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

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

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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.

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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.

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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.

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