A growing number of US taxpayers now have the opportunity to file their annual taxes online directly with the federal government, thanks to the much-anticipated Internal Revenue Service software called Direct File. The software has entered a pilot phase, with a broader public launch scheduled for mid-March, just ahead of the April 15 tax filing deadline.
While signing up for Direct File is free, there’s a requirement for users: they must have been residents of one of the 12 eligible states for the entire year of 2023 and should not have income from any other state. The IRS explains that it is taking a cautious approach by limiting the release and adhering to best software development practices for creating “complex services.”
Who Can Access the IRS Diretct File Tool
The currently eligible states for Direct File are Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming. However, the tool currently does not prepare state income tax returns, except for residents of Arizona, California, Massachusetts, and New York, who can access state-supported tools through Direct File.
Direct File is designed to handle what the IRS terms “simple” returns, covering individuals with W-2 wages and a few of the most common tax credits and deductions. Unfortunately, the program is not available for those who purchased health insurance through exchanges like HealthCare.gov or utilized funds from a Health Savings Account.
Other key criteria include that your 2023 income must have come from the following sources:
- W-2 earnings from an employer
- 1099-G (unemployment benefits)
- SSA-1099 (Social Security benefits)
- and/or 1099-INT (interest of up to $1,500)
Individuals with various types of income, such as gig workers, independent contractors, or those involved in complex deductions or credits, cannot use the service at this time. There are also income limitations, with households earning more than $125,000 and married couples with combined earnings exceeding $250,000 deemed ineligible.
The IRS assures users that the software is user-friendly, guiding them smoothly through the filing process. Early testers reportedly completed their taxes in less than 30 minutes. To further assist users, IRS customer service agents are available via live chat in both English and Spanish, providing answers to basic questions about tax law and offering technical support, all at no cost.
Stay Tuned For News From the IRS
In addition to subscribing to email alerts, the most effective way to stay informed about when Direct File is open for new participants in the pilot test is by regularly checking the Direct File website. If the pilot test is currently accepting new participants, a banner at the top of the homepage will indicate, “the Direct File pilot is currently open to new participants.” While the site does not specify the duration of the open window, this message serves as your signal to promptly initiate the filing process.
Navigating through the website during the pilot test period may not provide clear instructions on how to commence filing taxes. To begin, click the “check my eligibility” button, even if you’ve previously confirmed your eligibility, and go through all the specified criteria. Eventually, the site will guide you to sign in using your ID.me account, which, if set up beforehand, should be a straightforward process by clicking a green sign-in button.
Once officially enrolled in the pilot test, follow the guided prompts to complete your federal tax return. Reference your W-2 and 1099s, if applicable. If you have experience using other guided tax preparation software like TurboTax or H&R Block, Direct File should feel familiar, as the IRS’s software similarly presents step-by-step questions and provides references to locate information on your documents.