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This tax season, the IRS is offering a new way to file returns online--for free.
The agency is piloting its Direct File program, which allows certain taxpayers to prepare and file their individual federal returns directly to the IRS with the help of real-time support from agency representatives. The program is being rolled out in phases with the IRS expecting more wide availability by mid-March.
Business owners will have to wait for their chance to try out the software.
The agency has not provided specifics on how or when an expanded rollout could be expected, but for the taxpayers who are eligible now as determined by their location and tax filing complexity, this no-fee government option comes at just the right time. Tax season has become a perennial drain on people's time and money. The IRS found that on average, individuals spend an estimated 13 hours and $240 filing a single tax return. For small businesses, the process required even more time and money with business owners spending roughly 82 hours and $2,900 on tax compliance.
This year, that line item in the budget is likely going to increase. That's because tax preparation costs have sky-rocketed over the past year, far exceeding the overall rate of inflation. In January, the price of tax filing and accountant services, including DIY software options like TurboTax and H&R Block as well as services through traditional CPAs, increased 11.2 percent over the last twelve months, according to data from the Bureau of Labor Statistics.
The Biden Administration, which had made cracking down on high consumer fees part of its agenda, first announced that it was developing this tool last year. While a government competitor to TurboTax may be welcomed by some taxpayers, Direct File has already drawn the ire of thirteen Republican state attorneys general, who sent a letter to Treasury Secretary Janet Yellen last month calling the program unnecessary and unconstitutional.
Currently, taxpayers are eligible for Direct File if they live in one of the twelve participating states: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming, and are only reporting certain types of income, credits, and deductions.
The IRS has stressed that the Direct File program is currently designed for people with relatively simple tax needs. The agency wants to roll out the software, which is available in both English and Spanish, in small batches at first and elicit feedback from users before potentially expanding access. In its current iteration, the program is designed for individual returns with basic employee wages below $200,000 and a handful of credits and deductions, mostly geared towards lower-income tax brackets. To be eligible, a filer can only have earned income through W-2 wages, Social Security, unemployment, and interest income that did not exceed $1,500. That means that anyone that earned money from investments, gig jobs, or business income through a sole proprietorship, partnership, LLC, or corporation will not be able to use Direct File.
Filers are able to claim the Earned Income Tax Credit, the Child Tax Credit, and credits for other dependents. As for deductions, the standard deduction, student loan interest, and educator expenses are supported.
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IRS Pilots Free Tax-Filing Website, But Business Owners Will Have to Wait
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24.02.2024
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This tax season, the IRS is offering a new way to file returns online--for free.
The agency is piloting its Direct File program, which allows certain taxpayers to prepare and file their individual federal returns directly to the IRS with the help of real-time support from agency representatives. The program is being rolled out in phases with the IRS expecting more wide availability by mid-March.
Business owners will have to wait for their chance to try out the software.
The agency has not provided specifics on how or when an expanded rollout could........
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