20 Million U.S. Taxpayers Can Now File Their Taxes for Free

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In an ambitious move to transform the tax-filing landscape, the Internal Revenue Service (IRS) is set to launch Direct File, a groundbreaking project designed to provide free, accessible, and straightforward public tax filing.

The eagerly anticipated pilot will kick off during the 2024 tax filing season, offering phased availability to an estimated 20 million taxpayers across select states, including Arizona, California, Massachusetts, and New York, as well as states without a state income tax filing requirement such as Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington, and Wyoming.

Direct File is positioned not as a replacement but as a complement to existing tax filing options. Taxpayers who prefer the services of private companies or personal accountants will still have the freedom to choose those avenues. This announcement comes at a crucial time, as TurboTax faces scrutiny for its deceptive advertising practices, underscoring the urgent need for diversified tax filing alternatives.

The Significance of Direct File for Taxpayers

Americans collectively expend a staggering 1.7 billion hours or $31 billion annually on filing their taxes. Despite the majority having relatively simple tax cases that should take minutes and be free to file, many find themselves spending unnecessary time and money. A free tax filing option, such as Direct File, could potentially save Americans an average of 13 hours and $250 per tax season.

Moreover, millions of individuals find the process of filing taxes too challenging or expensive, leading them to miss out on valuable credits. This includes up to 1 in 5 families eligible for the Earned Income Tax Credit and approximately 4 million Child Tax Credit families in 2021—disproportionately impacting people of color.

In essence, providing 20 million Americans with the option to file taxes without relying on for-profit tax preparers is expected to save families both time and money. This is particularly advantageous for immigrants and communities of color, who are often disproportionately affected by the complexities of the current tax system.

Eligibility Criteria for 2024

Direct File is set to launch as a limited-scope pilot, covering specific types of income, credits, and deductions. These include W-2 income, unemployment benefits, interest up to $1,500 (no Schedule B), Social Security (and Railroad Retirement) benefits, as well as credits like the Earned Income Tax Credit, Child Tax Credit, and Credit for Other Dependents. Additionally, some deductions, such as the standard deduction, student loan interest deduction, and educator expenses subtraction, will be included.

The pilot aims to prioritize low and moderate-income families and enhance accessibility by offering the tool in both English and Spanish. Individual Taxpayer Identification Number (ITIN) holders, as opposed to Social Security Number (SSN) holders, will also have the ability to utilize the tool.

What Happens Next?

The inaugural year of Direct File serves as a pilot with limited functionality. If successful, subsequent phases are expected to expand its reach and capabilities, aligning with the overwhelming desire of Americans. Recent polling by Hart Research reveals that 88% of Americans support the Direct File pilot program, with over 75% expressing a willingness to try the free file tool.

Paying taxes is an integral part of civic duty, ensuring the government can continue to provide critical, lifesaving services. Direct File aims to simplify this process, making it easier for all citizens to fulfill their legal responsibilities.

In the words of Igor Volsky, Executive Director of Groundwork Action: “America’s current tax filing system is time-consuming, expensive, and complicated. Direct File offers a much-needed alternative for the millions of Americans seeking a free, simplified way to file taxes. This is especially important for low-income taxpayers, many of whom miss out on certain tax credits simply because it’s either too difficult or too expensive to file. Paying taxes is our civic duty and legal responsibility—the least the government can do is make it easier.”

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