The Internal Revenue Service announced Thursday that its experimental free tax filing option for simplified tax returns, “Direct File,” will become a permanent option starting next year.
The Direct File pilot program, which was rolled out on a limited basis earlier this year, has helped 140,000 taxpayers claim more than $90 million in refunds and saved an estimated $5.6 million in filing costs, the IRS said in a statement along with the U.S. Treasury Department.
“President Biden is committed to saving Americans time and money and ensuring families get the tax benefits they deserve. Providing free tools to all Americans who want the option to file directly with the IRS is key to achieving these goals,” Treasury Secretary Janet L. Yellen said in a statement.
“After a successful pilot, we are making Direct File permanent and inviting all 50 states to offer this free filing option to their residents. The Treasury Department and the IRS look forward to working with states to expand Direct File to Americans across the country.”
Direct File is designed for filers who file relatively simple tax returns, such as W2s and Social Security income, and take the standard deduction. It doesn’t cover other types of income, such as gig work or other business income.
Direct File is not a required government program and does not replace existing filing services.
But advocates have long called for a program that would reduce or eliminate application fees, especially in the digital age.
“President Biden is focused on lowering costs and making the tax system fairer for Americans, including providing a free and easy way to file taxes without expensive and unnecessary filing fees or upsells,” national economic adviser Lael Brainard said in a statement.
Brainard praised Biden, saying, “The Administration’s investments to modernize the IRS are already paying off, and I look forward to making these resources available to more Americans across the country.”
For filers who owe state income tax, their states must opt into direct file, and 12 states have already signaled their opposition to the move, echoing complaints from TurboTax parent company Intuit that direct file is a waste of taxpayer resources.
However, a survey released by the White House found that 90% of respondents rated their experience with Direct File as “excellent” or “above average.”
“The numbers speak for themselves: the Direct File pilot was a success, saving American taxpayers countless hours and millions of dollars filing their taxes,” White House deputy chief of staff Natalie Killian said in a statement. “We are now rolling this program out across the country – just another example of how President Biden’s Invest in America policies are helping to reduce costs in communities across the country.”
