The Internal Revenue Service (IRS) of the United States has unveiled a significant update: a new free electronic filing system that will be available to taxpayers in 24 states starting from the 2025 tax season. This service aims to simplify the process of filing federal tax returns for millions of Americans. Following a successful pilot program in 12 states in 2023, the IRS is extending the reach of its Direct File tool, which is expected to be utilized by over 30 million people, according to a press release from the agency.
Wider Access and Improved Features
During the previous pilot phase in the 2024 tax filing period, more than 140,000 taxpayers across 12 states used Direct File. This number is anticipated to double in the upcoming tax season. Direct File is a web-based service that operates on smartphones, laptops, tablets, and desktop computers, providing step-by-step guidance to taxpayers as they prepare their federal tax returns. Once the federal return is completed, the system automatically directs users to the appropriate state tax filing resources.
In last year's pilot, IRS customer service representatives offered assistance to thousands of users via a live chat function available in both English and Spanish. For the next tax season, the tool will feature “new enhancements to make tax filing faster and easier,” including a new chat bot to help users navigate the eligibility checker. The live chat option will return, allowing for additional authentication and verification, which will enable customer service officials to offer more detailed assistance.
States Eligible for Direct File
For the 2025 tax season, more than 30 million taxpayers will qualify to use Direct File, as noted by the IRS on its website. The tool will be accessible to eligible taxpayers in 24 states. Notable among these is Florida, home to a large Hispanic population, including a prominent Cuban community. Other states include New York, New Jersey, Connecticut, Arizona, California, Massachusetts, Nevada, New Hampshire, South Dakota, Tennessee, and Texas. Additionally, Washington, Wyoming, Alaska, Idaho, Kansas, Maine, Maryland, New Mexico, North Carolina, Oregon, Pennsylvania, and Wisconsin are included. The IRS also mentioned that more states could join the Direct File system in 2025, with several expressing interest or announcing participation for 2026.
Expanded Tax Situations Covered
Beyond increasing the number of states, Direct File will also support a broader range of tax situations for the 2025 filing season. The IRS highlighted that last year's pilot covered limited tax scenarios, including wage income reported on a W-2, Social Security income, unemployment compensation, and certain credits and deductions. For the 2025 tax season, Direct File will accommodate 1099 forms for interest income exceeding $1,500, retirement income, and the Alaska Permanent Fund Dividend for Alaska residents.
During the pilot, the service supported taxpayers claiming the Earned Income Tax Credit, Child Tax Credit, and Credit for Other Dependents. In 2025, Direct File will also cover those applying for the Child and Dependent Care Credit, Premium Tax Credit, Credit for the Elderly and Disabled, and Retirement Savings Contributions Credits. Additionally, it will assist taxpayers claiming the standard deduction and deductions for student loan interest and education expenses, as well as those seeking deductions for Health Savings Accounts.
The IRS announced plans to gradually expand the scope of Direct File in the coming years to “support the most common tax situations, focusing particularly on those impacting working families.” Direct File will begin accepting tax returns once the 2025 filing season opens.