The IRS is expanding its Direct File program, allowing taxpayers to file their taxes directly with the agency for free. This program, introduced as a pilot in 2024 in 12 states, will now be permanent and open to more than 30 million people in 24 states for the 2025 filing season.
Participants in the Direct File program can calculate and submit their returns to the IRS without using commercial tax preparation software. In 2024, those using the program claimed over $90 million in refunds.
New states joining the program in 2025 include Alaska, Connecticut, Idaho, Kansas, Maine, Maryland, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, and Wisconsin.
Eligibility for the program has also been expanded to include taxpayers with 1099 income and credits such as the Child and Dependent Care Credit, Retirement Savings Contributions Credit, and the deduction for Health Savings Accounts.
Treasury Deputy Secretary highlighted that other countries, like Germany and Japan, have similar systems with prepopulated tax forms, emphasizing the benefits of direct filing.
However, commercial tax prep software firms, which have profited from charging users for their services, are not in favor of the Direct File program.
An IRS inspector general report raised concerns about data protection related to the IRS Free File Alliance, a separate initiative providing free tax prep services to low and middle-income taxpayers.
The IRS was directed to explore the creation of a direct file system under the Inflation Reduction Act signed into law in 2022, allocating $15 million for the initiative.
