The Biden administration announced Thursday that a free online filing service for American taxpayers will be offered to all 50 states in time for the 2025 tax season.
Direct File was only available in a handful of states in 2024 as the Internal Revenue Service launched it as a pilot program. The IRS has offered free electronic filing for lower-income tax filers for years, but the scope of the program was limited. The IRS said it has not offered more extensive online filing services due to the cost of maintaining such a program.
The launch of the program came at the direction of Congress, which passed the Inflation Reduction Act in 2022.
The Biden administration said that 140,000 taxpayers filed their taxes through the pilot program in the 2024 tax season, saving an estimated $5.6 million in filing costs.
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The Treasury Department said it will work with states to expand Direct File to all Americans.
“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 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."
After the launch of the pilot program, Biden administration officials surveyed 11,000 users. In the survey, 90% of respondents ranked their experience with Direct File as “Excellent” or “Above Average."
The survey also said that taxpayers "emphasized their appreciation for the fact that Direct File is always free and there are no hidden fees or attempts to upsell users as they moved through the filing process."
A 2023 report found that 72% of taxpayers have an interest in free filing programs. How many of them will actually utilize the service remains in question.
The report found that 5 million users would cost the IRS $64 million, while 25 million users would come with $249 million in costs. The costs, however, do not account for potential savings from having filers convert from paper forms.
