In an effort to update the tax-filing process for Americans, the IRS took a big step with the launch of its Direct File expansion. The free, secure, and easy-to-use alternative to filing taxes with a software provider is a new opportunity for Americans to file taxes directly with the IRS. As of January 27, 2025, 25 states can access the program, an expansion of 13 new states from its 2024 pilot phase with 12 participating states. The expansion is part of an overall strategy of simplifying and reducing the cost of filing taxes for millions of Americans. Who, however, is qualified for the service, and what does it mean for me? Let’s break down the details.
What is the IRS Direct File Program?
The Direct File program is a free web application that enables qualified citizens to fill out and submit a federal tax return directly to the IRS. It’s for simple tax returners, including W-2 earners, Social Security beneficiaries, and unemployment beneficiaries. Users will navigate through each stage, having confidence that the form will be correct and their refund will be maximized.
Part of what sets Direct File apart is in-person customer service in both Spanish and English. Taxpayers can live chat with an IRS representative in hopes of resolving any questions or technical issues, taking out some of the fear and uncertainty and making it more accessible.
- Pilot states (2024): Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.
- New states (2025): Alaska, Connecticut, Idaho, Illinois, Kansas, Maine, Maryland, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, and Wisconsin.
This opens access to use Direct File for over 30 million taxpayers in these states, with savings in terms of both time and expense.
Who can participate in Direct File?
To qualify for the Direct File program, a series of requirements must be met in terms of your level of income, tax filing, and state of residence. An overview of requirements is below:
1. Income limits
- Your income level must be less than $200,000 (or $168,600 if more than one employer pays your salary).
- As a married individual filing a joint return, the amount must be less than $250,000.
2. Types of income
The following types of income Direct File accommodates:
- W-2 salaries
- Social Security payments (SSA-1099)
- Unemployment (1099-G)
- Interest (1099-INT)
- Retirement (1099-R)
- Alaska Permanent Fund Dividends (1099-MISC).
For any self-employment earnings, rental real estate, or employment through a gig economy, use of Direct File isn’t an option for you.
3. Tax credits and deductions
The program accommodates a variety of tax credits, including:
- Earned Income Tax CreditÂ
- Child Tax CreditÂ
- Child and Dependent Care CreditÂ
- Premium Tax Credit
- Retirement Savings Contributions Credit.
But use of Direct File is only for filers claiming the standard deduction. Itemizing deductions? You’ll have to seek alternative files.
4. State residency
Lived and worked in one of the 25 participating states for all of 2024
What’s the latest in 2025?
The following are a few of the additions to the Direct File program for the 2025 tax year:
- Data import tool: No more typing W-2 information and all other information by hand; import it directly from accounts at the IRS into returns.
- More tax situations included: Added to the program have been additional credits and deductions, including the Health Savings Account (HSA) deduction and the Credit for the Elderly or Disabled.
- Chat bot assistance: The new chatbot guides the user through the Eligibility Checker and answers simple queries.
How does Direct File stack up with other free programs?
Although Direct File is a winner for many, it is not the sole free tax-filing option. The IRS provides the following options:
- Free File Program: It provides a guided tax software, free, from private partners in case your AGI is $84,000 or less.
- Volunteer Income Tax Assistance (VITA): Gives free preparation of tax returns for low-income earners, seniors, and non-English speakers.
In other words, therefore, Direct File is direct and simple with the IRS but only for sole specific tax situations and states.
Direct File: Is it here to stay?
Although a success in all its forms, the future of Direct File is uncertain. It has been criticized by commercial tax-prep companies and lawmakers as a duplication of free-filing alternatives already in existence. But the IRS is committed to taking it to a larger group of states and complex tax situations in a matter of years.
Read more: IRS to send refunds soon: how to check the status of your tax refund
Read more: Goodbye to new IRS agents – Trump makes big changes that could affect your tax return
