The IRS has announced the expansion of its Direct File program, offering taxpayers the opportunity to submit their tax returns directly to the government at no cost in North Carolina and beyond. For the 2025 filing season, over 30 million individuals in 24 states will have access to this service, which eliminates the need for commercial tax preparation software.
Initially introduced as a pilot during the 2024 tax season in 12 states, the program has now been made permanent, with IRS Commissioner Daniel Werfel outlining plans to increase eligibility for taxpayers. The recent expansion is expected to provide millions more taxpayers with the option to utilize the Direct File program, with the potential for additional states to join in 2025.
During the pilot phase in 2024, individuals in select states with straightforward W-2 forms were able to directly submit their returns to the IRS, resulting in over $90 million in refunds claimed. This initiative was first available to taxpayers in California, New York, Arizona, Florida, and several other states, with new states like Alaska, Connecticut, Idaho, and North Carolina set to be included in 2025.
According to Treasury Deputy Secretary Wally Adeyemo, countries like Germany and Japan have successfully implemented similar systems, emphasizing the benefits of prepopulated tax forms. Although the Direct File concept has garnered praise among taxpayers, commercial tax preparation software firms, which have profited significantly from software usage charges, have expressed resistance to the program.
Additionally, an IRS inspector general report highlighted inadequate data protection safeguards concerning the IRS Free File Alliance, a longstanding agreement providing free tax preparation services to low and middle-income taxpayers. While the Free File Alliance remains distinct from the Direct File program, the IRS was tasked with exploring the creation of a direct filing system under the Inflation Reduction Act signed by President Joe Biden in 2022, receiving funding and a nine-month timeline to outline program functionality.
