WASHINGTON (AP) — The IRS is offering free Electronic Tax Return Filing System The company is piloting the program this year and is asking all 50 states and the District of Columbia to help taxpayers file their taxes through it in 2025.
The I.R.S. Direct File Projects for the 2024 tax season Limited to 12 states For very simple people W-2employee wage and tax statements.
The agency also encourages all states that impose a state income tax to sign up to help people file their state tax returns for free. During a 2024 pilot, tax officials in Arizona, Massachusetts, California and New York helped people file their state taxes directly.
IRS Commissioner Danny Wuerfel said the IRS will report later this year on how many states plan to participate in the program in 2025.
The IRS was tasked with exploring how to set up a “direct file” system as part of funding it received from the Stop Inflation Act, signed into law by President Joe Biden in 2022. The act gave the IRS nine months and $15 million to report on how such a program would work.
“The IRS has been underfunded for decades and taxpayers have not received the help they deserve,” Treasury Secretary Janet Yellen said in a telephone news conference Thursday. “Thanks to the Defeat Inflation Act, that is changing.” The IRS is part of the Treasury Department.
Since the Direct File trial began in March, Over 140,000 people Taxpayers took advantage of the opportunity to file their tax returns and receive more than $90 million in refunds, officials said.
Warfel said the program’s expansion gives taxpayers new filing options and “fits perfectly with the IRS’s commitment to making paying taxes as easy as possible for Americans, including saving them time and money.”
“We know there is still analysis to be done, but we feel we have enough information to make a decision at this point,” he said. “And an early decision on 2025 is critical for planning, both for the IRS and for any additional states that join the program.”
The IRS has faced fierce backlash against Direct File from private tax preparation companies that have made billions of dollars and spent millions collecting fees for the software. Lobbying CongressThe average American spends about $140 each year preparing their tax return.
David Ransom, a spokesman for the right-leaning American Taxpayer Rights Union, said a direct file program is “unnecessary” because free filing options already exist.
Taxpayers can file their taxes for free by mail, but the forms are complicated, and there are programs available for people under certain income limits to file online for free.
“Taxpayers would be better served if the IRS focused on promoting the existing IRS Free File program,” he said.
“This program is a solution to a problem, and it doesn’t change the fact that all Americans already can file their taxes for free, at no cost to the government or taxpayers,” Derrick Plummer, a spokesman for Intuit, a major tax preparation company, said in a statement.
Others also celebrated the news.
Adam Ruben, vice president of the left-leaning Economic Security Project, said the group is “already working with state partners across the country to help expand Direct File next year so more taxpayers have access to free and simplified tax filing this coming tax season.”
To keep growing, the Direct File program needed continued funding from the Inflation Control Act, which initially included $80 billion for the IRS, some of which lawmakers have since diverted to other programs.
House Republicans included $1.4 billion in cuts to the IRS in the debt ceiling and budget-cutting package passed by Congress last summer. A separate agreement would see an additional $20 billion taken from the IRS over the next two years to be redirected to other non-defense programs.
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