As the April 15 federal tax deadline approaches, the Internal Revenue Service (IRS) has announced significant updates to its Direct File program. Introduced on March 12 as a pilot program in 12 states, Direct File now allows users to import crucial details necessary to verify returns before filing. This adjustment aims to simplify the e-filing process by enabling users to validate their returns with information such as the previous year’s adjusted gross income or the prior year’s temporary pin. These details can now be imported from the IRS, reducing errors and improving efficiency.
Enhancing User Experience
One of the main issues hindering successful Direct File returns has been the inability to access these verification details seamlessly. First-time users often face challenges in manually adding this information, leading to delays and frustrations. By enabling users to import this data from their IRS accounts, the IRS hopes to streamline the process and make it more user-friendly. Bridget Roberts, who oversees Direct File at the IRS, emphasized that this update will leverage existing IRS information to simplify tax filing further for users.
Direct File remains open for rejected returns until April 20, allowing users to rectify any errors and resubmit their returns. However, the program caters to individuals with simple tax returns, excluding those with complex tax situations or additional forms like Form 1099. Eligible states for the pilot program include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.
To qualify for Direct File, individuals must have Form W-2 wages, Social Security retirement income, unemployment earnings, and interest of $1,500 or less. Contract income reported via Form 1099-NEC, gig economy workers, and self-employed filers are not eligible for the program. Additionally, users must claim the standard deduction, which is $13,850 for single filers and $27,700 for married couples filing jointly in 2023. Direct File accepts specific credits and deductions, such as the earned income tax credit, child tax credit, and deductions for student loan interest and educator expenses.
Usage and Expectations
The Treasury Department estimates that one-third of federal income tax returns could utilize Direct File this season, with approximately 19 million taxpayers meeting the eligibility criteria. Despite these projections, the agency anticipates around 100,000 filings through the program this season, which represents only 0.5% of eligible filers. While usage has been limited thus far, with roughly 60,000 taxpayers utilizing Direct File, the IRS expects a surge in submissions as the tax deadline approaches.
Overall, the updates to the Direct File program are designed to enhance the user experience, streamline the filing process, and improve accuracy in tax returns. By leveraging technology and user feedback, the IRS aims to provide a more efficient and user-friendly tax filing experience for individuals across eligible states.