Finally, taxes might be getting easier. The IRS announced this week that it intends to pilot a free system called Direct File in 2024 — but only for a limited number of taxpayers and in just a handful of states.
The U.S. system for doing taxes has never felt like it made any sense. This iconic tweet from Taylor Cox comes to mind.
That's basically how things work. You do some complicated math and risk getting it all wrong, while the IRS already claims to know how much you should owe.
It seems the IRS is finally looking to do something about that and, in the process, take a direct shot at often predatory tax services. In recent years, for instance, Pro Publica has dropped bombshell reporting on the efforts TurboTax has taken to keep Americans from filing taxes for free. The IRS noted earlier this year that it was looking to develop its own, free tax-filing system, much to the chagrin of companies like Turbo Tax. Now the pilot program has officially been announced.
The scope of the new program is going to be quite limited at first. Arizona, California, Massachusetts, and New York have already decided to work with the IRS to integrate the Direct File pilot program for the 2024 tax filing season (AKA your 2023 taxes). Taxpayers in nine states without a state income tax — Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — could also be eligible, the IRS said. It also sounds like this is just the first step in making the system wider.
"This is a critical step forward for this innovative effort that will test the feasibility of providing taxpayers a new option to file their returns for free directly with the IRS," IRS Commissioner Danny Werfel said in a statement. "In this limited pilot for 2024, we'll be working closely with the states that have agreed to participate in an important test run of the state integration. This will help us gather important information about the future direction of the Direct File program."
Now who, exactly, will be able to use the Direct File system isn't clear just yet. The IRS noted it would like to be limited to "taxpayers with relatively simple returns." The agency said it "anticipates specific income types, such as wages on a Form W-2, and important tax credits, like the Earned Income Tax Credit and the Child Tax Credit, will be covered by the Direct File pilot."
Details on what the system will look like are also a bit limited. However, the IRS did note that it will be interview-based, mobile-friendly, and available in both English and Spanish.
There is certainly a long way to go but maybe — just maybe — one day we can remove the frustrating, and often expensive, guesswork out of tax season.
