If you're a California resident and haven't filed your 2023 federal tax return, you now have another, easier-to-use online option: the IRS's free Direct File service.
However, it is not for everyone. Instead, it's primarily aimed at people with very simple annual tax returns, which the Treasury Department says makes up about 1 in 3 taxpayers.
The tax agency launched the Direct File service in January on an extremely limited basis to ensure its online systems were up to the task. That changed on Monday, when the IRS announced that Direct File was available to all taxpayers in California, Arizona, Nevada and nine other states.
Think of Direct File as the IRS' alternative to the free online tax filing programs TurboTax and H&R Block. Provides step-by-step guidance for completing your tax forms, filing them, and paying any amounts you may owe or collecting your refund.
The program's question-and-answer approach means you won't have to know which forms to fill out or where in the forms to enter your information. Instead, the program will handle those details for you.
The IRS already works with several tax preparation companies to offer low-income taxpayers a free online tax filing service called Free File. What makes Direct File different is that there are no middlemen or income limits for participants; Anyone can use it, as long as their tax returns use only the most basic forms.
Specifically, the program will work only for taxpayers whose income is limited to wages reported on a W-2, Social Security or Railroad Retirement Board retirement benefits, unemployment benefits, or interest income of $1,500 or less. That means if you are self-employed, a business owner, a contractor or freelancer, or have income from a partnership or trust, Direct File is not for you.
The Treasury Department estimates that 19 million people in the 12 participating states are eligible to use Direct File this year and that several hundred thousand people will do so.
Direct File also allows you to claim only a truncated list of credits and deductions: the Earned Income Tax Credit for low-income workers, credits for children and other dependents, the standard deduction, and deductions for student loan interest payments and classroom and educator education. Professional development expenses. If you can claim other credits and deductions, such as those for taxes paid abroad, child care, or retirement savings, or if you reduce your tax bill by itemizing deductions (for example, if you have significant medical expenses), Direct File No It would be a good option for you.
Another caveat: The IRS says Direct File will be available only through April 15, when most Californians' 2023 returns are due. The agency pushed back the deadline for San Diego County taxpayers to June 17 in response to the federal disaster declaration in that county.
Direct File runs online only; You will need a smartphone, tablet or computer to access. And to start, you'll need to prove to the IRS that you are who you say you are.
The only way to do that this year will be to use the identity verification service ID.me, which scans your government-issued photo ID, like your driver's license or passport, and then uses facial recognition software to match your image. from a live chat session or a new selfie with the stored photo. ID.me has raised concerns among some critics, who say it poses too big a threat to privacy and security.
Once you've established your identity, the program will verify your eligibility and then guide you as you enter information about your income, credits, and deductions. There is no need to download any software, the IRS said; Instead, your entries will be saved online and you can pause and resume them later without having to start over.
Direct File has a live chat feature to help taxpayers with questions, but is not a source of free tax advice.
“IRS customer service representatives can provide technical support and provide basic tax law clarifications related to the tax scope of Direct File,” the agency said in a statement. “Questions regarding issues other than Direct File will be directed to other IRS customer service, as appropriate.”
The Direct File service has not yet been integrated into the California tax filing system, so you won't be able to seamlessly transfer your federal information to your state return. The state Franchise Tax Board offers a free online filing system called CalFile whose restrictions are similar to those of Direct File, so if you're eligible for the latter, you can probably use the former.
If you're entitled to a refund, tax experts say, you should file your return as soon as possible. Otherwise, you will simply be providing an interest-free loan to the federal government.
