During this tax season, over 140,000 taxpayers took advantage of the IRS Direct File program, a free tax filing pilot introduced by the IRS. The program was initially launched in 12 states in early March, allowing certain taxpayers to file their federal returns without incurring tax preparation fees. According to IRS Commissioner Danny Werfel, the program saved filers an estimated $5.6 million in tax preparation fees.
A survey conducted by Direct File revealed that around 90% of users rated their experience as “excellent.” This suggests that the program was well-received by the majority of taxpayers who utilized it. Despite the success of the program, Werfel mentioned that a decision on the future of Direct File has not been made. The IRS plans to analyze data and gather feedback from various stakeholders before making a determination.
The Direct File pilot program was limited to specific types of income and deductions. It only accepted Form W-2 wages, Social Security retirement income, unemployment earnings, and interest of $1,500 or less. This meant that individuals with contract income reported via Form 1099-NEC, gig economy workers, and self-employed filers were excluded from using the program. Additionally, filers had to claim the standard deduction, with specific amounts for single filers and married couples filing jointly.
Potential for Expansion
While Direct File had its limitations, there is potential for the program to be expanded in the future. A senior IRS official mentioned that the program could include additional states and accept a broader range of tax situations in the next season. This could benefit a larger number of taxpayers who have more complex financial scenarios. However, the final decision on the future of Direct File is expected to be made later this spring by the IRS.
The IRS Direct File program has shown promise in providing a free and efficient tax filing option for taxpayers in certain states. Despite its current limitations, the program has received positive feedback from a significant number of users. As the IRS considers the future of Direct File, there is potential for the program to evolve and accommodate a wider range of tax situations, ultimately benefiting a larger pool of filers.
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