The Internal Revenue Service’s free tax-prep platform will soon be open for business.
After slowly increasing capacity on its Direct File platform, the IRS will make the platform available to a wider audience on Monday, the agency said.
The platform is expected to be fully up and running on March 12. The pilot program can only prepare relatively basic tax returns, and it will only be available to eligible taxpayers in 12 states: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington state and Wyoming.
But Direct File marks the widespread debut of a free, government-run answer to mass-market online tax preparation from commercial providers like TurboTax
INTU,
and H&R Block
HRB,
Regulators at the Federal Trade Commission have alleged that both TurboTax and H&R Block misled consumers about the extent of their free tax-preparation services. Both companies deny the allegations.
There are other free tax-filing options out there, including the IRS Free File program. That’s an IRS partnership with tax-software companies available to taxpayers with incomes of up to $79,000.
The IRS Direct File program has no income limits, just like the free tax-prep programs from H&R Block
HRB,
and TurboTax
INTU,
But all three can only be used for certain types of tax returns, mostly simple ones.
The IRS has slowly rolled out Direct File, making it available to taxpayers for certain hours of the day. Starting March 4, it will be available to new users 24 hours a day every day, according to an IRS official.
However, people who want to use the platform should look for a notice at the top of the site saying it’s open. The platform may be temporarily unavailable at times if too many users take up all the available slots for a given day, the official said.
“But more spaces will be added every day, and our goal is to ensure that all taxpayers who are interested and eligible can try out Direct File for themselves,” the IRS official added.
Someone who has already started a tax return can keep working on it even if the site isn’t accepting new users, according to the IRS.
Users in Arizona, California, Massachusetts and New York — the four states on the list with a state income tax — can also be connected to free online preparation of their state returns. Direct File can also help users in Washington state who are eligible for a certain tax credit.
The Direct File program can handle returns with W-2 job wages, common credits like the child tax credit and the student-loan interest deduction. It can’t support returns that need to report capital gains or independent-contractor income.
People who plan to use Direct File should be ready to answer eligibility questions when they log on to the program. IRS officials who designed the platform said they wanted to ask up front to quickly sort out people who cannot use the service.
The IRS began accepting and processing 2023 tax returns on Jan. 29. It has now processed over 44 million returns through late February, agency statistics show. Taxpayers are receiving an average refund of $3,213, which is more than 4% higher than the average amount at the comparable point last year.
This post was originally published on Market Watch
