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Wednesday May 29, 2024

Washington News

Washington Hotline

Free File Extended for Five Years - Direct File Decision Promised Soon

On May 22, 2024, the Internal Revenue Service announced a five-year extension of the Free File program. With Free File, taxpayers can use tax-filing software at no cost. During the 2024 filing season, there were approximately 2.9 million returns filed using the Free File program.

IRS Commissioner Danny Werfel stated, "Free File remains an important part of the IRS portfolio to help taxpayers file their taxes for free. We were pleased to see growth in the program this year, and we look forward to continuing this important collaboration with the tax software industry."

Free File has been available for 22 years. Currently, there are eight private Free File partners who provide their software at no charge to qualified taxpayers. To qualify, the Free File programs are for individuals with 2023 adjusted gross income (AGI) up to $79,000.

The IRS also indicated it is making plans on the future of the Direct File program. Bridget Roberts, Director of the IRS's Direct-File program, noted during a Washington conference on May 22 that "We are anticipating making a decision in the coming weeks."

The pilot version of Direct File allowed taxpayers in 12 states to file returns. Over 140,000 taxpayers filed returns with Direct File. The new program involved an IRS expenditure of $24.6 million for development costs. The IRS is currently communicating with the Electronic Tax Administration Advisory Committee, the IRS Advisory Council and the Council for Electronic Revenue Communication Advancement about the future of the Direct File program.

Over 130 Senators and Representatives sent a May 15 letter to the Department of Treasury and encouraged continuation of the Direct File program.

The lawmakers noted, "Taxpayers want and deserve a free and easy filing option, and thanks to this year's pilot, taxpayers used Direct File to claim over $90 million in tax refunds and save $5.6 million in estimated filing fees, with 90% of surveyed users rating their experience positively and 86% saying their experience with the tool increased their trust in the Internal Revenue Service."

The IRS conducted surveys of Direct File users and claimed this program was a "clear and resounding success." Additional data shows 96% of users were satisfied with the integrated state filing and 82% to 87% of users would recommend Direct File to others.

The lawmakers noted that the Direct File program survey showed that it was easy to use. It also saved both time and money — on average, Americans spend $150 and 9 hours to file their taxes. The letter concluded, "We hope Direct File will support additional sources of income, integrate with more states, offer more flexible identity verification procedures, and accommodate additional tax benefits, with a focus on refundable credits available to low- and middle-income families."


Published May 24, 2024
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