Washington News

The Direct-File program allowed about a dozen IRS employees to file their tax returns using the new software.

Bridget Roberts is the IRS leader of the Direct-File program. On February 8, 2024, she noted the agency employees had used the initial version of the pilot program. Roberts indicated that the next phase of the program will be approximately 1,200 taxpayers who are federal and state employees.

The pilot program will now expand to 12 states. Federal and state employees who volunteer may use the program if they are from Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington or Wyoming. Most of the states were selected because they do not require a state income tax return.

IRS Commissioner Daniel Werfel indicated the pilot program will continue to expand to larger groups of taxpayers. He hopes that there will be several hundred thousand taxpayers who use the Direct-File program this year.

Commentators have noted the IRS is being very cautious with this new program. The program is limited to individuals with W-2 income and those who may benefit from the child tax credit (CTC) or the earned income tax credit (EITC). This is a very limited group and the IRS is intentionally being quite careful.

IRS representative Roberts indicated she has a plan to test the success of the Direct-File program. She stated, "We will be looking holistically at all of that and what the story is that it tells so the IRS and Treasury can make a decision about it."

The IRS is tracking the number of taxpayers who start the Direct-File program but then do not complete their tax return. There also will be some taxpayers who want to use Direct-File but are not able because of the limitations of the program.

Editor's Note: There are advocates for and against Direct-File in Congress. There also are eight Free File companies that oppose the Direct-File program. Given the potential opposition, it is understandable the IRS is moving slowly and carefully.