As the April 15 federal tax deadline approaches, the IRS has introduced a significant update to its Direct File program, an initiative aimed at simplifying the tax filing process for eligible individuals. This update allows users to import crucial information required to verify returns before filing, addressing a key issue that has hindered successful filings in the past. The program has been open to select filers in 12 states since March 12, and the latest enhancement is expected to streamline the e-filing experience for taxpayers.
Importance of Verifying Returns with Direct File
When submitting taxes through Direct File, users are required to validate their returns before filing by providing details such as the previous year’s adjusted gross income or the prior year’s temporary pin. While tax software typically includes this information for returning customers, first-time users must input it manually. This verification step has been identified as a major hurdle for Direct File returns in the past. However, with the recent update, users can now import these verification details from the IRS, reducing the likelihood of errors during the filing process.
The ability to access and import verification details directly from their IRS account offers taxpayers a more seamless and efficient filing experience. By leveraging information that the IRS already possesses, Direct File users can simplify the process even further. This update is a step towards making tax filing more accessible and user-friendly for individuals with straightforward tax situations.
The Direct File program is limited to taxpayers with simple tax returns during the current filing season. Eligible filers must have Form W-2 wages, Social Security retirement income, unemployment earnings, or interest of $1,500 or less. Those with contract income reported on Form 1099-NEC, gig economy workers, or self-employed individuals are excluded from participating. To qualify for Direct File, taxpayers must claim the standard deduction, which varies based on filing status.
Available Credits and Deductions
Direct File only accepts a few tax credits, including the earned income tax credit, child tax credit, and credit for other dependents. Additionally, the software supports deductions for student loan interest and educator expenses. By focusing on a select range of credits and deductions, Direct File aims to cater to the needs of eligible taxpayers with simple tax situations.
The Treasury Department estimates that around one-third of federal income tax returns could benefit from the Direct File program this season. With approximately 19 million eligible taxpayers, the IRS hopes to receive 100,000 filings through Direct File. While current usage remains modest, the agency anticipates a surge in volume leading up to the tax deadline. Ultimately, Direct File aims to provide a convenient and accessible tax filing option for individuals with straightforward tax affairs.
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