Filing Your Taxes Is About to Get Cheaper in 13 States. Here's Who's Eligible. The IRS is set to launch a free tax preparation software called Direct File in 2024, offering an alternative to paid services like TurboTax.
By Madeline Garfinkle •
Key Takeaways
- Direct File's initial rollout in 2024 will be available in 13 states.
- In the pilot phase, Direct File will only be available to taxpayers with relatively straightforward tax returns.
Starting in 2024, the Internal Revenue Service is introducing a long-awaited innovation: Direct File, a free tax preparation software program, the agency announced last week.
Direct File, akin to paid programs like TurboTax, will debut in the upcoming tax season for Americans to file their 2023 tax returns. However, it will only be available in 13 states in its first year: Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, Arizona, California, Massachusetts and New York.
"In this limited pilot for 2024, we'll be working closely with the states that have agreed to participate in an important test run of the state integration," IRS Commissioner Danny Werfel said in a statement, adding that the pilot will help it gather crucial information for the "future direction" of Direct File.
The IRS aims to test and improve the Direct File service's technology, customer support, state integration, fraud detection and overall user experience through the pilot. It will share the results with the public when available.
Related: TurboTax Will Pay $141 Million In Settlement Over Allegedly 'Deceiving' Low-Income Americans
Only some taxpayers within the 13 states participating in the pilot will be eligible to use the program. The IRS is limiting the Direct File rollout to those with "relatively simple" returns.
Although the specific income criteria might change, it is anticipated to include income types like W-2 wage income, Social Security and railroad retirement income, unemployment compensation and interest income of $1,500 or less. Eligibility may extend to those who can claim specific tax credits, such as the Earned Income Tax Credit, Child Tax Credit and Credit for Other Dependents, per the IRS.
Additionally, users can deduct teachers' expenses and student loan interest, the agency stated.
Aside from the credits and deductions stated by the agency, no others will be compatible with the initial version of the software, according to The Washington Post.
The IRS will start sending invitations to selected taxpayers eligible to use Direct File around mid-February, an anonymous IRS official told the Post.
Related: 'These Steps Are Urgent': IRS Takes Action in Wake of Record-Breaking $688 Billion Tax Gap
