Direct File will be a permanent, free tax filing option—that’s the word from the U.S. Department of the Treasury and IRS.
Direct File will be a permanent, free tax filing option—that’s the word from the U.S. Department of the Treasury and IRS.
The announcement, which was made jointly by U.S. Secretary of the Treasury Janet L. Yellen and IRS Commissioner Danny Werfel, made clear that not only would the program be permanent, but it would be available to all 50 states and the District of Columbia for the 2025 filing season. However, not all taxpayers will benefit immediately. The pilot was limited to those with simple returns. Yellen acknowledged the challenges in rolling the program out to all taxpayers, saying, “over the next few years, we will expand Direct File so that it supports all of the most common tax situations.”
“Meeting your tax obligations and claiming the credits and deductions for which you’re eligible should be easy,” said Yellen, noting that “the IRS has been underfunded for decades, so taxpayers haven’t gotten the support they deserve. Thanks to the Inflation Reduction Act, we’ve been changing this.”Direct File Pilot
As part of a pilot program in 2024, eligible taxpayers were able to file their federal tax return for free, directly with the IRS, using Direct File.
The pilot was announced in October 2023 and closed after the filing season ended in April 2024. The IRS has called it a success, saying that several hundred thousand taxpayers across 12 states signed up for Direct File accounts, and 140,803 taxpayers filed their federal tax returns using the new service. Eligibility was limited to taxpayers with simple returns in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.
The IRS began promoting the program in January of 2024, with a more robust push to taxpayers when the program fully opened in March. The March rollout of the pilot program included making the service available in Spanish.
According to the IRS, taxpayers filed—for free—to obtain more than $90 million in refunds and saved an estimated $5.6 million in filing costs.
(An earlier IRS survey indicated that the average American spends $270 to file their taxes.)Inflation Reduction Act
As part of the Inflation Reduction Act, Congress tasked the IRS with delivering a report on, among other things, the cost of developing and running a free direct e-file tax return system, including costs to build and administer each release, with a focus on multi-lingual and mobile-friendly features and safeguards for taxpayer data. The IRS released the report to Congress in May 2023.
According to the report, the IRS spent several months studying how an IRS-run free direct e-file tax return system might work. Most taxpayers surveyed by the agency reported interest in using an IRS-provided tool to prepare and file their taxes. At the time, the IRS indicated it hoped to make that a reality for some taxpayers for the 2024 tax filing season.
At the same time, the House GOP proposed an appropriations bill that would bar the IRS from using funding to develop or provide a free direct-file tax return system without the prior approval of the Committees on Appropriations of the House and the Senate, House Ways and Means Committee, and Senate Finance Committee. The House failed to pass a long-term appropriations bill, and the short-term funding bill did not address the direct-file tax program.
When the filing season opened in January 2024, the IRS announced the limited-scope pilot, which it claimed would allow the IRS to evaluate the costs, benefits, and operational challenges associated with providing the option to taxpayers.
