IRS free filing program to become permanent with expanded scope

The IRS will make its new free filing program, Direct File, permanent starting in the 2025 tax season while making it available to all states and the District of Columbia, with plans to expand the taxpayer situations within its scope, Commissioner Danny Werfel said Thursday.

“Direct File is a critical tool to accomplish the IRS’s core mission to meet taxpayers where they are, give them options to interact with the IRS in ways that work for them, and help them meet their tax obligations as easily and quickly as possible,” Werfel said during a call with reporters.

Direct File was a pilot program for the 2024 tax season and was used by over 140,000 taxpayers in 12 states during the five weeks it was widely available, the IRS said in a news release. The taxpayers claimed over $90 million in refunds, Werfel said in his call. Treasury stated in a news release that it estimated that the program saved Direct File users about $5.6 million in filing fees. On the call, Werfel estimated the pilot program cost the IRS $31.8 million to implement.

Werfel emphasized that Direct File is an optional way for some taxpayers to file for free and not a requirement.

“Direct File will continue to be one option among many from which taxpayers can choose,” he said. “We have heard from many taxpayers who prefer to file their taxes directly with the IRS. We also know that many taxpayers prefer to work with a third party, whether that is a trusted tax professional or use tax preparation software, free and commercial.”

Including Direct File in the options for taxpayers “fits squarely into our effort to make taxes as easy as possible for Americans,” he said.

As taxpayers in the pilot states went through the eligibility checker for Direct File, the IRS saw areas of interest that were not covered, Werfel said. For example, taxpayers who received a premium tax credit could not use Direct File, and some retirement income was not allowed, he said.

Now the IRS is reviewing the best way to make Direct File available to taxpayers expressing the greatest interest, he said.

“Our goal is to gradually expand the scope of Direct File to support most common tax situations, focusing in particular on tax situations that impact working families,” he said.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.