The IRS has released an “important update” for its Direct File free tax filing program just one week before the April 15 federal tax deadline. This update allows users to import key details needed to verify returns before filing, which has been a significant issue preventing successful filing of Direct File returns. Taxpayers can now import verification details from their own IRS account, simplifying the process further. Direct File will remain open for rejected returns until April 20, and only those with simple tax returns qualify for the pilot program.
Deputy Secretary of the Treasury Wally Adeyemo has stated that Direct File eligibility is limited to those with simple tax returns, but a large percentage of Americans may qualify for the program. The pilot program is currently open in 12 states, including Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming. Only certain types of income, such as Form W-2 wages, Social Security retirement income, unemployment earnings, and interest of $1,500 or less, are accepted in the Direct File pilot program.
To qualify for Direct File, taxpayers must claim the standard deduction, which is $13,850 for single filers and $27,700 for married couples filing jointly for the 2023 tax year. The program only accepts a few credits and deductions, such as the earned income tax credit, child tax credit, credit for other dependents, student loan interest deduction, and educator expenses deduction. The Treasury Department estimates that one-third of federal income tax returns could use Direct File this season, and approximately 19 million taxpayers may be eligible for the program.
The IRS hopes to receive 100,000 filings through Direct File this tax season, which represents around 0.5% of eligible filers. So far, around 60,000 taxpayers have used the program, and the agency expects the volume to increase as the deadline approaches. Users can only access details from their own IRS account, which has identity verification measures in place to protect personal information. The update to the Direct File program aims to simplify the filing process and minimize common errors that have previously prevented successful e-filing of tax returns.
For those with tax situations not covered by the Direct File pilot, such as forms 1099 or individuals with contract income reported via Form 1099-NEC, gig economy workers, or self-employed filers, alternative tax filing options may be necessary. The Direct File program is designed for taxpayers with simple tax returns and limited income sources, making it a suitable option for many Americans this tax season. As the deadline approaches, the IRS encourages eligible filers to take advantage of the program to streamline the tax filing process and ensure timely submission of returns.
