IRS to open its free tax filing site to more new users

As the tax filing season gets underway, taxpayers in some states will have a new way to file online available to them in "the coming days," the IRS said this week.

Direct File, the free site for filing federal tax returns directly through the IRS, will be open for new users in 12 states during unspecified windows of time, before becoming widely available to taxpayers in those states in mid-March, according to the IRS.

The IRS has already launched its filing site to some federal government workers in a testing phase.

With this pilot program, the IRS says it is trying to provide a free alternative to taxpayers so they can use the government website for online filing instead of paying to do so with a commercial company.

According to the IRS, the website explains tax concepts and has customer support representatives available via chat to answer basic tax law questions in English and Spanish.

The agency created the platform with funds from the 10-year 2022 Inflation Reduction Act that included $80 billion for IRS improvements.

Here's how Direct File works and how taxpayers can use it.

Who is eligible?

Direct File will be available to taxpayers who in 2023 lived in these 12 states: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming.

Additionally, taxpayers in those states need to qualify depending on their income type and amount. For example, taxpayers with wages of more than $200,000 or independent contractors won't be able to use the site. The type of health insurance the taxpayer purchased might also restrict them from using the platform.

When does it become available to taxpayers?

The platform will be available to the taxpayers in those 12 states in the coming days, IRS said in a news release.

There's no specific date and time for when Direct File will be open to new users in those 12 states, instead it will be available for "short, unannounced windows of time." The state of the platform will be displayed on top of the website. The platform will be available to the wider public in mid-March, according to the IRS.

This is part of the testing phase to see how the site will work with a bigger volume of users, the IRS said.

The agency is supposed to start with a smaller testing group and the simplest characteristics, said Nina E. Olson, the executive director of the nonprofit Center for Taxpayer Rights. That's how platforms in the private sector had started, too, she said.

Currently, 1200 government employees are using the site to file their taxes as part of the testing, according to the updates on the IRS website.

What kind of taxes is the site for?

Direct File can be used only for federal taxes. State taxes must be filed separately through a different platform. However, the site will guide the taxpayers living in Arizona, California, Massachusetts or New York to a state-supported platform and transfer their information to file the state returns. These states were selected because they chose to partner with the agency, according to the IRS website.

How to use it?

Direct File is a website, so taxpayers don't need to install a special software or application.

To start with, taxpayers have to sign up with the IRS identity verification tool, ID.me.

According to an ID.me spokesperson, 88% of first-time users across the federal government experience no wait time for their verification.

"The vast majority of users experience very low wait times -- if any wait times at all -- to verify through the service," the spokesperson said.

If the taxpayer misses the window when Direct File is open, they can still sign up for ID.me and check the site for the next window.

The site has a step-by-step guide on how to track the progress of the return, the IRS said. Once they start the return, the taxpayers can come back to the platform anytime during the season and continue working on their returns -- even if the site is closed for new users.

The agency's Direct File is voluntary. The other paid or free alternatives are still available for taxpayers.

A similar site should have been created decades ago but this is a move in the right direction, Olson said.

Editor's note: This story has been corrected to reflect comment from ID.me.