The IRS is trying a free online tax-filing system that cuts out vendors
The IRS is trying a free online tax-filing system that cuts out vendors
It’s January, which means you’ll be able to file your 2023 tax returns soon. And this year the IRS is trying something new: Some taxpayers in 12 states will be able to electronically file their federal returns directly with the agency, as opposed to using third parties, which is how the agency’s current e-filing program works.
To start, the pilot will be limited to people with relatively simple tax returns, said University of Texas accounting professor Lisa De Simone.
“If you itemize your deductions, for example, it’s not going to be an option for you because that adds a lot of complexity to your tax return,” she said.
People who claim certain credits or have gig income are also not eligible.
De Simone said this new program comes after the Treasury Department found that very few eligible taxpayers were using the IRS’ existing Free File program, which relies on outside vendors.
“A lot of the companies that were supposed to be offering these products for free were directing taxpayers instead to their paid products,” she said.
The IRS estimates that making the program available to taxpayers on a broader scale could cost up to $249 million annually.
“If that sounds like a lot, to put this in context, Americans spend something like $14 billion a year on tax prep right now,” said Matthew Gardner with the Institute on Taxation and Economic Policy.
The idea here, he said, is to reduce both the money and time we spend doing our taxes.
The 12 states participating in the pilot are Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.
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