US Treasury Opens Direct File Option for Tax Season 2025

US Treasury Opens Direct File Option for Tax Season 2025

WASHINGTON – On May 30, 2024, the US Department of the Treasury and the Internal Revenue Service (IRS) announced a direct file as tax filing options for Americans.

Direct File, a permanent, free tax filing service, will be available nationwide for the 2025 tax season. All 50 states and the District of Columbia have been invited to participate in this initiative, aimed at simplifying the tax filing process and reducing costs for taxpayers.

This move follows the success of a pilot program that saw 140,000 taxpayers claiming over $90 million in refunds while saving an estimated $5.6 million in filing costs. The pilot program’s success underscored the potential of Direct File to offer a streamlined, cost-effective solution for tax filers.

Direct File became a reality thanks to the resources allocated by President Biden’s Inflation Reduction Act. This act aimed to bolster the IRS and deliver top-notch service to American taxpayers, ultimately saving them time and money. The Treasury Department’s goal in the coming years is to expand the reach and scope of Direct File to provide an accessible option for working- and middle-class taxpayers nationwide.

“President Biden is committed to saving Americans time and money and ensuring families receive the tax benefits they’re owed. Providing a free tool to all Americans who want the option to file directly with the IRS is key to achieving those goals,” said U.S. Secretary of the Treasury Janet L. Yellen. “After a successful pilot, we are making Direct File permanent and inviting all 50 states to offer this free filing option to their residents. The Treasury Department and IRS look forward to working with states to expand Direct File for Americans across the country.”

Direct File is central to the Biden-Harris Administration’s efforts to deliver modern, world-class customer service using Inflation Reduction Act resources. It also aligns with the IRS’s Strategic Operation Plan (SOP) to ensure taxpayers receive eligible tax credits, such as the Child Tax Credit and Earned Income Tax Credit. The IRS is committed to continually improving Direct File, ensuring it remains free, secure, and user-friendly.

Background on the Direct File Pilot Program

The average American spends $270 and 13 hours filing their taxes, according to the Taxpayer Burden Survey. President Biden’s Inflation Reduction Act mandated the IRS to explore the potential for an IRS-run Direct e-File System, enabling taxpayers to file their taxes for free, directly with the IRS. Following a review of the report, which highlighted strong taxpayer interest in a free IRS filing option, the Treasury Department launched a pilot of IRS Direct File during the 2024 Filing Season.

In the 2024 Filing Season, Direct File was available to taxpayers with simple tax situations in 12 states. The pilot program exceeded expectations, with more than 140,000 Americans successfully filing within the five-week period the program was widely available. These filers claimed more than $90 million in refunds and saved an estimated $5.6 million in tax preparation fees on their federal returns alone.

Users of Direct File reported high satisfaction levels and quick resolution of filing queries. According to a GSA Touchpoints survey of more than 11,000 Direct File users, 90 percent rated their experience as “Excellent” or “Above Average.” A majority of respondents who had filed taxes the previous year reported having paid for tax preparation services. Specifically, 47 percent of survey respondents paid to file their taxes last year, and 16 percent did not file taxes at all.

Treasury and IRS engagements with Direct File users revealed that taxpayers found the system straightforward and appreciated features that helped them understand different tax situations, credits, and deductions. They valued the transparency and lack of hidden fees, which gave them confidence in the accuracy of their filings.

Based on user feedback, survey results, and additional data analysis, IRS Commissioner Danny Werfel recommended to Secretary Yellen that Direct File be made permanent. He cited overwhelming user satisfaction, improved ease of tax filing, and reduced costs for taxpayers as key reasons for his recommendation, which Secretary Yellen has now accepted.

As the IRS prepares to expand Direct File, it aims to continue refining the product, ensuring it remains a secure, efficient, and free option for American taxpayers. This initiative marks a significant step towards modernizing the tax filing process and providing equitable access to tax services nationwide.