ECONOMY & WORK
MONEY 101
NEWS
PERSONAL FINANCE
NET WORTH
About Us Contact Us Privacy Policy Terms of Use DMCA Opt-out of personalized ads
© Copyright 2023 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.
MARKETREALIST.COM / ECONOMY & WORK

Looking for Higher Tax Savings? Check out the Direct Free Filing Option Introduced by IRS

On Tuesday, Direct File, a no-cost tax filing service provided by the IRS, became fully operational in 12 test states
PUBLISHED MAR 24, 2024
Cover Image Source: Photo by Olia Danilevich | Pexels
Cover Image Source: Photo by Olia Danilevich | Pexels

As Americans figure out their taxes, the IRS has rolled out direct free tax filing in 12 states as part of a test, and the U.S. Department of Treasury has released a list of those eligible to use this program for each state. The initiative is intended for those who filed simple tax returns and may be used to make the process easier for 19 million individuals. It's crucial to remember that this pilot program is only applicable to certain tax scenarios, such as W-2 employees who claim the standard deduction. You can check your eligibility to begin.

Image Source: Photo by Nataliya Vaitkevich |
 Pexels
Image Source: Photo by Nataliya Vaitkevich | Pexels

Here's the breakdown of eligible taxpayers in each pilot state:

- California: 5.2 million

- Arizona: 690,000

- Florida: 2.4 million

- Massachusetts: 850,000

- New Hampshire: 200,000

- Nevada: 480,000

- New York: 2.8 million

- South Dakota: 110,000

- Tennessee: 960,000

- Texas: 3.8 million

- Washington: 1.1 million

- Wyoming: 80,000

The agency hopes to receive about 100,000 filings through this program, which is approximately 0.5% of eligible filers.

IRS representatives indicated that you may be eligible for Direct File if your tax situation is straightforward and doesn't involve a lot of various kinds of income, credits, or deductions.

Only specific forms of income will be accepted by the pilot program: Form W-2 wages, Social Security retirement income, unemployment benefits, and interest of $1,500 or less. Gig economy jobs, self-employment income, and revenue from contracts reported on Form 1099-NEC are not covered by it.

You must claim the standard deduction when it comes to tax deductions. Tax credits such as the earned income tax credit, child tax credit, and credit for additional dependents are the only ones that can be filed using Direct File. Educator expenses and interest on student loans are also deducted by the program.

Monthly salary will at first affect your budgeting plans. Image Source: Pexels|Photo by Rdne Stock Project
Image Source: Pexels|Photo by Rdne Stock Project

IRS representatives say that if your tax return is straightforward, with few categories of income, credits, and deductions, you may qualify for Direct File. Specifically, income sources such as salary from Form W-2, Social Security retirement income, unemployment earnings, and interest totaling $1,500 or less will be handled under the experimental program. It will not, however, cover income from self-employment gig economy activity, or revenue reported on Form 1099-NEC.

You must deduct the standard amount to be eligible for Direct File. This deduction is $13,850 for single filers and $27,700 for married couples filing jointly for the tax year 2023.

Colleagues Standing in White Long Sleeve Shirts Discussing and Reading a Financial Report | Pexels | Mikhail Nilov
Image Source: Pexels | Mikhail Nilov

If you don't reside in one of the 12 states covered by the Direct File program, you have an additional option during tax season: IRS Free File. The IRS and a few tax software businesses collaborated on this program to assist the general population. Eight businesses will file federal taxes in 2023; some of them will also deal with state taxes.

If your income in 2023 was $79,000 or less, you are eligible to use Free File. It also provides Fillable Forms, which are accessible to everybody, regardless of financial situation, and resemble computerized equivalents of paper forms. About 100 million Americans, or nearly 70% of taxpayers, are eligible for Free File, according to Tim Hugo, the head of the Free File Alliance.

Even though only a small percentage of taxpayers used Free File last year, the number of returns filed (including Fillable Forms) has gone up by almost 15% compared to last year, according to Hugo.

There are other free options for filing taxes this year too, like Volunteer Income Tax Assistance, Tax Counseling for the Elderly, and free software from private companies.

MORE ON MARKET REALIST
The entrepreneur's mission to "save mankind" and his life's story impressed all of the sharks.
9 hours ago
Tom Cruise was not the only celebrity who was ranked lower than the popular game show host.
12 hours ago
The contestant also revealed that those shoes had lights in them before winning big.
13 hours ago
Steve Harvey's reaction to each of the answers was absolutely hilarious to watch.
1 day ago
The guest, who had the Levi Wells Prentice painting for 40 years, had no idea how valuable it was.
1 day ago
The host was stunned to hear the answer and made his public service announcement.
1 day ago
John considers himself the very best on the show when it comes to licensing deals.
2 days ago
Fans of the show found the joke tasteless and they let their feelings be known.
2 days ago
The host was stunned upon hearing the answer and had to ask the contestant about her logic behind it.
2 days ago
Mr. Wonderful had said no the first time, but promptly came back after learning about the royalty.
2 days ago
Steve Harvey had a hard time believing the contestant's answer, but she was outdone by her teammate.
3 days ago
The duo worked very well as a team and the victory was well-deserved.
3 days ago
Mr. Wonderful was passionate about bats right from the get-go and was the only one to make an offer.
3 days ago
The pawn shop owner made a deal with the seller that he'd pay more if the gun worked.
4 days ago
Amber Lancaster handled the situation gracefully, and even congratulated the player on his impressive win.
4 days ago
The contestant, Diane, gave a couple of cheeky answers that caught Steve Harvey off guard.
5 days ago
The guest was expecting $22,000 for a Led Zeppelin album that was signed by all four members.
5 days ago
Fans shared their excitement for the upcoming season, with many hoping to see another million-dollar winner.
5 days ago
The host noted that contestant was already a crowd favorite, and his kind gesture made Josh feel like a star.
5 days ago
The item’s uniqueness kept Rick Harrison from making an offer, as there was no reference point for its value.
6 days ago