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IRS Direct File to open to all 50 states and D.C. for 2025 tax season

524 points by kjhughes 2y ago

404mm 2y ago
> Taxpayers Protection Alliance spokesperson Kara Zupkus said in a statement that expanding the program will "radically increase the IRS's authority and scope" and "have devastating consequences." Sounds like something Turbo/Block would say. I don’t understand how more competition in this area could hurt the customers. All the “file federal taxes for free” offers usually cost me around $70 since I have more than just W2.
- anigbrowl 2y ago
  > Taxpayers Protection Alliance spokesperson Kara Zupkus said in a statement that expanding the program will "radically increase the IRS's authority and scope" and "have devastating consequences." 'For you.'
gnicholas 2y ago
Is it going to be open to itemizers? IIRC this year it wasn’t, which means a lot of people weren’t eligible (and basically had to pay an itemization penalty to a tax preparer/company).
- iends 2y ago
  Isn't itemization extremely rare post Trump tax cuts?
  - gnicholas 2y ago
    In CA it’s still 15%, which is millions of people. There are other states with a higher percent. You’re right that the number dropped due to the SALT cap. But the SALT cap is set to expire in 2025 (who knows what will happen, though).
syngrog66 2y ago
I'm aware of a much more efficient solution. Don't believe will ever be adopted, not at scale. Because threatens livelihoods of too many grifters with political power, haha.
anigbrowl 2y ago
I posted this same article yesterday. I wonder why the HN dupe detector didn't pick this up. https://news.ycombinator.com/item?id=40526554 https://news.ycombinator.com/item?id=40526554
throw7 2y ago
I realize "baby steps" and I should be happy for the incremental improvements. But somehow I just can't help feeling this will stall. freetaxusa was already "free" for federal and I don't see a seamless transition to filing for states anytime soon. The cost will just shift to that value point.
mavsman 2y ago
One can only hope that this would put Intuit out of business but that's likely a pipedream.
1oooqooq 2y ago
in this thread: people clueless to the political process giving excuses for the wins of lobbyists. no, the irs is not "avoiding code complexity" by those limits. the limits are purely chosen by intuit and irs "goals". first, irs already have how to calculate all of your tax. period. they do that since the 50s and let you guess if you got it right. then the limits exclude everyone who is the market for intuit, not some complex to code form. have a job were paying $200 is nothing? keep payinh intuit. have some stocks in your retirement plan? keep paying intuit. are too poor that you would rather no bother paying taxes? heres free file from the irs!
sizzle 2y ago
Wonder what the lovely folks at Intuit think about this…
CharlieDigital 2y ago
> Rep. Brad Sherman (D-Calif.), an accountant and senior member of the House Financial Services Committee, told Axios in April that he wants to go "way beyond Direct File," calling for a "self-populating form." > > "Why in the heck should you have to fill out your return when the government has all the information. They know what's on your W-2 form before you do. They know what's on your 1099 … Do you know how many mistakes people make?" Yes. Please. Now fix Workday, too.
- jjcm 2y ago
  This was one of my favorite things about living in Australia as an American. Taxes were clicking a checkbox and saying, "I agree". It was incredible how simple it was.
  - barbazoo 2y ago
    Pretty much the same in Canada at this point for many people. Your tax software, and there are lots of free ones, pull the data from CRA and populate your whole return.
  - codegeek 2y ago
    I lived in HongKong for about 2 years a while ago. It was the same there. They calculate everything and you just have to sign it.
- spiderice 2y ago
  This works against the governments interest, as they'll lose revenue from all the fines they give to people who accidentally fuck up their tax return.
  - Sohcahtoa82 2y ago
    > all the fines they give to people who accidentally fuck up their tax return. You only get fined if you deliberately (and fraudulently) fuck up. If you make a mistake, they give you a chance to correct it before fining you. I forgot a W-2 once (I switched jobs 4 weeks into the year and the first employer gave me my W-2 late) and filed without it. My return was rejected and I got a letter telling me why and requested an amended return. I amended, re-filed, got accepted, and got my refund. No fines. And certainly no jail time like a lot of memes like to suggest.
t3rabytes 2y ago
It seemed like the initial Direct File rollout was limited to states that didn't have a state-level income tax, or directly cooperated with the IRS. Are they forcing all states to play ball, or will Direct File not cover state tax submissions?
- xeromal 2y ago
  I doubt this will do anything for a state tax form. It's not their responsibility.
- deleted 2y ago
  [deleted]
- jprete 2y ago
  Quoting the IRS (https://www.irs.gov/about-irs/strategic-plan/irs-direct-file-pilot https://www.irs.gov/about-irs/strategic-plan/irs-direct-file...): > The Direct File pilot doesn't prepare state returns. However, if you live in Arizona, California, Massachusetts or New York, the Direct File pilot guides you to a state-supported tool you can use to prepare and file your state tax return. > If you live in Washington state, Direct File guides you to a state site where you can apply for the Working Families Tax Credit when you file your federal return with the Direct File pilot.
- larkost 2y ago
  From the second sentence of the article: "will be made permanent for the 2025 tax season with all 50 states and Washington D.C. invited to participate" It seems very much that this is an opt-in thing, state by state. I would suspect that the results of this will be most Democratic-leaning states at least trying to opt-in for next year, and many Republican-leaning states refusing loudly during this election year, then quietly starting to opt in in a few years.
  - svggrfgovgf 2y ago
    States part of the pilot program (i.e., 2023 tax year): Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington (state), Wyoming as per https://www.irs.gov/about-irs/strategic-plan/irs-direct-file-pilot https://www.irs.gov/about-irs/strategic-plan/irs-direct-file.... Looks like exactly half and half, Democratic/Republican to me ... But, who knows maybe next year ...
Someone1234 2y ago
How volatile is this to the political winds? As the article makes clear this was largely done with the support of the current incumbent, but what if the next one is more amenable to TurboTax's ideas? That seems to be an ongoing headache in the US with executive branch created programs, courts can just immediately squish them or political winds can change, then they're suddenly gone. Something like this, in order to be permanent, needs congressional approval.
- Covzire 2y ago
  Not very, absolutely everyone hates doing their taxes and the whole shady process behind it all. The IRS should have to declare what they think you owe before you pay or submit any paperwork, I don't know if that'll ever happen but any baby or big steps towards that reality will win bipartisan support, easily. Just have to get past the conflicted-out members of congress who are truly being controlled by Turbo Tax and other industry lobbyists.
  - nomagicbullet 2y ago
    > absolutely everyone hates doing their taxes and the whole shady process behind it all. I like preparing and paying my taxes. > The IRS should have to declare what they think you owe before you pay or submit any paperwork Agree.
  - kindatrue 2y ago
    "Not very, absolutely everyone hates doing their taxes and the whole shady process behind it all" That's the Grover Norquist (and Republican) argument for not having IRS Direct File to begin with: if filing taxes becomes easy, people might not hate the IRS and hate taxes. https://www.propublica.org/article/how-the-maker-of-turbotax-fought-free-simple-tax-filing https://www.propublica.org/article/how-the-maker-of-turbotax...
    - MisterBastahrd 2y ago
      And it's really because they don't know any poor people. Because if they did, they'd know that filing taxes for low income people with kids is a HUGE bonanza, and they'd work like hell to implement a system where all tax credits were applied to individual paychecks, not lump sums during tax season. It's the one time of the year when their pockets are flush with cash.
jawns 2y ago
The Taxpayers Protection Alliance spokesperson quoted at the bottom says: > Private tax services "have every incentive to find the deductions that will yield them the best return," Zupkus said, adding that the IRS wants "to extract as much as possible from the taxpayer." I think it's worthwhile to acknowledge that there are indeed slightly different incentives involved when it comes to the private sector handling tax prep versus the government. But it's laughable to argue that the private sector is not in it to extract as much as possible from its customers. ProPublica's series on the nasty ways TurboTax fooled its customers to extract more money from them is a clear example: https://www.propublica.org/series/the-turbotax-trap https://www.propublica.org/series/the-turbotax-trap Edit: I think some commenters are missing my point here. I'm not agreeing with this spokesperson. I'm saying that it's disingenuous to argue that the government is trying to fleece consumers when it's clear that the private sector has been doing so for some time.
- bombcar 2y ago
  It's not even correct - the IRS wants to follow their rules as closely as they can. I have had the IRS unprompted send me an additional refund because of a mistake I made on my forms, and they caught. (They also included a letter saying that if I thought my mistake was right, I could fight the refund, or file a new amended form and go for a bigger one.)
  - kbolino 2y ago
    I have had the IRS charge me tax and accuse me of lying to them over a UTMA withdrawal used to pay for tuition even though the fund running the account refused to send me the paperwork because the account is in my parent's name first instead of mine. It is a massive organization filled with uncoordinated people doing their level best to produce Brownian motion.
    - gamblor956 2y ago
      UTMA withdrawals by the child are not taxable, however UTMA income is taxable to the child... What exactly are you railing against? It sounds like the IRS is following the rules here.
nly 2y ago
As a Brit it's baffling that this is even an issue. I filed my taxes online with HMRC for free this year (we call it Self Assessment), it took 20 minutes, and I received a 4 figure refund in ~2 weeks directly in to my bank account.
- jimbob45 2y ago
  US government services are bad almost across the board. Most of us would pay a premium to use a private version over a government version of almost anything. I’m guessing you would find it equally confusing if I told you we’d pay a premium to use a private DMV or private post office. Here in the US, that statement wouldn’t be controversial at all.
  - op00to 2y ago
    I recently renewed my global entry, and it was a piece of cake. I occasionally interact with the FCC because of my amateur radio license, and the FRS is super easy to use. I recently got passports for my kids, and that was super easy to do as well and the passports came much faster than expected.
    - lotsoweiners 2y ago
      > I recently got passports for my kids, and that was super easy to do as well and the passports came much faster than expected. Interesting. I am currently renewing my and my spouse’s passports while also trying to get first time passports for my children and I couldn’t find the process more outdated and borderline kafkaesque. If you told me the website was built in 2003 and hasn’t been updated since then I would believe you. I can only renew my passport by snail mailing everything including my existing passport. I can only get my kids a passport by physically taking them to an approved location for processing. I could not get an appointment for about a month at any location near me. As a bureaucrat myself, I just find this level of hoop jumping to be ridiculous.
      - saratogacx 2y ago
colinb 2y ago
Anyone know if this covers foreign earned income etc? I.e. can I, who hasn't lived in the US for many years, make use of the service?
ChrisArchitect 2y ago
[dupe] Some more discussion: https://news.ycombinator.com/item?id=40526225 https://news.ycombinator.com/item?id=40526225
enraged_camel 2y ago
Is this only for people who have “simple” taxes? Does it support Schedule K-1 for example?
- MichaelNolan 2y ago
  The IRS is taking an agile / minimal viable product approach. So for now it only supports very basic W2 only tax filers. My guess is that K-1 is low on their priority list for now.
- burkaman 2y ago
  The pilot didn't support that, but there isn't any detailed information about what the expanded version will support yet. I would guess K-1 will not be supported for a while, here's what the announcement says: > The IRS is also exploring ways to gradually expand the scope of tax situations supported by Direct File. Over the coming years, the agency’s goal is to expand Direct File to support most common tax situations, with a particular focus on those situations that impact working families. Announcements about new state partners and expanded eligibility are expected in the coming months.
whimsicalism 2y ago
It's pretty dumb that this has an upper income limit that covers plenty of regular W2 wage workers
- stalfosknight 2y ago
  Nice complainbrag.
  - whimsicalism 2y ago
    thank you, had to draft a few times to make sure it was appropriately subtle so only you could pick up on it
- MarkSweep 2y ago
  Some forms like 8959 and 8960 kick in at $200k. So I assume limiting to below that was to limit the scope of their MVP.
- demosthanos 2y ago
  What is the income limit? The IRS's publication describing the program for 2023 lists a 1099-INT income limit but no W-2 income limit: https://www.irs.gov/pub/irs-pdf/p5917.pdf https://www.irs.gov/pub/irs-pdf/p5917.pdf
  - whimsicalism 2y ago
    "You can’t use Direct File if your wages are more than $200,000 ($160,200 if you had more than one employer)." from https://directfile.irs.gov/income https://directfile.irs.gov/income
    - demosthanos 2y ago
      Thanks! It's also weird that that's buried on a webpage that they really don't want you to find anymore and not prominently displayed on the flyer they put out.
yndoendo 2y ago
I would argue that having to file taxes through a 3rd party accountant or service is not only forced commerce but also broken glass economics. Looks like it helps the economy by creating jobs but the job is redundant and does not create anything of value. Where are crimes more likely to occur, a city with 10,000 or 1 million? Where are financial crimes more likely to occur, people that make $10,000 a year or people that make $1 million or more a year. I rather have these accounts move into forensic work and go after the wealthy tax evaders. IRS is an enforcement agency that specializes in tax collection and fraud. People that are clamoring for reduced IRS staffing are ultimately support of defending the police. I rather have a well staff IRS going after those that evade paying their taxes, probability speaking the wealthy.
- dzhiurgis 2y ago
  Who steals more? 10,000 people evading 100k or 1million people evading 1k?
  - kevingadd 2y ago
    Rich tax evaders are evading way more than 100k
- yndoendo 2y ago
  Since I cannot respond to everyone that broke of this binary tree and I take you for the view points. Let say you won the lottery, now you can buy that dream house. Do you get a mortgage or pay off the sum in the cash on hand so you are not losing moneys in interest payments? Why waste money on interest and save in the long run? Which is it, take a mortgage or pay interest? Take the mortgage and the tax deduction. First open a trust or a shell company. Move $1,000,000 into it to back the house purchase as Lender X. Take a loan against Lender X, which is yourself. Now on the tax deduction, state the amount of interest you paid to yourself as mortgage interest on your house, since you could / didn't pay in cash. Use this to place yourself into a lower tax bracket and put some of those tax dollars into your account. Creative account is legal and can be exploited by the rich. Even more when you use money to maximize the legal loop holes by paying others to find and construct other legal loop holes. Now try to remove that tax loop hole. Near impossible, this would remove that the tax loop hole that allows others not paying a mortgage to themselves, but to a Lender Y, a actual bank or credit union. This tax deduction is near impossible to remove because it cuts out the middle class and poor ability to buy a house. Where is crime most likely to happen, in a city of 10,000 (A) or 1 million (B)? 10,000 is 1/100 of 1 million. Now where would you bet single (1) crime will happen, city A or B? City B 100 times more people to commit a crime than city A. Lets rephrase, you have the ability to take 10,000 (A) lottery different lottery tickets or 1 million (B) lottery tickets? Which would you take tickets A or B to maximize your winnings? Cash based business that don't declare income in hospitality industry as tips. How many of those individuals make 10,000 or 1 million a year? How many people tip in cash versus in credit or debit card? More people have been using credit cards to make purchases versus paying in cash. When was the last time you payed in cash or be a party member in a pure cash based transaction in a restaurant? How many people use their company business credit card to pay for corporate deduction dinners and how many pay in cash? How do you plug this legal loop hole that places more tax dollars into a rich person's hands? Start by shifting money into a trust or shell company. Pay an artist $5,000 to create a new piece as Company X. Company X now auctions off the art. You, as the hidden supporter of company X, buy the art, and pay yourself at auction, for $50,000. Now you donate that art to a museum or other non-profit that fits the tax deduction bill. I just donated $50,000 because I made the declaration that $5,000 is actually $50,000 as proven by my auction bill, secretly paid to myself. Lets deploy a use tax. A person that drives more should be paying more for the road, repairs and maintenance. How much do you use your vehicle for person versus business? How much of your driving is just to get to work and back home, or driving from work to lunch and back to work? I'm using my car 80% for work driving to and home, and only 20% for personal. My use tax should be 20% of what I own, my employer should be paying 80% of the usage because it is being used to benefit them, but since I am the owner of the vehicle I pay 100% of the use tax. Now I am being taxed 80% to be employed.
kylecazar 2y ago
"Intuit doesn't see a success story here, arguing that the Direct File program is costly for taxpayers" Good Lord
- ashconnor 2y ago
  It cost me $490.00 to file my taxes with H&R Block this year. I can't use free software.
  - ThunderSizzle 2y ago
    Why can't you use freetaxusa?
    - itake 2y ago
      I didn’t check last year but free tax USA didn’t support importing stock trades. I didn’t wanna have to input every single trade I made.
      - glii 2y ago
        If cost basis was reported to the IRS by your brokerage, you can typically just report the summary total, since the IRS already knows about the individual trades.
        itake 2y ago
        I receive and sell RSUs, which I don't think the cost basis is reported. I also have ~3 brokerages with 2-3 accounts each.
    - ashconnor 2y ago
      Form 1116, Form 8938, didn't support state adjustments (dividends in foreign pension accounts), FBAR etc.
- protastus 2y ago
  "It is difficult to get a man to understand something, when his salary depends on his not understanding it." -Upton Sinclair
macrael 2y ago
It's SUCH a win that they managed to roll this out to a small set of tax situations and states to start. Every government project I've been on has required creativity in defining an MVP that doesn't include shipping to everyone. This was cited consistently as one of the great successes of this project, they were able to ship something that successfully filed 150k taxes b/c they were able to scope things down to something doable in 9 months.
- ksec 2y ago
  It gives me hope and positive energy that no matter how bad governments ( all around the world ) and especially US given how something so simple is still missing and so broken, manage to move forward. I would imagine the hard part isn't even the MVP or defining MVP phase, but to get it started in the first place. The amount of politics involves. And that is speaking as something who used to work inside government.
- dheera 2y ago
  sigh this is a baby step but - Many if not most software engineers in California earn more than the $200K household limitation for using Direct File - From my understanding there is no way auto-generate my state tax return from Direct File so I would have to do all the work twice even if I can use it - Complicating my tax situation (legally) allows me to save more money, I would save far more than the price of TurboTax by using TurboTax instead of Direct File, as much as I hate it
  - deleted 2y ago
    [deleted]
  - fragmede 2y ago
    > Many if not most software engineers in California have complicated taxes, due to how they're making that much money. I don't have a problem with them optimizing for the simpler case (eg the intention behind the 1040EZ) while software engineers, who can afford a CPA to deal with optimizing their tax burden off non W2 income, aren't initially able to use it.
  - 2y ago
PaulHoule 2y ago
My son tried Direct File in New York and had trouble signing up for it I think because he was filing for the first time and has no credit history. They make the process arduous because it’s a common scam to fill out a fake return — I had an uncle who worked for the IRS in the 1990s and he told me they were overwhelmed with this even then. We were put in line for 40 minutes to talk to someone to validate his id. Maybe it would not have been so bad if we had not procrastinated but we managed to print out the 1040 form and the corresponding New York form and file on paper before we got to the end of the line. I think he would have struggled to fill it out on his own but I have filled out easy and hard 1040s many times and I found it easy.
doctoboggan 2y ago
I am a big fan of this, however since it doesn't do state taxes I will be forced to continue using freetaxusa since they do federal for free and charge a modest fee for your state filing. I hope that more states will follow the federal governments example and start allowing free filing online.
giantg2 2y ago
I'll still be using 3rd party software. The main benefit is the guarantee of audit support and legal representation. For such a small fee, that's decent insurance. You'll get no such benefit working directly with the IRS.
- BeetleB 2y ago
  > The main benefit is the guarantee of audit support and legal representation. I strongly urge you to read the fine print. The support is usually quite limited.
  - giantg2 2y ago
    Yeah, it's not like they give you a high priced litigator. What you do get is someone to work through the return with you to verify things and a consultation on what the options are. The details vary by which company you go with.
- NickC25 2y ago
  You're probably in the minority, or you make a significant amount of income. If you are single or married without a family, a 1099 contractor or just inputting in a W2 or two, and have a single form from your healthcare company, chances are this really, really helps. The IRS isn't going to audit someone who just files a single W2 and claims maybe 1-2 deductions and a small stock portfolio appreciation.
  - giantg2 2y ago
    I'm not saying it's a bad service. I'm saying for $30 some audit and legal representation is cheap insurance. The IRS can audit anyone they want. My finances are not exceedingly complicated, nor am I a high earner. It's an extremely low risk but still can happen.
    - g15jv2dp 2y ago
      I'm sorry but paying $30 for legal insurance sounds like a red flag. Either they know for absolutely sure that they will never have to pay out on the insurance, or they don't intend to pay out if/when you need it. Have you read the fine print to make sure there isn't an exclusion that will void the insurance as soon as there is any kind of problem? E.g., if the user made any kind of mistake in declaring stuff to the filing company (even a trivial one), then the insurance is voided?

524 points by kjhughes 2y ago

> Taxpayers Protection Alliance spokesperson Kara Zupkus said in a statement that expanding the program will "radically increase the IRS's authority and scope" and "have devastating consequences." Sounds like something Turbo/Block would say. I don’t understand how more competition in this area could hurt the customers. All the “file federal taxes for free” offers usually cost me around $70 since I have more than just W2.

anigbrowl 2y ago
> Taxpayers Protection Alliance spokesperson Kara Zupkus said in a statement that expanding the program will "radically increase the IRS's authority and scope" and "have devastating consequences." 'For you.'

gnicholas 2y ago

Is it going to be open to itemizers? IIRC this year it wasn’t, which means a lot of people weren’t eligible (and basically had to pay an itemization penalty to a tax preparer/company).

iends 2y ago
Isn't itemization extremely rare post Trump tax cuts?
- gnicholas 2y ago
  In CA it’s still 15%, which is millions of people. There are other states with a higher percent. You’re right that the number dropped due to the SALT cap. But the SALT cap is set to expire in 2025 (who knows what will happen, though).

syngrog66 2y ago

I'm aware of a much more efficient solution. Don't believe will ever be adopted, not at scale. Because threatens livelihoods of too many grifters with political power, haha.

anigbrowl 2y ago

I posted this same article yesterday. I wonder why the HN dupe detector didn't pick this up. https://news.ycombinator.com/item?id=40526554 https://news.ycombinator.com/item?id=40526554

throw7 2y ago

I realize "baby steps" and I should be happy for the incremental improvements. But somehow I just can't help feeling this will stall. freetaxusa was already "free" for federal and I don't see a seamless transition to filing for states anytime soon. The cost will just shift to that value point.

mavsman 2y ago

One can only hope that this would put Intuit out of business but that's likely a pipedream.

1oooqooq 2y ago

in this thread: people clueless to the political process giving excuses for the wins of lobbyists. no, the irs is not "avoiding code complexity" by those limits. the limits are purely chosen by intuit and irs "goals". first, irs already have how to calculate all of your tax. period. they do that since the 50s and let you guess if you got it right. then the limits exclude everyone who is the market for intuit, not some complex to code form. have a job were paying $200 is nothing? keep payinh intuit. have some stocks in your retirement plan? keep paying intuit. are too poor that you would rather no bother paying taxes? heres free file from the irs!

sizzle 2y ago

Wonder what the lovely folks at Intuit think about this…

CharlieDigital 2y ago

> Rep. Brad Sherman (D-Calif.), an accountant and senior member of the House Financial Services Committee, told Axios in April that he wants to go "way beyond Direct File," calling for a "self-populating form." > > "Why in the heck should you have to fill out your return when the government has all the information. They know what's on your W-2 form before you do. They know what's on your 1099 … Do you know how many mistakes people make?" Yes. Please. Now fix Workday, too.

jjcm 2y ago
This was one of my favorite things about living in Australia as an American. Taxes were clicking a checkbox and saying, "I agree". It was incredible how simple it was.
- barbazoo 2y ago
  Pretty much the same in Canada at this point for many people. Your tax software, and there are lots of free ones, pull the data from CRA and populate your whole return.
- codegeek 2y ago
  I lived in HongKong for about 2 years a while ago. It was the same there. They calculate everything and you just have to sign it.
spiderice 2y ago
This works against the governments interest, as they'll lose revenue from all the fines they give to people who accidentally fuck up their tax return.
- Sohcahtoa82 2y ago
  > all the fines they give to people who accidentally fuck up their tax return. You only get fined if you deliberately (and fraudulently) fuck up. If you make a mistake, they give you a chance to correct it before fining you. I forgot a W-2 once (I switched jobs 4 weeks into the year and the first employer gave me my W-2 late) and filed without it. My return was rejected and I got a letter telling me why and requested an amended return. I amended, re-filed, got accepted, and got my refund. No fines. And certainly no jail time like a lot of memes like to suggest.

t3rabytes 2y ago

It seemed like the initial Direct File rollout was limited to states that didn't have a state-level income tax, or directly cooperated with the IRS. Are they forcing all states to play ball, or will Direct File not cover state tax submissions?

xeromal 2y ago
I doubt this will do anything for a state tax form. It's not their responsibility.
deleted 2y ago
[deleted]
jprete 2y ago
Quoting the IRS (https://www.irs.gov/about-irs/strategic-plan/irs-direct-file-pilot https://www.irs.gov/about-irs/strategic-plan/irs-direct-file...): > The Direct File pilot doesn't prepare state returns. However, if you live in Arizona, California, Massachusetts or New York, the Direct File pilot guides you to a state-supported tool you can use to prepare and file your state tax return. > If you live in Washington state, Direct File guides you to a state site where you can apply for the Working Families Tax Credit when you file your federal return with the Direct File pilot.
larkost 2y ago
From the second sentence of the article: "will be made permanent for the 2025 tax season with all 50 states and Washington D.C. invited to participate" It seems very much that this is an opt-in thing, state by state. I would suspect that the results of this will be most Democratic-leaning states at least trying to opt-in for next year, and many Republican-leaning states refusing loudly during this election year, then quietly starting to opt in in a few years.
- svggrfgovgf 2y ago
  States part of the pilot program (i.e., 2023 tax year): Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington (state), Wyoming as per https://www.irs.gov/about-irs/strategic-plan/irs-direct-file-pilot https://www.irs.gov/about-irs/strategic-plan/irs-direct-file.... Looks like exactly half and half, Democratic/Republican to me ... But, who knows maybe next year ...

Someone1234 2y ago

How volatile is this to the political winds? As the article makes clear this was largely done with the support of the current incumbent, but what if the next one is more amenable to TurboTax's ideas? That seems to be an ongoing headache in the US with executive branch created programs, courts can just immediately squish them or political winds can change, then they're suddenly gone. Something like this, in order to be permanent, needs congressional approval.

Covzire 2y ago
Not very, absolutely everyone hates doing their taxes and the whole shady process behind it all. The IRS should have to declare what they think you owe before you pay or submit any paperwork, I don't know if that'll ever happen but any baby or big steps towards that reality will win bipartisan support, easily. Just have to get past the conflicted-out members of congress who are truly being controlled by Turbo Tax and other industry lobbyists.
- nomagicbullet 2y ago
  > absolutely everyone hates doing their taxes and the whole shady process behind it all. I like preparing and paying my taxes. > The IRS should have to declare what they think you owe before you pay or submit any paperwork Agree.
- kindatrue 2y ago
  "Not very, absolutely everyone hates doing their taxes and the whole shady process behind it all" That's the Grover Norquist (and Republican) argument for not having IRS Direct File to begin with: if filing taxes becomes easy, people might not hate the IRS and hate taxes. https://www.propublica.org/article/how-the-maker-of-turbotax-fought-free-simple-tax-filing https://www.propublica.org/article/how-the-maker-of-turbotax...
  - MisterBastahrd 2y ago
    And it's really because they don't know any poor people. Because if they did, they'd know that filing taxes for low income people with kids is a HUGE bonanza, and they'd work like hell to implement a system where all tax credits were applied to individual paychecks, not lump sums during tax season. It's the one time of the year when their pockets are flush with cash.

jawns 2y ago

The Taxpayers Protection Alliance spokesperson quoted at the bottom says: > Private tax services "have every incentive to find the deductions that will yield them the best return," Zupkus said, adding that the IRS wants "to extract as much as possible from the taxpayer." I think it's worthwhile to acknowledge that there are indeed slightly different incentives involved when it comes to the private sector handling tax prep versus the government. But it's laughable to argue that the private sector is not in it to extract as much as possible from its customers. ProPublica's series on the nasty ways TurboTax fooled its customers to extract more money from them is a clear example: https://www.propublica.org/series/the-turbotax-trap https://www.propublica.org/series/the-turbotax-trap Edit: I think some commenters are missing my point here. I'm not agreeing with this spokesperson. I'm saying that it's disingenuous to argue that the government is trying to fleece consumers when it's clear that the private sector has been doing so for some time.

bombcar 2y ago
It's not even correct - the IRS wants to follow their rules as closely as they can. I have had the IRS unprompted send me an additional refund because of a mistake I made on my forms, and they caught. (They also included a letter saying that if I thought my mistake was right, I could fight the refund, or file a new amended form and go for a bigger one.)
- kbolino 2y ago
  I have had the IRS charge me tax and accuse me of lying to them over a UTMA withdrawal used to pay for tuition even though the fund running the account refused to send me the paperwork because the account is in my parent's name first instead of mine. It is a massive organization filled with uncoordinated people doing their level best to produce Brownian motion.
  - gamblor956 2y ago
    UTMA withdrawals by the child are not taxable, however UTMA income is taxable to the child... What exactly are you railing against? It sounds like the IRS is following the rules here.

nly 2y ago

As a Brit it's baffling that this is even an issue. I filed my taxes online with HMRC for free this year (we call it Self Assessment), it took 20 minutes, and I received a 4 figure refund in ~2 weeks directly in to my bank account.

jimbob45 2y ago
US government services are bad almost across the board. Most of us would pay a premium to use a private version over a government version of almost anything. I’m guessing you would find it equally confusing if I told you we’d pay a premium to use a private DMV or private post office. Here in the US, that statement wouldn’t be controversial at all.
- op00to 2y ago
  I recently renewed my global entry, and it was a piece of cake. I occasionally interact with the FCC because of my amateur radio license, and the FRS is super easy to use. I recently got passports for my kids, and that was super easy to do as well and the passports came much faster than expected.
  - lotsoweiners 2y ago
    > I recently got passports for my kids, and that was super easy to do as well and the passports came much faster than expected. Interesting. I am currently renewing my and my spouse’s passports while also trying to get first time passports for my children and I couldn’t find the process more outdated and borderline kafkaesque. If you told me the website was built in 2003 and hasn’t been updated since then I would believe you. I can only renew my passport by snail mailing everything including my existing passport. I can only get my kids a passport by physically taking them to an approved location for processing. I could not get an appointment for about a month at any location near me. As a bureaucrat myself, I just find this level of hoop jumping to be ridiculous.
    - saratogacx 2y ago

colinb 2y ago

Anyone know if this covers foreign earned income etc? I.e. can I, who hasn't lived in the US for many years, make use of the service?

ChrisArchitect 2y ago

[dupe] Some more discussion: https://news.ycombinator.com/item?id=40526225 https://news.ycombinator.com/item?id=40526225

enraged_camel 2y ago

Is this only for people who have “simple” taxes? Does it support Schedule K-1 for example?

MichaelNolan 2y ago
The IRS is taking an agile / minimal viable product approach. So for now it only supports very basic W2 only tax filers. My guess is that K-1 is low on their priority list for now.
burkaman 2y ago
The pilot didn't support that, but there isn't any detailed information about what the expanded version will support yet. I would guess K-1 will not be supported for a while, here's what the announcement says: > The IRS is also exploring ways to gradually expand the scope of tax situations supported by Direct File. Over the coming years, the agency’s goal is to expand Direct File to support most common tax situations, with a particular focus on those situations that impact working families. Announcements about new state partners and expanded eligibility are expected in the coming months.

whimsicalism 2y ago

It's pretty dumb that this has an upper income limit that covers plenty of regular W2 wage workers

stalfosknight 2y ago
Nice complainbrag.
- whimsicalism 2y ago
  thank you, had to draft a few times to make sure it was appropriately subtle so only you could pick up on it
MarkSweep 2y ago
Some forms like 8959 and 8960 kick in at $200k. So I assume limiting to below that was to limit the scope of their MVP.
demosthanos 2y ago
What is the income limit? The IRS's publication describing the program for 2023 lists a 1099-INT income limit but no W-2 income limit: https://www.irs.gov/pub/irs-pdf/p5917.pdf https://www.irs.gov/pub/irs-pdf/p5917.pdf
- whimsicalism 2y ago
  "You can’t use Direct File if your wages are more than $200,000 ($160,200 if you had more than one employer)." from https://directfile.irs.gov/income https://directfile.irs.gov/income
  - demosthanos 2y ago
    Thanks! It's also weird that that's buried on a webpage that they really don't want you to find anymore and not prominently displayed on the flyer they put out.

yndoendo 2y ago

I would argue that having to file taxes through a 3rd party accountant or service is not only forced commerce but also broken glass economics. Looks like it helps the economy by creating jobs but the job is redundant and does not create anything of value. Where are crimes more likely to occur, a city with 10,000 or 1 million? Where are financial crimes more likely to occur, people that make $10,000 a year or people that make $1 million or more a year. I rather have these accounts move into forensic work and go after the wealthy tax evaders. IRS is an enforcement agency that specializes in tax collection and fraud. People that are clamoring for reduced IRS staffing are ultimately support of defending the police. I rather have a well staff IRS going after those that evade paying their taxes, probability speaking the wealthy.

dzhiurgis 2y ago
Who steals more? 10,000 people evading 100k or 1million people evading 1k?
- kevingadd 2y ago
  Rich tax evaders are evading way more than 100k
yndoendo 2y ago
Since I cannot respond to everyone that broke of this binary tree and I take you for the view points. Let say you won the lottery, now you can buy that dream house. Do you get a mortgage or pay off the sum in the cash on hand so you are not losing moneys in interest payments? Why waste money on interest and save in the long run? Which is it, take a mortgage or pay interest? Take the mortgage and the tax deduction. First open a trust or a shell company. Move $1,000,000 into it to back the house purchase as Lender X. Take a loan against Lender X, which is yourself. Now on the tax deduction, state the amount of interest you paid to yourself as mortgage interest on your house, since you could / didn't pay in cash. Use this to place yourself into a lower tax bracket and put some of those tax dollars into your account. Creative account is legal and can be exploited by the rich. Even more when you use money to maximize the legal loop holes by paying others to find and construct other legal loop holes. Now try to remove that tax loop hole. Near impossible, this would remove that the tax loop hole that allows others not paying a mortgage to themselves, but to a Lender Y, a actual bank or credit union. This tax deduction is near impossible to remove because it cuts out the middle class and poor ability to buy a house. Where is crime most likely to happen, in a city of 10,000 (A) or 1 million (B)? 10,000 is 1/100 of 1 million. Now where would you bet single (1) crime will happen, city A or B? City B 100 times more people to commit a crime than city A. Lets rephrase, you have the ability to take 10,000 (A) lottery different lottery tickets or 1 million (B) lottery tickets? Which would you take tickets A or B to maximize your winnings? Cash based business that don't declare income in hospitality industry as tips. How many of those individuals make 10,000 or 1 million a year? How many people tip in cash versus in credit or debit card? More people have been using credit cards to make purchases versus paying in cash. When was the last time you payed in cash or be a party member in a pure cash based transaction in a restaurant? How many people use their company business credit card to pay for corporate deduction dinners and how many pay in cash? How do you plug this legal loop hole that places more tax dollars into a rich person's hands? Start by shifting money into a trust or shell company. Pay an artist $5,000 to create a new piece as Company X. Company X now auctions off the art. You, as the hidden supporter of company X, buy the art, and pay yourself at auction, for $50,000. Now you donate that art to a museum or other non-profit that fits the tax deduction bill. I just donated $50,000 because I made the declaration that $5,000 is actually $50,000 as proven by my auction bill, secretly paid to myself. Lets deploy a use tax. A person that drives more should be paying more for the road, repairs and maintenance. How much do you use your vehicle for person versus business? How much of your driving is just to get to work and back home, or driving from work to lunch and back to work? I'm using my car 80% for work driving to and home, and only 20% for personal. My use tax should be 20% of what I own, my employer should be paying 80% of the usage because it is being used to benefit them, but since I am the owner of the vehicle I pay 100% of the use tax. Now I am being taxed 80% to be employed.

kylecazar 2y ago

"Intuit doesn't see a success story here, arguing that the Direct File program is costly for taxpayers" Good Lord

ashconnor 2y ago
It cost me $490.00 to file my taxes with H&R Block this year. I can't use free software.
- ThunderSizzle 2y ago
  Why can't you use freetaxusa?
  - itake 2y ago
    I didn’t check last year but free tax USA didn’t support importing stock trades. I didn’t wanna have to input every single trade I made.
    - glii 2y ago
      If cost basis was reported to the IRS by your brokerage, you can typically just report the summary total, since the IRS already knows about the individual trades.
      - itake 2y ago
        I receive and sell RSUs, which I don't think the cost basis is reported. I also have ~3 brokerages with 2-3 accounts each.
  - ashconnor 2y ago
    Form 1116, Form 8938, didn't support state adjustments (dividends in foreign pension accounts), FBAR etc.
protastus 2y ago
"It is difficult to get a man to understand something, when his salary depends on his not understanding it." -Upton Sinclair

macrael 2y ago

It's SUCH a win that they managed to roll this out to a small set of tax situations and states to start. Every government project I've been on has required creativity in defining an MVP that doesn't include shipping to everyone. This was cited consistently as one of the great successes of this project, they were able to ship something that successfully filed 150k taxes b/c they were able to scope things down to something doable in 9 months.

ksec 2y ago
It gives me hope and positive energy that no matter how bad governments ( all around the world ) and especially US given how something so simple is still missing and so broken, manage to move forward. I would imagine the hard part isn't even the MVP or defining MVP phase, but to get it started in the first place. The amount of politics involves. And that is speaking as something who used to work inside government.
dheera 2y ago
sigh this is a baby step but - Many if not most software engineers in California earn more than the $200K household limitation for using Direct File - From my understanding there is no way auto-generate my state tax return from Direct File so I would have to do all the work twice even if I can use it - Complicating my tax situation (legally) allows me to save more money, I would save far more than the price of TurboTax by using TurboTax instead of Direct File, as much as I hate it
- deleted 2y ago
  [deleted]
- fragmede 2y ago
  > Many if not most software engineers in California have complicated taxes, due to how they're making that much money. I don't have a problem with them optimizing for the simpler case (eg the intention behind the 1040EZ) while software engineers, who can afford a CPA to deal with optimizing their tax burden off non W2 income, aren't initially able to use it.
- 2y ago

PaulHoule 2y ago

My son tried Direct File in New York and had trouble signing up for it I think because he was filing for the first time and has no credit history. They make the process arduous because it’s a common scam to fill out a fake return — I had an uncle who worked for the IRS in the 1990s and he told me they were overwhelmed with this even then. We were put in line for 40 minutes to talk to someone to validate his id. Maybe it would not have been so bad if we had not procrastinated but we managed to print out the 1040 form and the corresponding New York form and file on paper before we got to the end of the line. I think he would have struggled to fill it out on his own but I have filled out easy and hard 1040s many times and I found it easy.

doctoboggan 2y ago

I am a big fan of this, however since it doesn't do state taxes I will be forced to continue using freetaxusa since they do federal for free and charge a modest fee for your state filing. I hope that more states will follow the federal governments example and start allowing free filing online.

giantg2 2y ago

I'll still be using 3rd party software. The main benefit is the guarantee of audit support and legal representation. For such a small fee, that's decent insurance. You'll get no such benefit working directly with the IRS.

BeetleB 2y ago
> The main benefit is the guarantee of audit support and legal representation. I strongly urge you to read the fine print. The support is usually quite limited.
- giantg2 2y ago
  Yeah, it's not like they give you a high priced litigator. What you do get is someone to work through the return with you to verify things and a consultation on what the options are. The details vary by which company you go with.
NickC25 2y ago
You're probably in the minority, or you make a significant amount of income. If you are single or married without a family, a 1099 contractor or just inputting in a W2 or two, and have a single form from your healthcare company, chances are this really, really helps. The IRS isn't going to audit someone who just files a single W2 and claims maybe 1-2 deductions and a small stock portfolio appreciation.
- giantg2 2y ago
  I'm not saying it's a bad service. I'm saying for $30 some audit and legal representation is cheap insurance. The IRS can audit anyone they want. My finances are not exceedingly complicated, nor am I a high earner. It's an extremely low risk but still can happen.
  - g15jv2dp 2y ago
    I'm sorry but paying $30 for legal insurance sounds like a red flag. Either they know for absolutely sure that they will never have to pay out on the insurance, or they don't intend to pay out if/when you need it. Have you read the fine print to make sure there isn't an exclusion that will void the insurance as soon as there is any kind of problem? E.g., if the user made any kind of mistake in declaring stuff to the filing company (even a trivial one), then the insurance is voided?