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IRS Launches Free Tax Filing Service, Direct File, in 12 States
The Internal Revenue Service has introduced Direct File, a free tax filing service, in 12 states for taxpayers with simple tax situations. Following several weeks of rigorous testing, the United States Treasury Department announced the official launch of this service, available in both English and Spanish.
Efficiency and Accessibility
Direct File aims to provide a secure and user-friendly option for individuals with straightforward tax returns to file directly with the IRS. The service ensures transparency, eliminating hidden fees, and is compatible across various devices, including smartphones, laptops, tablets, and desktop computers. Direct File also enables taxpayers to verify the accuracy of their returns, ensuring they receive the entitled refund.
To determine eligibility for using Direct File, taxpayers can visit the official website at directfile.irs.gov. Based on the IRS program’s eligibility criteria, the Treasury Department estimates that approximately one-third of all federal income tax returns could utilize this service.
State-Specific Considerations
In collaboration with the IRS, Arizona, California, Massachusetts, New York, and eight states without income tax have integrated their state tax systems into the Direct File pilot program. However, eligibility and options for state taxes vary depending on the state of residence.
- Arizona and New York offer a free state filing tool that integrates with IRS Direct File.
- California and Massachusetts direct users to their respective state’s online tax tools for filing state taxes.
Eligibility Restrictions
Direct File supports different types of income, including employment income, unemployment compensation, Social Security benefits, and up to $1,500 in interest income. However, certain limitations prevent taxpayers from utilizing the system for more complex tax situations.
For instance, Direct File does not support income from payment apps, online marketplaces, independent contractor work, rental income, pension distributions, and other specific income sources. Additionally, there are income thresholds that restrict eligibility for using Direct File based on wages, filing status, and health insurance coverage.
While Direct File covers essential tax credits such as the Child Tax Credit and the Earned Income Tax Credit, it does not support itemized deductions or other specialized credits. Despite these limitations, the IRS emphasizes that approximately 90% of federal tax filers opt for the standard deduction.
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