Personal finance

IRS free tax filing pilot processed more than 140,000 returns, saved consumers $5.6 million in prep fees

IRS Commissioner Danny Werfel testifies during the Senate Finance Committee hearing on the fiscal 2024 IRS budget and the IRS’ 2023 filing season, in the Dirksen Building in Washington, D.C., on April 19, 2023.
Tom Williams | CQ-Roll Call, Inc. | Getty Images

This season, more than 140,000 taxpayers successfully filed returns using IRS Direct File, a free tax filing pilot from the IRS, according to the U.S. Department of the Treasury and the IRS.

The program fully opened for certain taxpayers in 12 states in early March and saved filers an estimated $5.6 million in tax preparation fees for federal returns, IRS Commissioner Danny Werfel told reporters on a press call.

Direct File surveyed more than 15,000 users, around 90% of whom rated their experience as “excellent,” the agencies reported.

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“We have not made a decision about the future of Direct File,” Werfel said, noting the agency still needs to analyze data and get feedback from a “wide variety of stakeholders.”

The IRS plans to release a more detailed report about the Direct File pilot “in the coming days,” he added.

How Direct File could be expanded

The Direct File pilot included Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.

The pilot only accepted Form W-2 wages, Social Security retirement income, unemployment earnings and interest of $1,500 or less. This excluded filers with contract income reported via Form 1099-NEC, gig economy workers and self-employed filers.

Filers had to claim the standard deduction, which was $13,850 for single filers and $27,700 for married couples filing jointly for 2023.

Moreover, Direct File only accepted a few credits: the earned income tax creditchild tax credit and credit for other dependents. The pilot also accepted deductions for student loan interest and educator expenses.

If Direct File were expanded for the next season, the program could add additional states and tax situations, according to a senior IRS official.

The agency expects to decide the future of Direct File later this spring, Werfel said.

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