By WASHINGTON (Reuters) – The U.S. Treasury said on Thursday that more than 30 million taxpayers in 24 participating states will be eligible to file their federal taxes for free next year through the Internal Revenue Service’s expanded online Direct File system.
WHY IT’S IMPORTANT
The Biden administration is eager to show that its policies are saving consumers money, bolstering a key theme of Vice President Kamala Harris’ run for the presidency — to help ease high living costs.
The Treasury said that Direct File could save taxpayers tens of millions of dollars in tax preparation fees during the 2025 tax filing season A pilot version of the program that started this year was funded out of the roughly $60 billion in supplemental modernization funding for the IRS approved in the 2022 Inflation Reduction Act clean energy law.
BY THE NUMBERS
For the 2024 filing season, which covered the 2023 tax year, more than 140,000 taxpayers in 12 states used the Direct File pilot program to file relatively simple tax returns with W-2 wage income and standard deductions.
For the 24 states participating in the project next year, Direct File will allow tax returns with additional types of incomes, credits and deductions, expanding the pool of eligible users to over 30 million. But taxpayers who itemize their tax returns with mortgage interest and some other deductions will not be eligible to use the system yet.
The Treasury estimates the average American taxpayer spends $270 and 13 hours filing their tax return.
KEY QUOTE
“By doubling the number of participating states and expanding eligibility, Direct File has the potential to save Americans tens of millions of dollars in filing fees in the upcoming filing season, advancing the Biden-Harris Administration’s goal of reducing costs for American families,” Treasury Secretary Janet Yellen said in a statement.
The Direct File system will be available next year in Alaska, Arizona, California, Connecticut, Florida, Idaho, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming.