IRS Makes Free Tax-Return Program Permanent

The IRS said Thursday it will make permanent the free electronic tax-return filing system that it experimented with this year and is asking all 50 states and the District of Columbia to help taxpayers file their returns through the program in 2025, per the AP:

• The pilot: The IRS tried the Direct File project for the 2024 tax season on a limited basis in 12 states for people with very simple W-2s, the employee's wage and tax statement.
• State expansion: The agency also is inviting all states with a state income tax to sign up and help people file their state returns for free. During the 2024 pilot, tax agencies in Arizona, Massachusetts, California, and New York helped people directly file their state taxes.

• Users: Since the Direct File trial began in March, more than 140,000 taxpayers used it to file their tax returns, claiming more than $90 million in refunds, agency officials said.
• Friction: The IRS has faced intense blowback to Direct File from private tax-preparation companies that have made billions from charging people to use their software and have spent millions lobbying Congress. Americans spend an average of about $140 preparing their returns each year.
• Funding: The IRS was tasked with looking into how to create a "direct file" system as part of the money it received from the Inflation Reduction Act signed into law by President Joe Biden in 2022. For the Direct File program to keep growing, it will need continued funding under the act, which initially included $80 billion for the IRS. Some of that has since been diverted by lawmakers to other programs.

(More IRS stories.)