The IRS, after testing a free tax-filing website for a limited group earlier this year, now aims to offer Direct File nationwide. The success of this initiative depends on how many states will participate.
Following a 12-state pilot during the 2024 tax-filing season, the Biden administration announced in May that Direct File would become permanent, inviting every state to join. New Jersey, New Mexico, Oregon, and Pennsylvania have expressed their intent to participate. Deputy Treasury Secretary Wally Adeyemo expects about half of the states to join by the 2025 tax-filing season. While there’s no formal deadline, setting up a tax-filing website might be challenging for states that wait past the end of August.
Bridget Roberts, the IRS official leading Direct File, mentioned that no state has outright rejected the program. Democrats support the initiative as a fulfillment of a longstanding goal to simplify tax filing, while Republicans argue against spending on services already provided by companies like Intuit and H&R Block.
Although many Americans use professional tax preparers or commercial software, free options are available through the government’s Free File program. Despite initial opposition from some state treasurers and controllers, the program is seen favorably by nonpartisan state tax officials.
Advocacy groups, like the Economic Security Project, are lobbying states to adopt Direct File, emphasizing the benefits of easier and quicker tax filing. New Jersey’s Governor Phil Murphy believes the program will save the state money by encouraging more residents to file online.
However, not all taxpayers will be eligible for free filing. The pilot program excluded certain groups, such as gig workers and those with complex tax situations. The IRS plans to expand the number of eligible tax situations in 2025, with hopes to include the child and dependent care credit, which could benefit more taxpayers.
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