The IRS Direct File Project is a new initiative by the Internal Revenue Service (IRS) aimed at allowing taxpayers to e-file their federal tax return for free directly through the IRS.
In today’s article, I’ll explain more about the project and let you know if you can take part in the 2024 IRS Direct File Project Pilot.
What is the IRS Direct File Project Pilot?
The IRS Direct File Project Pilot is designed to test how the IRS can provide taxpayers with a new, free option to electronically file their federal tax return directly through an IRS website. Basically, the overall idea of the whole project is to make filing your taxes faster, easier, and more convenient.
Can I participate in the IRS Direct File Project Pilot in 2024?
There are a total of 13 states where tax filers may be eligible to participate in the 2024 Direct File Project Pilot. Whether you’re eligible to participate will depend not only on if you live in one of those states but also what types of income, credits, and deductions you have. If you have a “simple return,” you are more likely to qualify.
The IRS has announced that a small group of taxpayers in the following 13 states will be eligible to participate at the beginning of the tax-filing season in 2024 (more taxpayers are expected to be given access to the program as the 2024 tax season continues):
- Alaska
- Arizona
- California
- Florida
- Massachusetts
- Nevada
- New Hampshire
- New York
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Additionally, the Direct File Project Pilot will only work for taxpayers who are filing individual federal tax returns, and it will not apply to state returns. You’ll likely qualify for the pilot as long as your tax return is a “typical” return. The IRS has said the pilot will likely allow you to:
- Report W-2 income
- Report Social Security and railroad retirement income
- Report unemployment compensation
- Report interest of $1,500 or less
- Claim the Earned Income Tax Credit
- Claim the Child Tax Credit
- Claim the Credit for Other Dependents
- Take the standard deduction
- Deduct student loan interest
- Deduct educator expenses
Why is the IRS conducting a Direct File Project Pilot?
In 2022, the Inflation Reduction Act created funding for the IRS to improve its services and technology. At that time, the IRS was also tasked with researching the feasibility of providing a free, electronic filing program.
To accomplish this, the IRS will begin allowing a group of taxpayers to participate in the Direct File Project Pilot beginning in 2024. They will then evaluate the program and determine their next steps if the program is successful.
What are the potential benefits of participating in the IRS Direct File Project?
Some important and possibly beneficial features being piloted in this program are:
1. A Simplified Filing Process
The IRS Direct File Project is meant to simplify tax forms and make it easier for taxpayers to file tax returns. If you participate in this project, you’ll likely see simple instructions and easy-to-follow directions when using the IRS site.
2. Technology and Tax Support
In addition to the online tools, the IRS plans to provide customer service support to assist with any questions you may have while entering information and filing your return. This will likely include both technical support and some customer service support in answering your tax questions.
3. Faster Refunds
Another benefit to participating in the Direct File Project is that you should experience a faster refund process. When you file your taxes through this program, you should expect quicker processing of your return, so if you’re expecting a return, you should receive it faster than if you file through other methods.
4. A User-Friendly Mobile App
The IRS plans to provide a mobile app for taxpayers to file their taxes right on their phone or iPad. For those who are comfortable completing all sorts of tasks on their phone, this will likely be a big draw to participate in the program.
What do tax professionals think about the IRS Direct File Project Pilot?
I’m interested to see how this project evolves. The IRS has also said that they will work to develop tools within the pilot and project that can be used by tax professionals to help their clients, so I’m encouraged by that news as well.
I applaud any effort by the IRS to make the tax process easier, more accessible, and less intimidating for taxpayers. I will say, however, that if you choose to participate in the pilot and you don’t feel like you’re getting the answers you need from the IRS, consider reaching out to a CPA who can ensure you’re making the right tax decisions.
