As the 2025 tax season approaches, the IRS has begun to open its free tax filing service for every state. That means many are gearing up to file their taxes with the IRS Direct File program. It allows taxpayers to file their federal tax returns online, though for those outside of Arizona, California, Masschusetts and New York, state tax must still be filed separately. This year, however, IRS Direct File will be an option for many additional taxpayers.
According to the Washington Post, four states – New Jersey, New Mexico, Oregon, and Pennsylvania – have announced they will also begin supporting the tax filing service. What began as a 12-state pilot in 2024 is continuing to grow, with every state invited to offer the option permanently. Should the new group of states make their intention to join official, that number will grow to just 16.
Unfortunately for the rest of the country’s taxpayers, time is running out for the remaining states to get on board. That’s because they need to have an online state tax filing system in place to be eligible for the program. With the tax season only months away, states that haven’t yet met the requirements are scrambling to implement the necessary infrastructure to ensure their residents can take advantage of this convenient filing option. As the Washington Post reports, Deputy Treasury Secretary Wally Adeyemo estimates that it would be “hard to set up a tax-filing website” should the states wait too long after the end of August. That’s only a few weeks away.
The Inflation Reduction Act of 2022 mandated that the IRS investigate the cost and feasibility of creating and running its own free online tax filing system. After reporting its findings to Congress in May 2023, the agency then began developing the free software. On Jan. 29, 2024, the Direct File system went live for preselected taxpayers, and on Feb. 21 the IRS opened the test program to new participants before briefly closing it. On March 12, the program reopened to the public. More than 140,000 people submitted accepted tax returns through the system before it closed on April 15.
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Here’s everything we know about how the new IRS free tax filing software works and how the program will expand for the 2025 tax filing season.
What is IRS Direct File?
Direct File is the name of the new free tax filing system that the IRS launched for the 2024 tax season. Taxpayers using Direct File answer questions similarly to those in popular tax software like TurboTax or H&R Block, and the software uses the provided answers to complete tax returns that can you can then submit electronically on the IRS website.
Which taxpayers can file income tax returns with IRS Direct File?
The 2024 pilot program for Direct File was only available to taxpayers in 12 states — Arizona, California, Florida, Massachusetts, New Hampshire, New York, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming. To participate, residents of those states could not have earned income in other states.
Along with its geographical restrictions, the 2024 Direct File program only handled tax returns from taxpayers with relatively simple tax situations. Particularly, Direct File only worked for taxpayers who took the standard deduction. Those who itemized deductions couldn’t file their tax return with Direct File in 2024.
According to the Treasury Department’s plans, Direct File could be expanded to all 50 states and Washington, DC, for the 2025 tax-filing season.
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Although Direct File in 2024 did not support itemizing deductions like mortgage interest or medical expenses, it did support both the student loan interest and educator expenses deductions, since they can be claimed without itemizing.
In addition to the deduction restrictions, Direct File in 2024 supported only three tax credits:
If you wanted to take tax credits for items such as energy efficiency, electric vehicles, adopted children, retirement savings, health care premiums or child care costs, you needed to use another tax filing option in 2024.
The IRS has said that it will be “exploring ways to expand Direct File to make more taxpayers eligible in the 2025 filing season,” but the details of which new taxpayers will be eligible has not yet been decided. The agency notes that it plans to focus on “situations that impact working families.”
You’ll need to create an online IRS account to use Direct File. If you don’t already have an account when you apply, the site will direct you to create one first.
How do I check if I’m eligible for IRS Direct File?
The 2024 Direct File site had an eligibility checker to see if you qualified to use the service. Since April 15, that functionality has been disabled. For 2025, we’ll need to wait to see which states accept the offer to be added to the Direct File program, as well as which additional taxpayers will be added to Direct File based on their tax situations.
Are there income limits for IRS Direct File?
For the 2024 tax-filing season, Direct File had income restrictions for eligibility.
If you filed as single or head of household, you could not have income greater than $200,000 to use Direct File, or $160,200 if you earned income from multiple employers in 2023.
If you filed jointly, the income requirements for Direct File apply to both you and your spouse, and together you could not have earned more than $250,000 in 2023 total.
If you were married and filed separately, you could not use Direct File unless your income for 2023 was $125,000 or lower.
In addition to its income caps, Direct File in 2024 was limited to four 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)
That means that if you were an independent contractor or freelancer with income reported on Forms 1099-K or 1099-NEC, you could not use Direct File in 2024. Similarly, taxpayers with income from retirement distributions, unreported tips or reportable alimony could not use Direct File.
We’re not sure yet if or how those income limits will be modified for the 2025 tax season.
What does the IRS Direct File software look like?
Direct File looks — in its 2024 edition — similar to other software programs you’d use for filing income tax returns. The application uses plain language in a questionnaire format to glean your info, gives you a chance to review your information after each section, and then compiles all of your taxpayer info in a 1040 form that you can review and submit online.
The IRS Direct File software uses a questionnaire format that is similar to other popular tax preparation tools.
Direct File is available in English or Spanish, and a button at the top of the application lets you switch back and forth between the two languages. A persistent Chat button lets you ask questions online to a human assistant (not a bot) during the hours of 7 a.m. to 10 p.m. ET, Monday through Friday. Direct File works on computers, smartphones and tablets.
How does the IRS Direct File software work?
In 2024, the Direct File software began by assessing your eligibility for the program using seven questions. If it found that you qualified, it then moved on to your personal information, family and household, 2023 income, the three included tax credits and taxes that you already paid via withholding or estimated quarterly payments. If at any time you entered tax information that Direct File didn’t support for 2024, an alert informed you that you weren’t eligible and pointed you to other tax resources for finishing your tax return.
Direct File breaks down the tax filing process into a short series of steps.
After you completed all of the sections, Direct File showed you the amount of your tax refund or the amount of money that you owe, along with a summary of the calculations performed to determine that amount. If you were getting a refund, you could then decide to receive a paper check or enter your banking details for direct deposit.
You were then presented with a completed Form 1040 that you could download and review. A summary page provided links for editing information in any of the sections. Once you were satisfied that the information looked good, you could confirm and sign your return by verifying your identity with last year’s AGI or self-selected PIN. Then you could digitally sign and submit your 2023 federal income tax return.
When did the IRS Direct File program launch?
The IRS officially launched its Direct File program on Jan. 29, 2024, for preselected taxpayers. The program continued to accept limited applicants during the next two months, and completed its final testing phase from March 4 to 11. The IRS opened up Direct File for the 2024 tax-filing season fully to residents in 12 states on March 12, 2024.
Can IRS Direct File help taxpayers file state taxes online?
Taxpayers in Arizona, Massachusetts and New York who filed their federal income tax returns online with Direct File in 2024 were able to automatically transfer their federal tax information into state-provided online tax filing software. Residents of California who used Direct File were directed to CalFile after completing their federal tax returns, but they needed to copy all of their information manually. Washington does not have any state income tax, but Direct File directed users to the state’s Working Families Tax Credit after completing their federal tax returns.
Like Washington, six other states in the 2024 Direct File program — Florida, Nevada, South Dakota, Tennessee, Texas and Wyoming — do not collect state income taxes. New Hampshire does not tax wages and earnings but does collect a flat-rate tax (4% in 2023) on interest and dividends when the amount is at least $2,400. Because Direct File had a $1,500 limit on interest income and did not support income from dividends (Form 1099-DIV), it was unlikely that a New Hampshire taxpayer using Direct File would be required to pay state taxes on interest or dividends.
For the 2025 tax season, Direct File’s ability to help taxpayers file state taxes online will depend on whether their state accepts the IRS offer to participate in Direct File and if their state offers online tax-filing for state income tax returns. In its announcement, IRS Commissioner Danny Weurfel said that, “User experience – both within the product and integration with state tax systems – will continue to be the foundation for Direct File moving forward.”
For more information on income taxes, take a look at our best tax software or all the tax breaks available to homeowners.
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