On Tuesday, October 17, 2023, the Internal Revenue Service (IRS) introduced an $11 billion tax program that will undergo testing in 13 states for the 2024 filing season. The 2024 Direct Submit trial may be accessible to residents in these states. This innovative service will grant taxpayers the ability to electronically submit their federal tax returns to the IRS as part of the IRS Free Tax Filing 2024 initiative. Offering taxpayers various methods to interact with The tax authority aligns with the IRS Strategic Operating Plan’s objectives, and initiatives like Direct File exemplify this commitment.
IRS Free Tax Filing 2024
IRS Commissioner Danny Werfel announced a significant stride in offering taxpayers a fresh avenue to submit their forms directly through the IRS Free Tax Filing 2024 initiative. He stated, “In this pivotal 2024 pilot program, we will collaborate closely with the states that have agreed to participate, conducting a vital assessment of state integration. This collaboration will allow us to gather essential data to chart the future trajectory of the Direct File program. Residents of those 13 states may have access to the 2024 Direct Submit trial.
This innovative service empowers taxpayers with the choice to electronically submit their federal tax returns directly to the IRS through the IRS Free Tax Filing 2024 program. Participation in this pilot program will be limited to taxpayers with specific types of income, credits, and deductions, primarily those with straightforward tax returns, subject to state-based restrictions. The Direct File pilot program, as announced by the IRS, will encompass significant tax credits such as the Earned Income Tax Credit and the Child Tax Credit.
Why is IRS Free Tax Filing 2024 Significant?
The introduction of free online tax filing has the potential to reshape how many Americans handle their tax returns, and it could have a substantial impact on the multi-billion dollar tax preparation industry.
This method, known as Direct File, will encompass state taxes in Arizona, California, Massachusetts, and New York. Additionally, residents of the nine other states without income taxes, including Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming, may also participate in the pilot program.
The IRS will evaluate the pilot program’s findings to address any issues and make improvements for subsequent iterations.
Eligible income types include W-2 earnings, social security and railroad retirement benefits, unemployment benefits, and interest payments up to $1,500. In May 2023, the IRS presented a report to Congress, stating that the pilot program was open to all states.
How Does IRS Free Tax Work?
Direct File will be available in both English and Spanish, designed to be mobile-friendly and feature an interview-based approach. Initially, it will be rolled out to a select group of eligible taxpayers, with the potential for further expansion. Taxpayers in the 13 qualifying states also have access to other tax preparation software.
Who Qualifies for IRS Direct File in 2024?
Laurel Blatchford, Chief Implementation Officer for the Inflation Reduction Act at the U.S. Department of the Treasury, mentioned that the pilot program will launch in phases to ensure a positive experience for taxpayers. The focus in 2024 will be on individual taxpayers with relatively simple returns. However, not all taxpayers will qualify; the program is expected to cover Form W-2 wages, Social Security benefits, unemployment compensation, and interest payments up to $1,500. In addition to these, the government plans to include the standard deduction, student loan interest deduction, tax breaks for educator expenses, earned income tax credit, child tax credit, and credit for additional dependents. Some taxpayers will be excluded during the pilot’s initial year.
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The IRS has faced years of declining funding, workforce reductions, and reduced audit rates. The 2022 Inflation Reduction Act, a substantial government spending bill, aims to provide long-term financing to enhance tax enforcement efforts and modernize IRS operations.
The IRS contends that these funds have led to improved taxpayer services, evident in the handling of 3 million more calls and a reduction in phone wait times from 28 minutes to three minutes during the 2023 filing season.
The IRS has ambitious plans to digitize all paper tax returns by 2025, which is expected to halve refund processing delays and expedite them by four weeks.
However, questions have been raised by Republicans regarding whether the $80 billion investment in the IRS over ten years, as part of the Inflation Reduction Act, will lead to increased audits of ordinary Americans. A bipartisan debt limit agreement earlier this year allowed Republican legislators to recover $20 billion.
The White House asserts that the reduction in funding will not significantly impact the IRS’s capabilities in the years ahead. It also reaffirms that individuals earning less than $400,000 annually will not face audits due to the additional funding.