The IRS will launch a free program for filing returns

The IRS is pursuing a plan to create its own free tax filing program known as Direct File. The pilot version will be available to some taxpayers in 13 states next year, reports CNN.

Photo: IStock

The IRS is conducting an overhaul of its operations despite ongoing threats from Republicans to cut future funding and even abolish the agency entirely.

Ultimately, the IRS tax filing system could become an alternative to private tax preparation companies such as H&R Block and Intuit's TurboTax.

On the subject: IRS Announces New Tax Rates: How Much You'll Have to Give to Uncle Sam

But for now, the online pilot program will be very limited in scope. Only taxpayers from those 13 states that have a specific tax situation will be able to participate.

The IRS expects at least several hundred thousand taxpayers to choose to participate in the pilot.

Critics of Direct File, including H&R Block and Intuit, argue that the government system would likely provide a worse deal for taxpayers than what is currently available. They believe that the federal tax collector should not also play the role of tax preparer.

Taxpayers will still be able to use professional tax software, commercial tax software, or the existing Free File program provided by seven different private companies.

The Direct File pilot program will help the IRS determine whether it is possible to offer the government tax filing system to more taxpayers in the future.

Who will be eligible to participate in the pilot program?

Select taxpayers in Arizona, California, Massachusetts and New York will become eligible for the pilot program during the 2024 tax season, which begins in January.

The Direct File pilot will only cover individual federal tax returns. But once the federal return is filed, taxpayers will have access to a state-backed tool they can use to file their state taxes.

Like the article? Support ForumDaily!?

Taxpayers in nine other states that do not levy state income taxes—Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming—may also be eligible to participate in the pilot. But not every taxpayer in the 13 participating states will be allowed to use Direct File next year. Eligibility will be limited to taxpayers with certain types of income who qualify for certain types of credits and deductions.

The IRS has not yet determined the exact tax situations that will be compatible with the pilot program next year. But those with wages reported on Form W-2 and who claim tax credits such as the Earned Income Tax Credit and the Child Tax Credit are expected to be able to take advantage of the program.

Major changes

The IRS has endured years of funding cuts, leading to declines in both staffing and audits. But thanks to Democrats' Inflation Reduction Act, a massive federal spending package that Congress passed in 2022, the agency will receive a steady stream of long-term funding. It will help fight tax fraud and transform the activities of the service.

The IRS says the money has already helped improve service for taxpayers. In the 2023 application season, the company answered 3 million more calls and reduced wait times to three minutes from 28 minutes compared to a year earlier.

The IRS has also begun a plan to digitize all paper tax returns by 2025. The move is expected to cut processing times in half and speed up tax refunds by four weeks.

You may be interested in: top New York news, stories of our immigrants, and helpful tips about life in the Big Apple - read all this on ForumDaily New York.

The Inflation Relief Act included a provision to give the IRS $80 billion over 10 years, but Republicans have raised questions about whether the investment will lead to more audits for average Americans. Earlier this year, Republican lawmakers were able to return $20 billion in funding as part of a bipartisan deal to address the debt ceiling.

The White House says the cuts won't fundamentally change what the IRS can do over the next few years. Biden administration officials have also repeatedly said taxpayers making less than $400 a year will not face increased checks due to the new funding.

Read also on ForumDaily:

11 famous luxury resorts that will become cheaper to visit in 2024

Evacuation to Egypt and Biden’s unexpected opinion: what is happening now in the war between Israel and Hamas

A Florida resident left two children alone on the beach: a 3-year-old girl went swimming herself

Do you want more important and interesting news about life in the USA and immigration to America? — support us donate! Also subscribe to our page Facebook. Select the “Priority in display” option and read us first. Also, don't forget to subscribe to our РєР ° РЅР ° Р »РІ Telegram  and Instagram- there is a lot of interesting things there. And join thousands of readers ForumDaily New York — there you will find a lot of interesting and positive information about life in the metropolis.