IRS To Launch Free Tax Filing Pilot Program From January 2024

The Internal Revenue Service (IRS) is set to launch a free tax filing pilot program, Direct File, which will be available to some taxpayers starting January 29, 2024.

What Happened: The new program, Direct File, will be accessible to federal and state government employees in 12 states with specific tax situations, reported CNN on Thursday. The IRS plans to gradually expand the program to include private-sector workers in these states.

The Direct File system was developed in-house by the IRS, following a substantial investment from the Inflation Reduction Act, a bill backed by the Democrats in 2022. The Act mandated the IRS to conduct a cost and feasibility study for a free, electronic tax filing system, which was completed in May. The agency then decided to proceed with a pilot program.

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IRS Commissioner Danny Werfel emphasized that Direct File is an additional option for filing tax returns and will not replace any existing options. The program will initially be available to federal and state workers in 12 states, including Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.

By mid-March, the program will be expanded to include private sector workers in these states with specific income and tax situations. Direct File will prompt taxpayers to answer screening questions to determine their eligibility. The program will also offer step-by-step guidance in both English and Spanish.

Why It Matters: The IRS has been at the center of several significant developments in recent weeks. The agency’s contentious $10,000 cryptocurrency tax rule has been put on hold, easing concerns in the crypto space.

Meanwhile, a proposed bill could potentially expand the Child Tax Credit, providing further financial relief to American families during the ongoing COVID-19 pandemic.

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