I have written before about the new Internal Revenue Service (IRS) Direct File pilot program. “Eligible” taxpayers in 12 states can now file their 2023 US tax returns directly with the IRS (for free). No more need for Turbo Tax or a tax return preparer!
According to the IRS, the Direct File pilot is easy to use! Check out its amazing capabilities, detailed below.
Americans Overseas – No Way!
If you are an American abroad – forget about using the Direct File pilot program. Given the complexity of US tax returns for the American living and working overseas, use of the Direct File program is not possible. My earlier blog post on this topic makes clear that until the US tax system drastically changes, the Direct File program will not be a realistic possibility for taxpayers living and working abroad or having foreign investments. Even those with very simple tax returns are not “eligible” assuming they plan to use the foreign earned income and/or housing exclusions.
A Wizard of a Program?
According to IRS Tax Tip 2024-13 (March 7 2024), the Direct File pilot is easy to use and helps “eligible” taxpayers:
- File a 2023 federal tax return in as little as 30 minutes using a mobile device.
- Add tax information with step-by-step guidance
- Connect with real-time online support from IRS customer service representatives
- Access it from smartphones, laptops, tablets and desktop computers
- Get a federal tax refund in less than 21 days
Taxpayers who join the pilot can claim the Earned Income Tax Credit, Child Tax Credit and Credit for Other Dependents.
Who’s eligible:
IRS Direct File pilot is available for taxpayers who file simple (emphasis on the word “simple”) federal tax returns in 12 participating states and who report the following types of income:
- W-2 wage income
- SSA-1099 Social Security income
- 1099-G unemployment compensation
- 1099-INT interest income of $1,500 or less
Direct File is not an option if you have other types of income such as retirement income, gig economy or business income.
IRS Direct File pilot participants must take the standard deduction and can claim deductions only for student loan interest and educator expenses.
On March 12, IRS issued tips on how to use the Direct File successfully.
How Did We Get Here? A Little Bit of (Shady) History from ProPublica
Here is information from an email sent by ProPublica. It provides fascinating background. Perhaps this explains how we arrived today to see the development by IRS of the Direct File program.
“Back in 2013, ProPublica reported that Intuit, the maker of TurboTax, had successfully lobbied to stop the IRS from creating an easy way for millions of taxpayers to file online for free (a service many other countries provide).
Instead, the IRS struck a deal with Intuit and other for-profit tax preparation companies to offer their products for free to qualifying taxpayers, while the government pledged not to create its own competing system.
In 2019, as Intuit was lobbying Congress to make this agreement permanent, ProPublica exposed how TurboTax was using deceptive design and misleading tactics to steer low-income filers to paid versions of its service even though they were eligible to file for free.
This shady behavior worked. Only a tiny percentage of eligible taxpayers actually used the free products offered through the deal with the government.
Our investigation spurred public outcry, federal and state investigations, lawsuits and more. The IRS announced major reforms to its agreement with the tax prep software industry, more than 4 million people received refunds from Intuit as part of a $141 million settlement, and this year, the IRS is testing its own pilot program covering 12 states.”
Posted March 14, 2024
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