IRS Direct File pilot expands testing

The Internal Revenue Service's Direct File free tax preparation system is making progress on its pilot test this tax season in 12 states, with the agency planning to offer it around the clock next week and open it to a larger group of outside testers. The announcement comes as the IRS's longstanding Free File program is seeing a nearly 10% increase in usage so far this tax season.

"After successful external testing and evaluation, the Direct File pilot is expanding final testing," said an IRS official. "Starting March 4, Direct File will be available for new users to start their returns 24 hours a day, every day. A message at the top of directfile.irs.gov will indicate that Direct File is open."

The IRS has been offering regular updates on the initiative, including when it is shut down and when it reopens for testing.

The agency has been developing the system since last year, when it announced plans to offer a free direct-filing system after carrying out a feasibility study mandated by the Inflation Reduction Act.

The 12 states where the system is available include Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming. 

The IRS began internal pilot testing of the system last month with a group of IRS employees in the states where it's available this tax season. It has since expanded the pilot test to taxpayers in the dozen states where it's available. 

The agency official said the pilot remains limited, however, during final testing, and Direct File may briefly close to new taxpayers if the day's allotment of available spaces is exceeded. However, more spaces will be added each day, with the goal of ensuring that all taxpayers who are interested and eligible can try out Direct File for themselves. Taxpayers who have begun a return can continue using Direct File even if the platform is temporarily closed to new users.

When final testing is complete, the IRS plans to fully open Direct File to all eligible users in the 12 pilot states on March 12. Interested taxpayers can subscribe to the Direct File pilot newsletter, watch the Direct File Pilot Overview video, and visit Direct File to learn more about eligibility and sign up to use the system.

Free File

The IRS also reported Friday that its Free File Guided Tax Software service has experienced a year-over-year increase of nearly 10% so far this tax season. Through Feb. 24, 943,000 taxpayers had filed tax returns this tax season through IRS Free File, a 9.7% increase from last year's comparable period when 860,000 tax returns were filed. 

The IRS also reported it's continuing to see a strong start to the 2024 filing season. Through Feb. 24, the IRS had delivered more than 28.9 million refunds to taxpayers worth $92.9 billion. The average refund this year is $3,213, up 4.3% from 2023.

Free File has been around for 22 years. Under the public-private partnership, tax prep and filing software providers make their online products available to eligible taxpayers. Eight private-sector Free File partners provide online guided tax software products this year to any taxpayer with adjusted gross income of $79,000 or less in 2023. It's available from IRS Free File.

Those with an AGI over $79,000 can still use the IRS's Free File Fillable Forms. But that product is aimed at people who are already comfortable using IRS form instructions and publications when preparing their own taxes. The IRS also offers a special free help page on IRS.gov that lists the various free services and options to help people with their taxes.

For 2024, the following companies are participating in IRS Free File: 1040Now,
Drake (1040.com), ezTaxReturn.com, FileYourTaxes.com, On-Line Taxes, TaxAct, TaxHawk (FreeTaxUSA) and TaxSlayer. For 2024, ezTaxReturn.com is also offering an IRS Free File product in Spanish.