After testing a free tax-filing website for a limited group of people earlier this year, the IRS now has a far grander ambition: Offer Direct File to the rest of the country.
The question is how many states will take the IRS up on it.
After a 12-state pilot during the 2024 tax-filing season, the Biden administration announced in May that it would make Direct File permanent and invite every state. Since then, New Jersey, New Mexico, Oregon, and Pennsylvania have announced intentions to join.
That leaves the majority of states outside the program for now, though Deputy Treasury Secretary Wally Adeyemo said in an email to The Washington Post that he expects “approximately half of states” to ultimately agree to join for the 2025 tax-filing season. While the IRS hasn’t set a formal deadline for joining, many professionals say it would be hard to set up a tax-filing website if a state waits much past the end of August.
“We so far have not run across any state that has told us, ‘Absolutely not, we’re not interested,’” said Bridget Roberts, the IRS official who leads Direct File.
Democrats have lauded the Biden administration for fulfilling a decades-old goal of offering an easy-to-use tax-filing site like many other countries, at least for people with very basic tax returns. Meanwhile, Republicans have argued that the government shouldn’t spend money re-creating something that major companies like Intuit and H&R Block already provide.
A large majority of Americans hire professional preparers or complete their tax returns using commercial services such as Intuit’s TurboTax. But free options exist — including software that companies offer to certain users at no charge through the government’s Free File program — and people have always had the option of filling out their tax forms without help.
“IRS Direct File is a solution in search of a problem and every American can already file their taxes for free, without any cost to the government or taxpayers,” Intuit spokeswoman Tania Mercado wrote in an email.
Last month, Republicans in Congress introduced a bill aiming to block the IRS from continuing Direct File. In a letter Wednesday to IRS Commissioner Danny Werfel, a group of 19 Republican senators argued against Direct File because a recent Supreme Court ruling broadly suggests that agencies like the IRS shouldn’t enact programs that “go beyond the clear intent of Congress.”
Many state treasurers and controllers publicly opposed Direct File during its pilot, but advocates for the program claim that it looks like a good deal to many nonpartisan state officials who deal with taxes.
“High-level politics aside, the people who are actually in charge of implementing the state tax systems, the Department of Revenue folks — … it’s in their best interest to make filing your taxes as easy and quick as possible and get more people doing it,” said Anna Aurilio, senior director of campaigns for the Economic Security Project. Her group is one of several advocacy groups lobbying states to sign up for Direct File.
In New Jersey, Gov. Phil Murphy (D) has said he “suspects strongly” that the program will save the state money because it will encourage some state residents to file online rather than on paper.
Angela Altice, a North Carolina deputy secretary of revenue, said the same, as her state weighs whether to join. Right now, North Carolina residents have limited options for free filing online, so many residents mail in paper returns, which are harder for state workers to process. Direct Files would reduce that burden.
But revenue administrators in many states wonder about signing up for a new, permanent program. “States are looking to learn more about the long-term sustainability of it,” Altice said.
The IRS requires that to join Direct File, a state has its own online option for filing a state return that can be linked from the IRS’s site after the taxpayer completes the federal return. (Seven of the states that participated in the 2024 pilot program avoided this requirement; they don’t have a state income tax.)
That leaves states with several choices. Some, like California in the pilot year, already have their own tax filing website. New Jersey built its own site before joining Direct File; a state official said the cost of linking it to the IRS’s site is minimal.
Others, like Massachusetts in the pilot and Oregon and New Mexico in the new arrivals, paid a contractor called Fast Enterprises to link their filing sites to the IRS. That might be the easiest solution for many state tax agencies, experts said, because a large number of them already use software from Fast Enterprises to manage their internal systems.
Democratic members of Congress from Virginia recently sent Gov. Glenn Youngkin (R) an open letter urging him to enroll the state in Direct File. Virginia is looking into the option, said Heather Cooper, a spokesperson for the state tax department.
Maryland’s tax department also said it is weighing whether to join. Natalie Wilson, a spokesperson for the D.C. Office of the Chief Financial Officer, said the District would not be ready to participate this year because of ongoing technological upgrades.
States that have agreed to join Direct File won’t be able to offer free tax filing to everyone. The Direct File pilot program excluded people in many tax situations, including gig workers, anyone who itemizes deductions, people with marketplace health plans or health savings accounts, and others.
Direct File will expand the number of eligible tax situations in 2025, the IRS has said, without giving specifics.
Roberts, who runs the IRS site, would like the agency to add the child and dependent care credit to Direct File next year. The credit is claimed by only 3 percent of all taxpayers, but its absence from the list this year deterred many people who paid any sort of child-care expenses, Roberts said.