Free IRS Filing System Available in 2024
The IRS has announced a new tax filing system called Direct File, which will become available in 2024. This is the first time that the IRS has created its own tax filing system. It is likely that this system’s scope will be limited in its first few years but will evolve over time to have the ability to process complex returns if all goes well. It is unknown at this time who will be able to use the IRS Direct File system in 2024.
Why the need for the new system?
Currently, the IRS does not have a way for tax filers to file directly through the IRS. Dozens of other countries have made similar systems available to their citizens. Right now, American tax filers have a few options for filing their taxes: use an online tax filing software, such as H&R Block or TurboTax; work with a tax preparer; or file using paper returns. It can be expensive to file taxes using an online software or a tax preparer, and paper returns often take a very long time to be processed by the IRS.
The IRS does currently offer the IRS Free File system, which is only for taxpayers who have an AGI (Adjusted Gross Income) of less than $73,000. This system redirects users to partner sites, such as H&R Block or TurboTax, where the taxpayer can file their taxes.
The new Direct File system announced by the IRS is different in that it is free for all filers, regardless of their AGI. It is also different in that it does not go through a partner site but is managed directly by the IRS.
What other options are available?
Other tax filing options, such as paper filing and online tax software systems, will still be available. The IRS is not trying to get rid of these other options but is simply offering a free alternative through which taxpayers can file their taxes.
What concerns are there?
The IRS is developing this new filing system from the ground up. It will take time for the IRS to perfect the system and for the system to accommodate all tax filers. Some have concerns that the other online tax filing software, such as H&R Block or TurboTax, have already filled the need in this space, so the government is wasting its efforts by creating this new solution. Some have also expressed concern over the IRS helping taxpayers in filing their taxes while also being the agency that manages their tax returns, feeling like this may create a conflict of interest for the IRS. Often, more information than is truly necessary is collected while preparing tax returns, and there is some concern over the IRS’s ability to secure and protect this mass amount of personal information. Additionally, as this new Direct File system is solely for federal taxes, meaning that taxpayers may need to use a different software to file their state taxes.
Why should you use the new tax filing system?
Tax preparation can be expensive. While online tax preparation software such as TurboTax or H&R Block offer free versions of their services for simple returns, their paid versions start at $59 and $85, respectively. It has been found that the average taxpayer spends about $140 to file their taxes each year. The IRS is hoping to get rid of the cost of filing by providing their new filing system for free to all taxpayers, no matter the complexity of the return.
At this time, the IRS Direct File system is not expected to pre-fill tax returns with information the IRS already has on file for the taxpayer from forms such as W-2s. This feature may come in future adaptations, which would make tax preparation much easier and could reduce the number of errors on a tax return.
For more information, visit:
https://abcnews.go.com/US/wireStory/irs-moves-forward-free-filing-system-pilot-program-99372451
If you have questions or would like to consult with an attorney, contact the Indiana Legal Services Low Income Taxpayer Clinic at tax.clinic@ilsi.net or (812) 339-7668.
Claire Thiel,
Low Income Taxpayer Clinic Law Clerk