IRS makes the free tax filing program permanent and asks all states to join in by 2025

WASHINGTON (AP) — The IRS has said it will make permanent the free electronic tax filing system it experimented with this year and is asking all 50 states to help taxpayers file their returns through the program in 2025.

The IRS has piloted the Direct File Project for the 2024 tax season on a limited basis in 12 states for people with very basic W-2s, employee wages, and tax returns.

The agency also invites all states with a state income tax to sign up and help people file their state returns for free. During the 2024 pilot, tax authorities in Arizona, Massachusetts, California and New York helped people file their state taxes directly.

IRS Commissioner Danny Werfel said the IRS will report later this year how many states plan to participate in the program in 2025.

The IRS was tasked with exploring how to create a “direct file” system as part of the money it received from the Inflation Reduction Act signed by President Joe Biden in 2022. It gave the IRS nine months and $15 million to report on. how such a program would work.

Since the Direct File process began in March, more than 140,000 taxpayers have used it to file their tax returns, claiming more than $90 million in refunds, agency officials said.

Werfel said the expansion of the program will provide taxpayers with a new filing option and is “fully in line with the IRS’s efforts to make taxes as easy as possible for Americans, including saving time and money.”

The IRS has faced intense backlash over Direct File from private tax preparation companies that have made billions charging people to use their software and spent millions lobbying Congress. The average American typically spends about $140 each year preparing their returns.