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Regulation and Compliance > Federal Regulation > IRS

4 States to Test-Run IRS Free Filing Tool in 2024

By Melanie Waddell

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What You Need to Know

  • Nine other states without an income tax may also be eligible to participate in the pilot.

The Internal Revenue Service said Tuesday that four states — Arizona, California, Massachusetts and New York — plan to integrate their state taxes into the Direct File pilot for the filing season of 2024.

The IRS said it will conduct “a limited-scope pilot during the 2024 tax season to further assess customer support and technology needs,” and “provide a platform for the IRS to evaluate successful solutions for potential operational challenges” identified in the report the IRS submitted to Congress earlier this year.

Taxpayers in nine other states without an income tax — Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming — may also be eligible to participate in the pilot, the IRS announced.

Washington has also chosen to join the integration effort for the state’s application of the Working Families Tax Credit.

“All states were invited to join the pilot, but not all states were in a position to join the pilot at this time,” the IRS said.

The IRS announced in late June that it would pilot a free tax-filing tool next year.

A recent audit by the Treasury Inspector General for Tax Administration criticized surveys sent by the IRS to taxpayers about the agency’s proposed e-file system, stating the surveys may have been improperly designed to mislead Americans about their ability to file state taxes via direct e-file.

IRS Commissioner Danny Werfel said in a statement that the states joining the effort “is a critical step forward for this innovative effort that will test the feasibility of providing taxpayers a new option to file their returns for free directly with the IRS.”

In this limited pilot for 2024, the IRS will be “working closely with the states that have agreed to participate in an important test run of the state integration,” Werfel said. “This will help us gather important information about the future direction of the Direct File program.”

Taxpayers in those 13 states may be eligible to participate in the 2024 Direct File pilot, a new service that will provide taxpayers with the choice to electronically file their federal tax return directly with the IRS for free.

Taxpayer eligibility to participate in the pilot, the IRS explained, “will be limited by the state in which the taxpayer resides and will be limited to taxpayers with certain types of income, credits and deductions — taxpayers with relatively simple returns.”

The IRS said “it anticipates specific income types, such as wages on a Form W-2, and important tax credits, like the Earned Income Tax Credit and the Child Tax Credit, will be covered by the Direct File pilot.”

Rep. Richard Neal, D-Mass., ranking minority member of the House Ways and Means Committee, applauded the IRS’ progress on the direct filing initiative.

“Direct filing will ease taxpayers’ burden and help deliver more comprehensive services, including bilingual customer support lines, that particularly benefit low- and moderate-income families across America,” Neal said Tuesday in a statement.

“As one of the four states participating in the pilot program, Massachusetts is ready to be at the forefront of delivering this new electronic filing option and continuing the advancements delivered by Ways and Means Democrats with the historic Inflation Reduction Act.”

Melanie Waddell

@Think_MelanieW

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