U.S. Treasury Expands Free Federal Tax Filing System

WASHINGTON (Reuters) – The U.S. Treasury announced that over 30 million taxpayers in 24 states will be eligible to file federal taxes for free through an expanded online Direct File system next year.

Why It’s Important

The Biden administration aims to demonstrate that its policies are reducing consumer costs, a key theme of Vice President Kamala Harris’s presidential campaign to alleviate rising living expenses.

The Treasury projects that Direct File could save taxpayers tens of millions in tax preparation fees during the 2025 tax season. This initiative was supported by roughly $60 billion in modernization funding for the IRS allocated in the 2022 Inflation Reduction Act.

By The Numbers

During the 2024 filing season, over 140,000 taxpayers in 12 states utilized the pilot program to file straightforward tax returns that included W-2 wage income and standard deductions.

Next year, the Direct File system will expand to accommodate additional income types, credits, and deductions, increasing eligible users to over 30 million. However, taxpayers who itemize returns with mortgage interest and certain deductions will not be able to use this service yet.

On average, the Treasury estimates that American taxpayers spend $270 and 13 hours filing their returns.

Key Quote

“By doubling the number of participating states and expanding eligibility, Direct File has the potential to save Americans tens of millions of dollars in filing fees…” – Treasury Secretary Janet Yellen.

Participating States

The Direct File system will be available next year in the following states:
– Alaska
– Arizona
– California
– Connecticut
– Florida
– Idaho
– Kansas
– Maine
– Maryland
– Massachusetts
– Nevada
– New Hampshire
– New Jersey
– New Mexico
– New York
– North Carolina
– Oregon
– Pennsylvania
– South Dakota
– Tennessee
– Texas
– Washington
– Wisconsin
– Wyoming