The Internal Revenue Service (IRS) announced the commencement of its Direct File tax-filing program today, Wednesday, commencing at 6 a.m. PT (9 a.m. ET).
This launch marks a phase of the IRS’s initiative to conduct limited-scale trials of its Direct File tax-filing program, which may eventually be accessible to a wide range of taxpayers across the United States.
Currently, the pilot program is accessible to the public for brief, intermittent periods in 12 states, as stated by the IRS.
Direct File is the designation given to the novel no-cost tax filing platform being introduced by the IRS for the 2024 tax season, albeit initially available only for a portion thereof.
Users of Direct File are prompted to respond to inquiries akin to those encountered in mainstream tax software applications such as TurboTax or H&R Block.
Subsequently, the software utilizes the supplied responses to finalize tax returns, which can then be electronically submitted via the IRS website.
Who Can Use an IRS Direct File?
The 2024 pilot phase of Direct File is operational in 12 states: Arizona, California, Florida, Massachusetts, New Hampshire, New York, Nevada, South Dakota, Tennessee, Texas, Washington, as well as Wyoming.
Eligibility for participation in these states requires individuals not to have earned income from other states.
Direct File, in addition to its geographical constraints, is tailored to address tax returns from individuals with uncomplicated tax circumstances.
It is specifically designed for taxpayers who opt for the standard deduction, as it does not accommodate itemized deductions, such as mortgage interest or medical expenses, for the 2024 tax year, as per IRS guidelines.
Despite its limitation on itemized deductions, Direct File allows deductions for student loan interest and educator expenses, as these deductions can be claimed without itemization. Moreover, Direct File exclusively supports three tax credits: the Child Tax Credit (including the Additional Child Tax Credit), the Earned Income Tax Credit, and the Credit for Other Dependents.
Furthermore, due to its inability to handle the Premium Tax Credit, this year’s trial version of Direct File is unsuitable for taxpayers who obtained health insurance through a state or federal marketplace like HealthCare.gov.
Additionally, it does not support taxpayers who made withdrawals from health savings accounts in 2023.
Income Limits for IRS Direct File
For individuals filing as single or head of household, eligibility for Direct File is contingent upon their income not exceeding $200,000.
However, if the individual received income from multiple employers in 2023, this threshold is reduced to $160,200.
For joint filers intending to utilize Direct File, the income limitations mentioned above apply collectively to both spouses.
Together, their combined income cannot surpass $250,000 to be eligible for Direct File.
In the case of married individuals filing separately, Direct File can only be utilized if their 2023 income was $125,000 or less.
Furthermore, in the 2024 iteration, Direct File is restricted to four types of income sources:
- Income from an employer (Form W-2)
- Income from unemployment compensation (Form 1099-G)
- Social Security or railroad retirement benefits (Form SSA-1099)
- Income of $1,500 or less from interest, US savings bonds, or treasury obligations (Form 1099-INT)
Consequently, individuals categorized as independent contractors or freelancers with income reported on Forms 1099-K or 1099-NEC are ineligible to use Direct File this year.
Similarly, taxpayers receiving income from retirement distributions, unreported tips, or reportable alimony are also ineligible for Direct File.
