IRS launches its new free tax filing program

The U.S. Department of the Treasury and the Internal Revenue Service launched its new, free tax filing program in Nevada and 12 other states Tuesday. 

Nearly 20 million people qualify for the Direct File program including 480,000 Nevadans, according to the Treasury Department release.

In Nevada and the dozen other states participating in the Direct File pilot program, eligible taxpayers include those whose incomes include W-2s,  unemployment benefits, interest up to $1,500, and people with social security income. 

“Direct File will offer millions of Americans a free and simple way to file their taxes, with no expensive and unnecessary filing fees and no upselling, putting hundreds of dollars back in the pocket of working families each year, consistent with President Biden’s pledge to lower costs,”  said National Economic Advisor Lael Brainard, in a statement announcing the launch.  

Annually, taxpayers in the U.S. spend 1.7 billion hours and $31 billion on tax preparation, with the average person spending 13 hours and $270 to file, despite the bulk of people having simple tax cases and qualifying for free programs.

Direct File allows eligible taxpayers to file directly with the IRS, avoiding hidden fees that come with other ostensibly free options, including Free File, the public-private partnership between the IRS and tax filing software industry giants. 

Those companies have come under scrutiny for embedding misleading practices in the Free File process like charging tax filers additional and unnecessary fees. 

A ProPublica investigation found that companies like Intuit used code to make the Free File landing page on TurboTax hidden on search engines, charged for other products that were not free or for commonplace tax forms, and only disclosed the paywall pop-up for these extra charges when the taxpayer was already deep into the filing process.

The Inflation Reduction Act funded the Direct File pilot program as part of $80 billion for the IRS to address severe understaffing, modernize outdated technology, and enhance enforcement. The IRS will use $15 million of IRA funding to implement and monitor the new pilot program. 

Direct File, the new program, is not available for those whose income is from a personal business or gig economy employment, who have itemized deductions, or who use the Saver’s Credit or Premium Tax credits.