The IRS is moving forward with its own initiative to offer a free option for direct filing. In an announcement on Tuesday, they revealed their plans to conduct a pilot program in 13 states next year. This program will enable a select group of taxpayers to complete and submit their tax returns online without the need for a paid service.
The pilot program is currently in its initial phase and does not offer complete functionality for all types of deductions and credits that taxpayers may want to claim. However, individuals with relatively straightforward tax returns should be able to utilize it, according to the IRS.
Utilizing the IRS platform is not mandatory.
Taxpayers in Arizona, California, Massachusetts, and New York, who have connected their state systems with the IRS, will have access to it. Additionally, residents of Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming, where there is no state income tax, will also be able to use it. Limited availability will be offered in Washington state as well.
Danny Werfel, the commissioner of the IRS, expressed that this is a significant advancement for this groundbreaking initiative. It aims to assess the possibility of offering taxpayers a fresh alternative to directly file their returns with the IRS at no cost.
Next year’s pilot will cover tax returns with basic W-2 earnings, Social Security income and relatively low-interest income. It should also allow claims of the Earned Income Tax Credit, child tax credit and student loan interest deductions.
More than 90% of taxpayers file their returns electronically and about half of taxpayers use a paid preparer. Having an official government-run option has been a goal of some lawmakers, particularly Democrats, for years.
In the budget-climate law of the previous year, they included wording to promote the direct-file option.
Earlier this year, the IRS published a study assessing the viability of the concept and highlighting substantial interest from taxpayers.
However, the inspector general of the agency stated that the IRS mishandled its investigation and formulated the taxpayer survey in a manner that could potentially exaggerate the true extent of interest.
The survey might have given taxpayers the wrong impression that the IRS’s option would be just as effective as paid preparers right away. According to the inspector general, studies have shown that 60% of taxpayers would prefer to continue using their current options once they learn about the IRS’s offering lacking certain features.
The estimate made by the IRS regarding the number of users for the government-run option was deemed unjustifiable by the inspector general.
Rep. Jason Smith, chairman of the House Ways and Means Committee that oversees the IRS, said the agency “cooked the books” to get its desired outcome.
“I cannot reword”
Republicans express concerns about granting the IRS authority to handle both tax filing and auditing, urging taxpayers to be cautious.
However, Democrats argue that Americans should be given the choice if they desire it.
“I cannot reword”
