In 13 States, You Might Just Be Able To File Your Taxes For Free

Tax season is probably the last thing you want to think about with the holidays right around the corner, but it’ll be here before you know it — and there’s particular tax news that won't ruin Christmas.

Earlier this week, the IRS announced that beginning in 2024, residents of 13 states will have access to a free tax prep service called Direct File. The plan has been in the works since earlier this year, bolstered by an influx of cash from the government designed to overhaul aging and inefficient infrastructure at the agency.

What States Will Get To File Taxes For Free Next Year?

Direct File will serve as a free alternative to services like H&R Block and TurboTax, but, to start, it will only be available to certain residents of Arizona, California, Massachusetts, and New York — which have also integrated state taxes with the Direct File system.

Though Direct File will not handle state taxes, the service will direct users to a tool to file their state returns once their federal returns have been filed.

Some residents of Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — states with no state income tax — will also be eligible.

Of course, if you are not in one of these states, and you make under $73,000 a year, you do still qualify for the Free File program run by the IRS — the IRS partners with programs like TaxAct and Free Tax USA to help you file your taxes for free. (TurboTax and H&R Block used to be a part of this program, but withdrew from it.) But this new Direct File program represents taxpayers being able to directly file with the government — and could potentially become a widespread program for taxpayers nationwide.

Who Will Qualify For Direct File?

Not every resident of the above states will be eligible to use the service, but the IRS hasn’t hammered out all the details yet, so eligibility requirements will be forthcoming. For now, Laurel Blatchford of the U.S. Treasury said it will be a limited roll-out for those with “relatively simple returns.”

Filers with W-2 earnings, unemployment, Social Security income, and interest less than $1,500 should be eligible, while gig workers and others with self-employment or contract income will not. Those claiming credits like earned income tax credit, child tax credit, and credit for other dependents will be eligible, along with those claiming the standard deduction and educator expenses.

Will We All Be Able To File Our Taxes For Free Someday?

The 2024 launch is a pilot program designed to gather data on functionality and other parameters before the IRS decides whether it's feasible to launch Direct File as a nationwide service. “In this limited pilot for 2024, we will be working closely with the states that have agreed to participate in an important test run of the state integration,” IRS Commissioner Danny Werfel told the media on Tuesday. “This will help us gather important information about the future direction of the Direct File program.”

Feelings are mixed on the launch of an IRS-sponsored tax prep service. When the program was first announced earlier this year, after the results of a feasibility study were published, Intuit, the parent company of Turbo Tax, issued a statement strongly decrying the proposed project. “The conclusions of this study ignore facts, common sense, and what we know from our decades of helping millions of Americans file their taxes – taxpayers don’t want the tax collector, assessor, auditor, and enforcer also to be their tax preparer,” the company wrote in a blog post on the Intuit website. “A government-run system like what is proposed will likely provide a worse taxpayer experience that does not guarantee the maximum refund for taxpayers, does not provide access to expert advice, does not account for state tax returns, creates a conflict of interest, and will be a waste of taxpayer money and resources.”

Nothing could be further from the truth, though, according to the IRS. “I can’t stress enough that Direct File, if pursued further after the pilot, would be just another choice taxpayers have to help them prepare their tax returns,” Werfel said.