tour of the new system was given to the press in January. The system is similar to some commercial tax preparation software, but typically has a simpler and less interactive design.
In its initial form, Direct File can process payroll income rather than investment income, and can process a limited number of tax credits, such as the Child Tax Credit and the Earned Income Tax Credit.
The form is not pre-filled. Taxpayers must enter their tax information manually. But experts say the program could be expanded in the future.
“If this pilot is successful, the program will be significantly expanded next filing season,” Villanova University tax law professor Leslie Book told The Hill.
Republicans are adamantly opposed to the Direct File program, challenging IRS Commissioner Danny Wuerffel’s authority to roll out such a program at a committee hearing Thursday.
Werfel said Thursday that the direct filing program is just one of many options available to taxpayers.
“We have the responsibility and authority to offer taxpayers different approaches to meeting their tax obligations,” he said. “The important thing about the Direct File solution is that it is optional. No one is obligated to use this solution.”
The Inflation Reduction Act of 2022 provided $15 million to study the feasibility of a direct file system. The survey found that almost three-quarters of taxpayers are either “somewhat interested” or “very interested” in such a scheme.
The IRS announced Friday that it will release periodic updates directly to file as the system continues its testing phase.
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