IRS takes the decision to expand the direct file program in 2025. It allows the taxpayers of 24 states to file their taxes with the agency directly at no fees. The direct file program piloted in 2024 in 12 states earlier, but now it will serves to more than 30 million people. With the direct file expansion to 24 states, new states joins the taxpayers list, include the new jersey, Connecticut, Alaska, etc.
The direct file expanded eligibility allows taxpayers with 1099 income and credits to take part in it. This direct file program simplify tax filling process, and collaborate with commercial tax preparation services. The average American spends the $270 and 13 hours on filling taxes, and gets benefits of the direct file program.
Overview of the IRS Direct File Program
IRS direct file program allows taxpayers to file their taxes with the federal government directly for free. It bypass the commercial tax preparation process. It has been pilot in 2024 initially, and once it will start getting success, it enables the taxpayers of 12 states to get $90 Million in refunds.
As the pilot will get success, the IRS announced that it will make the direct file program permanent and expand it to the 2025 tax season to more than 30 million people in 24 states
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2024 IRS Direct File Program
Taxpayers who belong to 12 states eligible for the direct file program can only use it if their income is restricted to W-2 wages, unemployment compensation social security income or interest income of less than $1500. They will be able to get credits such as child tax credits, earned income tax credits, and credits for other dependents.
The deductions for student loan interest and teacher expenses are also allowed in the direct file program, but taxpayers are limited to only claim the standard deduction.
Direct file Expanded to Tax Season 2025
For the 2025 tax season, there are 12 more states will participate, and its total 24 allowed to use the direct file program. IRS has expand direct file to 24 states. It expands the types of credit, income, and deductions allowed. new additions are
- Alaska Permanent Fund dividends (for Alaska residents)
- 1099-INT interest income exceeding $1,500
- Child and Dependent Care Credit (Form 2441)
- Credit for the Elderly and Disabled (Schedule R)
- Retirement Savings Contribution Credit (Form 8880)
- Premium Tax Credit (Form 8962)
- Health Savings Account Deduction (Form 8889)
According to the previous year, the taxpayers who are using the direct file will able to claim the standard deduction
Why is the IRS expanding Direct File?
IRS has taken leading steps to expand the direct file program to 24 states. It makes the tax season 2025 easier and more affordable. New countries like Japan and Germany will also provide free tax filing methods to citizens after this expansion. IRS has emphasized that this program will permit US taxpayers to get benefits of similar services.
IRS is funded by the Inflation Reduction Act signed by President Biden in 2022 and gets $15 million to get the creation of a direct file system. The aim is to reduce the costs for taxpayers and give straight options to paid tax preparation software.
List of states eligible for Direct File in tax season 2025
As per the IRS expansion, the total 24 states will eligible for direct file in tax season 2025. Here is a list of all eligible states
- Alaska
- Arizona
- California
- Connecticut
- Florida
- Idaho
- Kansas
- Texas
- Maine
- Maryland
- Massachusetts
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- Oregon
- Pennsylvania
- South Dakota
- Tennessee
- Washington
- Wisconsin
- Wyoming
Other Important Points to Know
Along with the names of states eligible for direct file in tax season 2025, you should also know about some key facts.
- Availability: Direct File will only available in starting of 2025 tax filing season.
- Eligibility: Taxpayers who are not live in 24 states are not eligible for Direct File program.
- State Income Tax Returns: Direct file program only covers individual income tax returns and allows states with state income tax. It will assist users in transferring their information to a state-supported tool and preparing and e-filing their tax returns.
- Filing Options: Direct File is expansion, it will not replace any existing filing methods. Taxpayers will still have the option to use free tax preparation sites ( TCE, ITA, etc), tax professionals, Free File, commercial software, or paper returns.
Eligibility for IRS direct file
IRS direct file eligibility are vary according to income type, tax credits, deductions, etc. Let us tell you about these in brief.
Types of Income
Here are the types of income that direct file will support in tax filing season 2025
- Wage income (W-2)
- Social Security income (SSA-1099)
- Unemployment compensation (1099-G)
- Interest income (1099-INT)
- Pension and annuity income
Tax credits
Tax credits support by direct file for the 2025 tax filing season are
- Earned Income Tax Credit
- Child Tax Credit
- Credit for Other Dependents
- Child and Dependent Care Credit
- Premium Tax Credit
- Retirement Savings Contributions Credit (Saver’s Credit)
- Credit for the Elderly and Disabled
Deductions
You are unable to use direct files if you itemize deductions. The eligible deductions are
- Standard deduction
- Student loan interest
- Educator expenses
- Health Savings Account contributions
IRS tax extension deadline 2024
You have to filled the extension timely to become eligible for direct file for tax filling season 2025. The deadline to file your income taxes or extension is 15 October. So, you have to file it before the deadline to save from IRS penalties. There is no extension on payments after the 15 April deadline.