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With one week until the April 15 federal tax deadline, the IRS has released a “major update” to Direct File, the agency’s free tax filing program.
As of March 12, the pilot program has been fully open for select filers in 12 states, and Direct File now allows users to import key details needed to verify returns before filing.
When you file your taxes electronically, you validate your return before filing by entering your adjusted gross income from the previous year or your temporary PIN from the previous year. Tax software typically adds this information for repeat customers, but first-time users must add it manually.
According to a Treasury official, this key step was the primary issue that prevented Direct File returns from being successfully filed.
But as of Monday, Direct File users can now import these verification details from the IRS, which could minimize the common mistake. Taxpayers can access the details only from their IRS account, which has identity verification, a Treasury official said.
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“This important update will allow Direct File users to leverage information the IRS already has to further streamline the filing process,” said Bridget Roberts, who directs Direct File at the IRS.
Direct File will remain open for rejected returns until April 20, a Treasury official said.
Who qualifies for the Direct File pilot
Another common reason for abandoning Direct File returns was tax situations not covered by the pilot, such as 1099 forms, according to a Treasury official.
“Direct File eligibility is limited to those filing simple tax returns this filing season,” Deputy Treasury Secretary Wally Adeyemo said during a news conference in March. “But a large percentage of Americans qualify.”
IRS Direct File pilot states include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.
The pilot will only accept Form W-2 wages, Social Security retirement income, unemployment earnings, and interest of $1,500 or less. This excludes filers with contractual income reported via Form 1099-NEC, gig economy workers, or self-employed filers.
To qualify, you must claim the standard deduction, which is $13,850 for single filers and $27,700 for married couples filing jointly for 2023.
Direct File accepts only a few credits: the earned income tax credit, the child tax credit, and the credit for other dependents. The software also accepts deductions for student loan interest and teacher expenses.
In March, the Treasury Department estimated that one-third of federal tax returns could use Direct File this season and that 19 million taxpayers could currently be eligible.
The agency hopes to receive 100,000 requests this season, a senior administration official said in March. This corresponds to approximately 0.5% of those who applied. About 60,000 taxpayers have used Direct File so far, and the agency expects the volume to increase before the deadline, according to a Treasury official.
